SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
(Amendment No.___)
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14c-5(d)(2))
[ ] Definitive Information Statement
FOUNTAIN PHARMACEUTICALS, INC.
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(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] Fee computed on table below per Exchange Act Rules 14C-5(g) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4. Proposed maximum aggregate value of transaction:
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[ ] Check box if any part of the fee is offset as provided by Exchange Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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FOUNTAIN PHARMACEUTICALS, INC.
505 South Westland Avenue, Suite D
Tampa, Florida 33606
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Information Statement pursuant to sections 14(C) and 14(F)
of the securities and exchange act of 1934
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WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
----------------
This Information Statement (the "Information Statement") is being
mailed on or about April 22, 2002 to the holders of record at the close of
business on April 12, 2002, (the "Record Date") of the Class A and Class B
common stock, $.001 par value per share (unless otherwise specified,
collectively the "Common Stock") of Fountain Pharmaceuticals, Inc. (the
"Company"), in connection with the Company's acquisition of SiriCOMM, Inc.
("SiriCOMM") and appointment of certain persons to the Board of Directors of the
Company other than at a meeting of the shareholders of the Company.
This Information Statement is also being mailed to the Company's
shareholders in connection with a proposed action by written consent to
authorize and approve:
1. An amendment and restatement of the Company's Certificate of
Incorporation which (a) changes the name of the Company to "SiriCOMM,
Inc."; (b) combines the outstanding shares of Common Stock into a
single class of Common Stock; (c) reverse splits the outstanding shares
of the Company's Common Stock one-for-sixty (the "Reverse Split"); (d)
decreases the par value of the Company's Common Stock resulting from
the Reverse Split from $.06 to $.001; (e) increases the number of
shares of Common Stock the Company is authorized to issue from 916,667
to 50,000,000; and (f) increase the number of shares of Preferred
Stock, $.001 par value, the Company is authorized to issue from
2,000,000 to 5,000,000.
2. The adoption of the Company's 2002 Equity Incentive Plan.
The sole member of the Board of Directors owns 3,500,000 shares of
Class A Common Stock and 100,000 shares of Class B Common Stock. These
shareholdings represent approximately 59.6% and 95.7%, respectively, of the
total outstanding votes of all issued and outstanding Common Stock of the
Company and was sufficient to take the proposed action on the Record Date.
Dissenting shareholders do not have any statutory appraisal rights as a result
of the action taken. The sole director has executed a written consent in favor
of the proposed action on behalf of the shares of the Company which he owns. The
sole director does not intend to solicit any proxies or consents from any other
shareholders in connection with this action.
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Pursuant to the provisions of Delaware law and the Company's
Certificate of Incorporation, the amendments require the approval of a majority
of such shares. Accordingly, the vote of the sole director is sufficient to
approve these matters, which he believes is in the best interests of the Company
and its shareholders. The corporate action will be effective 20 days after the
mailing of this Information Statement.
This Information Statement is being distributed pursuant to the
requirements of Sections 14(c) and 14(f) of the Securities Exchange Act of 1934.
The entire cost of furnishing this Information Statement will be borne
by the Company. The Company will request brokerage houses, nominees, custodians,
fiduciaries and other like parties to forward this Information Statement to the
beneficial owners of the Common Stock held of record by them and will reimburse
such persons for their reasonable charges and expenses in connection therewith.
INFORMATION RELATING TO THE COMPANY'S COMMON STOCK
The shares of Class A Common Stock and Class B Common Stock are the
only class of voting securities of the Company outstanding. Each share of Class
A Common Stock is entitled to one vote per share on all matters submitted to a
vote of the shareholders. Each share of Class B Common Stock is entitled to five
(5) votes per share on all matters submitted to a vote of the shares. As of the
Record Date, the Company had 5,875,795 shares of the Class A Common Stock
outstanding and 104,505 shares of Class B Common Stock outstanding.
CHANGES OF CONTROL OF THE COMPANY
On December 31, 2001 Park Street Acquisition Corporation ("Park
Street"), a Florida corporation, acquired 2,000,000 shares of Class A
Convertible Preferred Stock ("Preferred Stock") of Fountain Pharmaceuticals,
Inc. (the "Company") from Fountain Holdings LLC ("Holdings") and all Common
Stock Purchase Warrants (the "Warrants") in the name of Holdings to purchase
shares of the Company's Class A Common Stock. The Preferred Stock converts into
1,264,151 shares of Class A Common Stock. The aggregate purchase price paid to
Holdings was Twenty Thousand ($20,000) Dollars ("Purchase Price"), allocated
$8,000 towards the purchase of the Preferred Stock and $12,000 towards the
purchase of the Warrants. Simultaneously with the closing, Park Street and the
Company agreed to retire the Warrants. Park Street has also returned the
Preferred Sock to the Company. As of the Record Date no shares of Preferred
Stock are issued or outstanding.
Joseph S. Schuchert, Jr. ("Schuchert"), the principal shareholder of
Holdings, in consideration of the Purchase Price, released and discharged the
Company from its obligations due to him pursuant to a Credit Agreement dated as
of December 31, 1998, and from any other debts or obligations owing Schuchert by
the Company. As of September 30, 2001 the Company owed Schuchert $1,454,733 of
principal and interest.
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Simultaneously with the transactions described above, Park Street
acquired directly from the Company 3,500,000 shares of the Company's Class A
Common Stock and 100,000 shares of the Company's Class B Common Stock for an
aggregate purchase price of $180,000. The proceeds of this transaction were
utilized by the Company to retire all of its remaining liabilities. As a result
of the foregoing, Park Street became the "control person" of the Company as that
term is defined in the Securities Act of 1933, as amended.
In connection with these transactions, the Board of Directors of the
Company nominated Brendon K. Rennert to the Board of Directors and all former
officers and directors delivered their letters of resignation to the Company.
Mr. Rennert was named CEO, President and Secretary of the Company.
As a result of the transactions described above, there are no shares of
Preferred Stock issued and outstanding and Park Street owns 95.7% of the Class B
Common Stock and 59.6% of the Class A Common Stock.
By virtue of Park Street's ownership of the Company's aforementioned
securities, it is able to elect new directors and officers either at a meeting
of the shareholders or by written consent.
BOARD OF DIRECTORS
General
Management of the Company, prior to the Acquisition (collectively
referred to as "Prior Management") is set forth below:
Name Position
---- --------
Brendon K. Rennert President, Treasurer, Secretary
and Sole Director
Prior Management will resign effective as of the closing of the
Acquisition (scheduled for May 13, 2002) and the following individuals
(collectively referred to as "New Management") will be nominated to assume the
positions set forth next to their names:
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Name Age Position
---- --- --------
Henry P. (Hank) Hoffman 51 President, CEO and Chairman
David N. Mendez 41 Executive Vice President - Sales and
Marketing and a Director
Kory S. Dillman 31 Executive Vice President - Internet
Business Development and a Director
Tom Noland 45 Executive Vice President -
Administration, General Counsel,
Secretary and a Director
Henry P. (Hank) Hoffman, President, CEO and Chairman
Mr. Hoffman co-founded SiriCOMM in January 2000 and has been its President, CEO
and Chairman since SiriCOMM's inception. Mr. Hoffman has over twenty years
experience in the transportation industry. Mr. Hoffman's most recent position
was President and Chief Operating Officer of Hook Up, Inc. of Joplin, MO. In his
four years with this niche motor carrier, profit margins expanded while gross
revenue more than tripled. Mr. Hoffman credits his West Point background for
enabling him to communicate with people at every level of an organization. From
1990 to 1995 Mr. Hoffman was President and COO of Tri-State Motor Transit, the
nation's largest transporter of munitions for the U.S. Government. Under his
direction the Tri-State business grew from $40 million to over $100 million
annual revenue and a capacity base of over 750 drivers.
Prior to his term at Tri-State, he served in several Operations/Management
positions with both Schneider National, Inc. and Viking Freight System. As an
industry leader he has been a Vice President of the American Trucking
Associations, President and Chairman of the Board of the Munitions Carriers
Conference, member of the Board of Directors of the National Automobile
Transporters Association, and Forum Co-Chairman of the National Defense
Transportation Association. Prior to his trucking industry career, Mr. Hoffman
served as an officer in the United States Army Field Artillery for six years
where he completed two successful command assignments. Mr. Hoffman earned a
Bachelor of Science degree from the United States Military Academy, West Point,
NY and a Master of Business Administration from the University of Wisconsin,
Oshkosh, WI.
David N. Mendez, Executive Vice President - Sales and Marketing and a Director
Mr. Mendez co-founded SiriCOMM in January 2000 and has been its Executive Vice
President Sales and Marketing and a director since SiriCOMM's inception. Mr.
Mendez has over nine years experience in telecommunications sales and marketing.
Mr. Mendez's telecommunications expertise focuses on domestic and international
data communication networks including Frame Relay and ATM infrastructures and
Internet and intranet networks. Most recently he was National Sales Manager for
DRIVERNet where he managed such national accounts as Ford, Kenworth, Peterbilt,
Paccar Corporation, and Cue Paging. From 1995 to 1998 Mr. Mendez worked as a
Major Account Manager for Sprint. In this position he secured long-term
contracts with Tandy Corporation, Southwest Airlines, MaryKay Cosmetics, and
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DaisyTek International with a cumulative annual billing in excess of $20
million. In addition, Mr. Mendez managed MCI and Amway's co-marketing program
with annual billings in excess of $60 million. Mr. Mendez graduated with a
Bachelor of Science degree from Southwest Missouri State University,
Springfield, MO.
Kory S. Dillman, Executive Vice President - Internet Business Development and a
Director
Mr. Dillman co-founded SiriCOMM in January 2000 and has been its Executive Vice
President - Internet Business Development and a director since SiriCOMM's
inception. From 1996 to 1999 Mr. Dillman was Creative Director for DRIVERNet. In
that position he successfully produced many of the intranet and Internet
applications for DRIVERNet and its customers. He developed specific web-based
products for Volvo Trucks North America, Kenworth, Peterbilt, Ambest,
Caterpillar Engines, and TravelCenters of America. Prior to joining DRIVERNet
Mr. Dillman was Art Director for Wendfall Productions. In this position he
managed development for Sony Music and Ardent Records. Mr. Dillman earned a
Bachelor of Fine Arts degree from the University of Tulsa, Tulsa, OK.
Tom Noland, Executive Vice President - Administration, General Counsel,
Secretary and a Director
Mr. Noland joined SiriCOMM in January 2000 as its Executive Vice President -
Administration, General Counsel and a Director. Mr. Noland was in private
practice with the law firm of Spencer, Scott & Dwyer in Joplin for eleven years,
focusing on the representation of business and banking clients in the areas of
real estate transactions, creditors' rights and workers' compensation defense.
Prior to joining SiriCOMM, he served as General Counsel to Hook Up, Inc. from
1997 through 2000. Mr. Noland received a Bachelor of Arts degree in history form
Missouri Southern State College and a Juris Doctorate from the University of
Tulsa.
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 12, 2002, information with
respect to the securities holdings of all persons which the Company, pursuant to
filings with the Securities and Exchange Commission, has reason to believe may
be deemed the beneficial owners of more than 5% of the Company's outstanding
Common Stock and Class B Common Stock. The following table indicates the
beneficial ownership of such individuals numerically calculated based upon the
total number of shares of Common Stock and Class B Common Stock outstanding and
alternatively calculated based upon the percentage voting power allocated to
such share ownership taking into account the disproportionate voting rights
attributed to the Class B Common Stock. Also set forth in the table is the
beneficial ownership of all shares of the Company's outstanding stock, as of
such date, of all officers and directors, individually and as a group.
Amount of Percent of Percent of
Name and Address Beneficial Ownership(1) Beneficial Ownership Voting Power(2)
----------------- ----------------------- -------------------- ----------------
Park Street Acquisition Corporation 3,600,000(3) 60.2% 62.5%(5)
P.O. Box 530246
St. Petersburg, FL 33747
Brendon K. Rennert 3,600,000(3) 60.2% 62.5%(5)
P.O. Box 530246
St. Petersburg, FL 33747
John C. Walsh 1,257,100(4) 21.0% 19.6%
9 North Pelican Drive
Avalon, NJ 08202
Joseph S. Schuchert, Jr. -0- -0- -0-
Fountain Holdings, LLC
c/o Eaglestone Capital Services, Inc.
400 Oaceangate, Suite 1125
Long Beach, CA 90802
All Directors and Officers as a Group 3,600,000(3) 60.2% 62.5%
(1 Persons)
-----------------------
(1) Except as otherwise indicated, includes total number of shares outstanding
and the number of shares which each person has the right to acquire within
60 days through the exercise of warrants or the conversion of Preferred
Stock pursuant to Item 403 of Regulation S-B and Rule 13d-3(d)(1),
promulgated under the Securities Exchange Act of 1934. Also reflects
5,980,301 shares of the Company's Common Stock (including Class B Common
Stock) outstanding as of January 8, 2001.
(2) This column takes into account the disproportionate voting rights granted
to the holders of the Class B Common Stock. Holders of Class B Common
Stock are entitled to five (5) votes for every share held.
(3) Includes 100,000 shares of Class B Common Stock.
(4) Includes 6,000 shares of Common Stock issuable upon the exercise of
options at an exercise price of $.625 per share. Does not include Common
Stock options to purchase 18,000 shares at an exercise price of $.625 per
share which were granted September 23, 1999 and which have not vested.
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On August 28, 2001, Park Street Acquisition Corporation and Brendon K.
Rennert entered into a Pledge and Escrow Agreement (the "Loan Agreement") with
Robert Smith to obtain the funds for the acquisition of the Class A Common
Stock, Class B Common Stock and the Class A Convertible Preferred Stock
(collectively the "Securities"). Pursuant to the terms of the Loan Agreement,
the Securities acquired by Park Street are collateral for the collection of
the $350,000 loan that is due March 31, 2002 with interest at 6% per annum.
Pursuant to the Loan Agreement, Robert Smith may become the beneficial owner
of the Securities following a default in the Loan Agreement. Prior to such
default, Mr. Smith does not have voting or dispositive power with respect to
the Securities.
EXECUTIVE COMPENSATION
Executive Officers and Directors
We currently do not pay any cash salaries to any officers or directors.
Summary Compensation Table
The Summary Compensation Table shows certain compensation information
for services rendered in all capacities for the fiscal years ended December 31,
1999, 2000 and 2001. Other than as set forth herein, no executive officer's
salary and bonus exceeded $100,000 in any of the applicable years. The following
information includes the dollar value of base salaries, bonus awards, the number
of stock options granted and certain other compensation, if any, whether paid or
deferred.
SUMMARY COMPENSATION TABLE
===============================================================================================================
Long Term
Annual Compensation Compensation
------------------------------------------ ------------------- ------------- -------------- --------------------
Fiscal Year
Ended
Name and Principal Position September 30 Salary ($) Bonus ($) Options/SARS (#)
------------------------------------------ ------------------- ------------- -------------- --------------------
Gerald T. Simmons(1) 2001 $ 19,630 -0- -0-
Former Chief Executive Officer and 2000 $ 77,782 -0- 4,636(5)
President 1999 $104,500 $5,000 344,744(5)
Christopher J. Whitaker(2) 2001 $100,000 -0- -0-
Former Interim Chief Executive Officer and Vice 2000 $124,442 -0- -0-
President of Operations 1999 $110,962 $25,000 37,500(6)
Francis J. Werner(3) 2001 $ 97,750 -0- -0-
Interim Chief Executive & Financial Officer and 2000 $ 97,991 -0- -0-
Director of Finance and Administration 1999 $ 86,912 -0- -0-
John C. Walsh(4) 2001 -0- -0- -0-
Director, Former Chairman, Chief 2000 -0- -0- -0-
Executive Officer and President 1999 $130,962 -0- 24,000(7)
========================================== =================== ============= ============== ==================
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(1) Mr. Simmons resigned from his position as Chief Executive Officer and
President on November 30, 2000. Mr. Simmons did not receive a severance
arrangement. See Employment Arrangements and Change of Control.
(2) Mr. Whitaker was hired on March 30, 1998 as Director of Marketing. On
August 3, 1998, Mr. Whitaker was appointed Vice President of Operations.
Effective February 1, 2001 assumed the position as Interim Chief Executive
Officer and Vice President of Operations. Effective July 6, 2001, Mr.
Whitaker was terminated.
(3) Mr. Werner was hired on May 21, 1990 as Controller. On July 1, 1992 Mr.
Werner was appointed Director of Finance and Administration. Effective
February 1, 2001 assumed the position as Interim Chief Financial Officer
and Director of Finance and Administration. Effective July 6, 2001 he
assumed the position of Acting Chief Executive Officer. Effective December
31, 2001 Mr. Werner was terminated.
(4) Mr. Walsh resigned from his position as Chief Executive Officer and
President on December 1, 1998. As part of his severance arrangement, Mr.
Walsh received full salary and accompanying benefits through August 3,
1999. Mr. Walsh resigned from his position as a Director on December 31,
2001.
(5) Represents options to purchase Common Stock granted as of December 8,
1998, as adjusted as of September 30, 1999 for certain anti-dilution
provisions pursuant to Mr. Simmons' employment agreement. The options have
an exercise price of $.56 per share and a term expiring on December 8,
2003. The options vested 20% as of the date of grant with the balance
vesting 20% on each anniversary of the date of grant.
(6) Represents option to purchase Common Stock granted as of December 8, 1998.
The options have an exercise price of $.56 per share. 25,000 options vest
1/3 per year over a period of three years starting December 8, 1998 and
expire on December 8, 2003. 12,500 options vest 1/3 per year over a period
of three years starting December 8, 1999 and expire on December 8, 2003.
(7) Represents options to purchase Common Stock granted as of September 23,
1999. The options have an exercise price of $.625 per share. The options
vest 25% per year over a period of 4 years, and expire on September 23,
2004.
OPTION/SAR GRANTS TABLE
Option/SAR Grants in the Last Fiscal Year
=======================================================================================================================
Individual Grants
----------------------------------- ---------- ------------------- ------------------- --------------- ----------------
% of Total
Options/SARs
Granted to Exercise or
Fiscal Options/SARs Employees in Base Price Expiration
Name Year Granted (#) Fiscal Year ($/Sh) Date
----------------------------------- ---------- ------------------- ------------------- --------------- --------------
Gerald T. Simmons 2001 -0-(1) 0.0% -0- -
Former Chief Executive Officer
and President
Christopher J. Whitaker 2001 -0-(1) 0.0% -0- -
Interim Chief Executive Officer
and Vice President of Operations
Francis J. Werner 2001 -0-(1) 0.0% -0- -
Interim Chief Financial Officer
and Director of Finance and
Administration
John C. Walsh 2001 -0-(1) 0.0% -0- -
Director, Former Chairman,
Chief Executive Officer and
President
=================================== ========== =================== =================== =============== ================
(1) No options were granted during fiscal year 2001.
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OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
========================================================================================================================
Aggregated Options/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Value
---------------------------------------------------------------------------- ------------------------ ------------------
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
at FY-/End (#) FY-End ($)(1)
----------------------------------- --------- ----------------- ------------ ------------------------ ------------------
Shares Value
Fiscal Acquired on Realized Exercisable/ Exercisable/
Name Year Exercise (#) ($) Unexercisable Unexercisable
----------------------------------- --------- ----------------- ------------ ------------------------ ------------------
Gerald T. Simmons 2001 -0- -0- (E)-0-/(U)-0- E)$0/(U)$0
Former Chief Executive Officer
and President
Christopher J. Whitaker 2001 -0- -0- (E)20,832/(U)16,668 (E)$0/(U)$0
Interim Chief Executive Officer
and Vice President of Operations
Francis J. Werner 2001 -0- -0- (E)37,500/(U)-0- (E)$0/(U)$0
Interim Chief Financial Officer
and Director of Finance and
Administration
John C. Walsh 2001 -0- -0- (E)12,000/(U)12,000 (E)$0/(U)$0
Director, Former Chairman, Chief
Executive Officer and President
=================================== ========= ================= ============ ======================== ==================
(1) Based upon the closing price of the Company's Common Stock of $.02 per
share as reported on the NASDAQ OTC Bulletin Board as of September 30,
2001.
In addition to the foregoing, Mr. Rennert approved the Company's 2002
Equity Incentive Plan (the "Plan"). Additional information concerning the Plan
is set forth under the caption "Approval of the 2002 Equity Incentive Plan,"
below.
APPROVAL OF AMENDMENT AND RESTATEMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION
The Company's sole director approved an amendment and restatement to
the Company's Certificate of Incorporation to (a) change the name of the Company
to "SiriCOMM, Inc."; (b) combine the outstanding shares of Common Stock into a
single class of Common Stock; (c) reverse split the outstanding shares of the
Company's Common Stock one-for-sixty (the "Reverse Split"); (d) reduce the par
value of the Company's Common Stock resulting from the Reverse Split from $.06
to $.001; (e) increase the number of shares of Common Stock the Company is
authorized to issued from 916,667 to 50,000,000; and (f) increase the number of
shares of Preferred Stock, $.001 par value the Company is authorized to issue
from 2,000,000 to 5,000,000. The sole board member, who holds approximately
59.6% of the Company's Common Stock and who holds approximately 95.7% of the
Class B Common Stock has approved these actions and has consented to the taking
of these actions without a meeting. A copy of the restated and amended
Certificate of Incorporation substantially in the form it will be filed with the
Secretary of the State of Delaware is attached hereto as Appendix A.
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Change of Corporate Name
The Company has entered into a Securities Exchange Agreement
("Securities Exchange Agreement") with shareholders owning 100% of SiriCOMM,
Inc., a Missouri corporation ("SiriCOMM") regarding acquisition by the Company
of all of the issued and outstanding common stock of SiriCOMM. At present it is
anticipated that a closing will occur on or about May 13, 2002 and the sole
director believes it is prudent to take the necessary corporate actions
necessary to consummate the Acquisition. Information concerning SiriCOMM is set
forth under the caption "The SiriCOMM Acquisition," below. In the event the
closing does not occur, the Company will maintain its present name.
The change of corporate name will become effective upon the filing with
the Secretary of State of an amendment and restatement to the Company's
Certificate of Incorporation which states that, upon the filing of the
Certificate of Amendment the name of the Corporation will be "SiriCOMM, Inc."
Combination of Outstanding Shares of Common Stock into a Single Class
The Company has two classes of Common Stock authorized and outstanding.
At present there are 5,875,796 shares of Class A Common Stock issued and
outstanding and 104,505 shares of Class B Common Stock issued and outstanding.
The Company's sole officer and director owns 59.6% and 95.7% of the outstanding
shares of Class A and Class B Common Stock, respectively. The two classes have
the same relative rights, except that the Class B Common Stock has a
disproportionate voting right whereby each share of Class B Common Stock
represents five votes.
As a result of the combination each share of Class B Common Stock
outstanding at the effective time of the combination and Reverse Split will,
without any action on the part of the holder thereof become one-sixtieth share
of New Common Stock, defined below.
The sole officer and director of the Company does not believe it is in
the Company's best interest to have a class of Common Stock with a
disproportionate voting right and is willing to surrender these disproportionate
rights and feels the elimination of the Class B Common Stock will simplify the
capitalization of the Company.
One-For-Sixty Reverse Split and Reduction of Par Value
As a result of the Reverse Split, each share of Common Stock
outstanding at the effective time of the Reverse Split, will, without any action
on the part of the holder thereof, become one-sixtieth share of Common Stock.
The amendment will also decrease the par value per share of the Company's common
stock to $.001. The decrease in the par value per share will reduce the
Company's capital stock accounts. For purposes of this description, the Common
Stock, as presently constituted, is referred to as the "Old Common Stock" and
the Common Stock resulting from the Reverse Split is referred to as the "New
Common Stock."
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The Reverse Split will become effective upon the filing with the
Secretary of State of an amendment and restatement to the Company's Certificate
of Incorporation which states that, upon the filing of the Certificate of
Amendment, each share of Old Common Stock then issued and outstanding would
automatically become and be converted into one-sixtieth share of New Common
Stock.
Principal Effects of the Reverse Split
The principal effects of the Reverse Split will be as follows:
Based upon the 5,980,301 shares of Old Common Stock (including the
shares of Class B Common Stock) outstanding on the Record Date, the Reverse
Split would decrease the outstanding shares of Old Common Stock by 98.3%, and,
upon the effectiveness of the Reverse Split and the completion of the
Acquisition approximately 11,660,003 shares of New Common Stock would be
outstanding.
The Company will obtain a new CUSIP number for the New Common Stock at
the time of the Reverse Split. Following the effectiveness of the Reverse Split,
each sixty shares of Old Common Stock, without any action on the part of the
holder, will represent one share of New Common Stock.
Subject to the provisions for elimination of fractional shares, as
described below, consummation of the Reverse Split will not result in a change
in the relative equity position or voting power of the holders of Old Common
Stock.
The Certificate of Restatement and Amendment of the Company's
Certificate of Incorporation will be filed with the Secretary of State of
Delaware ten days after the mailing of this Information Statement. The Reverse
Split would become effective as of the date of such filing (the "Effective
Date").
Purposes of the Reverse Stock Split
The Reverse Split will decrease the number of shares of Old Common
Stock outstanding and presumably increase the per share market price for the New
Common Stock. Theoretically, the number of shares outstanding should not, by
itself, affect the marketability of the stock, the type of investor who acquires
it, or the Company's reputation in the financial community, but in practice this
is not necessarily the case, as many investors look upon a stock trading at or
under $1.00 per share as unduly speculative in nature and, as a matter of
policy, avoid investment in such stocks.
Many leading brokerage firms are reluctant to recommend lower-priced
securities to their clients and a variety of brokerage house policies and
practices currently tend to discourage individual brokers within firms from
dealing in lower-priced stocks. Some of those policies and practices pertain to
the payment of brokers' commissions and to time consuming procedures that make
the handling of lower priced stocks unattractive to brokers from an economic
standpoint. In addition, the structure of trading commissions also tends to have
an adverse impact upon holders of lower priced stocks because the brokerage
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commission on a sale of a lower priced stock generally represents a higher
percentage of the sales price than the commission on a relatively higher priced
issue.
In addition, there are not a sufficient number of authorized but
unissued shares of Common Stock to consummate the Acquisition. The sole director
believes that the Reverse Split and Acquisition is in the best interest of the
Company and its shareholders. The Company requires additional capital for its
operations and does not believe that it will be able to raise the necessary
capital unless the price of the Common Stock is higher than the current Common
Stock price levels. However, no assurance can be given that the Reverse Split
will result in any increase in the Common Stock price or that the Company will
be able to complete any financing following the Reverse Split.
Exchange of Certificate and Elimination of Fractional Share Interests
On the Effective Date, each sixty shares of Old Common Stock will
automatically be combined and changed into one share of New Common Stock. No
additional action on the part of the Company or any shareholder will be required
in order to effect the Reverse Split. Shareholders will be requested to exchange
their certificates representing shares of Old Common Stock held prior to the
Reverse Split for new certificates representing shares of New Common Stock.
Shareholders will be furnished the necessary materials and instructions to
effect such exchange promptly following the Effective Date. Certificates
representing shares of Old Common Stock subsequently presented for transfer will
not be transferred on the books and records of the Company but will be returned
to the tendering person for exchange. Shareholders should not submit any
certificates until requested to do so. In the event any certificate representing
shares of Old Common Stock is not presented for exchange upon request by the
Company, any dividends that may be declared after the Effective Date of the
Reverse Split with respect to the Common Stock represented by such certificate
will be withheld by the Company until such certificate has been properly
presented for exchange, at which time all such withheld dividends which have not
yet been paid to a public official pursuant to relevant abandoned property laws
will be paid to the holder thereof or his designee, without interest.
No fractional shares of New Common Stock will be issued to any
shareholder. Accordingly, shareholders of record who would otherwise be entitled
to receive fractional shares of New Common Stock, will, upon surrender of their
certificates representing shares of Old Common Stock, receive a cash payment in
lieu thereof equal to the fair value of such fractional share. Holders of less
than sixty shares of Old Common Stock as a result of the Reverse Split will on
the Effective Date no longer be shareholders of the Company. The Board of
Directors had determined that the fair value of the Common Stock will be based
on the closing price of the Common Stock on the OTC-Bulletin Board on the
Effective Date (as adjusted to reflect the Reverse Split) or, if there are no
reported sales on such date, the average of the last reported high bid and low
asked price on such day shall be used.
12
Federal Income Tax Consequences of the Reverse Split
The combination of each sixty shares of the Old Common Stock into one
share of New Common Stock should be a tax-free transaction under the Internal
Revenue Code of 1986, as amended, and the holding period and tax basis of the
Old Common Stock will be transferred to the New Common Stock received in
exchange therefor.
Generally, cash received in lieu of fractional shares will be treated
as a sale of the fractional shares (although in unusual circumstances such cash
might possibly be deemed a dividend), and shareholders will recognize gain or
loss based upon the difference between the amount of cash received and the basis
in the surrendered fractional share.
This discussion should not be considered as tax or investment advice,
and the tax consequences of the Reverse Split may not be the same for all
shareholders. Shareholders should consult their own tax advisors to know their
individual Federal, state, local and foreign tax consequences.
Change in Authorized Capital Stock
The sole director has approved an amendment to the Company's
Certificate of Incorporation which would change the number of authorized shares
of Common Stock, and the par value to $.001 per share. The number of authorized
common shares would be increased to 50,000,000 shares. In addition, the
amendment will eliminate the Class A Preferred Stock and increase the number of
authorized shares of Preferred Stock from 2,000,000 to 5,000,000 shares. As of
the Record Date there were no shares of Preferred Stock issued or outstanding.
Discussion of the Amendment
On the Record Date, there were 5,980,301 shares of Common Stock
outstanding, including 104,505 shares of Class B Common Stock. Pursuant to the
Securities Exchange Agreement, the Company is obligated to issue the equivalent
of 577,391,565 shares of Old Common Stock to the SiriCOMM shareholders.
Additionally, pursuant to the Securities Exchange Agreement, the Company has
agreed to issue the equivalent of 116,228,160 shares to retire $500,000 of
convertible debentures issued by SiriCOMM. Accordingly, after the amendment and
closing with SiriCOMM, the new combined entity will have approximately
11,660,003 shares of New Common Stock issued and outstanding.
Under the Company's Certificate of Incorporation, the Board of
Directors of the Company has authority to issue authorized and unissued shares
of Common and Preferred Stock without obtaining approval from the holders of the
Common Stock. The holders of the Company's Common Stock and Preferred Stock do
not have preemptive rights. The Preferred Stock provisions give the Board of
Directors broad authority to issue shares of Preferred Stock in one or more
series and to determine such matters as the dividend rate and preference, voting
rights, conversion privileges, redemption provisions, liquidation preferences
13
and other rights of each series. Each share of Common Stock is entitled to one
vote. The holders of any series of preferred stock issued in the future will be
entitled to such voting rights as may be specified by the Board of Directors.
Because of the broad powers granted to the Board of Directors to issue
shares of Preferred Stock and determine the rights, preferences and privileges
of the holders of such series, the Board of Directors has the power to issue
shares of Preferred Stock in a manner which could be used as a defensive measure
against a hostile takeover or to keep the Board of Directors in power. However,
the Board of Directors has no present plans to issue shares for such purpose.
The Board of Directors of the Company believes it will benefit the
shareholders to have additional unreserved shares available for issuance in
order that adequate shares may be available for the possible issuance of Common
Stock, convertible Preferred Stock or convertible debt securities in connection
with a possible financing of the Company's business or an acquisition, although,
except for the Securities Exchange Agreement with SiriCOMM and 100,000 New
Common Shares reserved for issuance upon the conversion of an outstanding
convertible debenture, the Company has no plans, arrangements, understanding or
commitments with respect to the issuance of such shares.
Approval Required
The approval of a majority of the outstanding stock entitled to vote
will be necessary to approve the proposed amendment. As discussed above, the
Company's sole director, who holds approximately 59.6% of the votes of the
Company's outstanding Common Stock and 95.7% of the outstanding Class B Common
Stock has consented to this amendment. He has executed a written consent voting
those shares in favor of the proposed amendment. The sole director does not
intend to solicit any proxies or consents from any other shareholders in
connection with this action.
APPROVAL OF THE COMPANY'S
2002 INCENTIVE STOCK OPTION PLAN
The Company's sole director adopted a 2002 Equity Incentive Plan (the
"Plan"). The written consent approved the Plan. There are no awards outstanding
under the Plan. A complete copy of the Plan is attached hereto as Appendix B.
Shareholders should note that certain disadvantages may result from the
adoption of the Plan, including a reduction in their interest of the Company
with respect to earnings per share, voting, liquidation value and book and
market value per share if options to acquire shares of Common Stock are granted
and subsequently exercised.
THE SIRICOMM ACQUISITION
SiriCOMM, Inc. is a broadband wireless applications service provider
serving the marine and highway transportation industries. The Company has
integrated multiple technologies including satellite communications, the
Internet (and intranets), wireless networking, and productivity enhancing
software. The Company's patent pending network architecture enables subscribers
14
to transmit data at speeds 20 to 100 times faster than other wireless solutions.
Moreover, the Company's unique software solutions leverage this ultra high-speed
data network to deliver significant cost reduction and productivity improvement
opportunities to users.
From its central hub server co-located at the satellite teleport the
Company receives and transmits data on a "point to broadcast" high-speed network
between multiple wireless local area networks installed in strategic locations.
For a flat, low monthly fee subscribers have access to a suite of productivity
software, the Internet, e-mail, proprietary company intranet information, etc.
The network supports multiple user devices to include 802.11b-compatible Palm
OS(TM) wireless hand held devices for the most mobile subscribers.
FINANCIAL INFORMATION
The Financial Statements required by Item 304 of Regulation S-B are
stated in U.S. dollars and are prepared in accordance with U.S. Generally
Accepted Accounting Principles. The following financial statements pertaining to
SiriCOMM are part of this Information Statement.
15
SiriCOMM, Inc.
(A Development Stage Enterprise)
Accountants' Report and Financial Statement
November 30, 2001
F-1
SiriCOMM, Inc.
(A Development Stage Enterprise)
November 30, 2001
Contents
Independent Accountants' Report.....................................F-3
Financial Statement
Balance Sheet...................................................F-4
Notes to Financial Statement....................................F-5
F-2
Independent Accountants' Report
Board of Directors
SiriCOMM, Inc.
Joplin, Missouri
We have audited the accompanying balance sheet of SiriCOMM, Inc. (A Development
Stage Enterprise) as of November 30, 2001. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of SiriCOMM, Inc. (A Development
Stage Enterprise) as of November 30, 2001, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statement has been prepared assuming the Company will
continue as a going concern. As discussed in Note 4, the Company has not yet
generated revenues from operations, has deficit equity accumulated during the
development stage and has debt obligations coming due in the next year that
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 4. The
financial statement does not include any adjustments that might result from the
outcome of this uncertainty.
/s/ BKD, LLP
January 17, 2002
F-3
SiriCOMM, Inc.
(A Development Stage Enterprise)
Balance Sheet
November 30, 2001
Assets
Current Assets
Cash $ 369,917
---------------
Total current assets 369,917
---------------
Long-Term Receivable
Note receivable 50,000
---------------
Property and Equipment, At Cost
Office and computer equipment 61,674
Less accumulated depreciation and amortization 9,715
---------------
51,959
Other Assets
Loan costs, net of accumulated amortization of $5,882 44,118
---------------
$ 515,994
===============
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Notes payable $ 598,079
Current portion of settlement payable 114,038
Accounts payable 10,339
Accrued expenses 9,453
Due to stockholder 7,278
---------------
Total current liabilities 739,187
---------------
Long-Term Debt
Long-term portion of settlement payable 176,486
---------------
Stockholders' Equity (Deficit)
Common stock, $1 par value; authorized and issued 10,000 shares 10,000
Additional paid-in capital 674,886
Deficit accumulated during the development stage (831,041)
----------------
(146,155)
Treasury common stock, at cost, 1,694.5 shares 253,524
---------------
Total stockholders' equity (deficit) (399,679)
----------------
$ 515,994
===============
See Notes to Financial Statement
F-4
Note 1: Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations and Development Stage Enterprise
The Company is considered a development stage enterprise, as there has
been no revenue generated from the Company's principal operations. The
Company was organized in January 2000 as a broadband wireless
applications service provider, serving the marine and highway
transportation industries. The Company is integrating multiple
technologies including satellite communications, the Internet, wireless
networking, and productivity enhancing software. The Company plans to
receive and transmit data on a high-speed network between multiple
wireless local area networks installed in strategic locations. The
Company will charge a monthly fee to subscribers for access to a suite
of productivity software, the Internet, e-mail, and proprietary company
intranet information through wireless hand held devices. The Company
expects completion of the development stage to occur in 2002.
Use of Estimates
The preparation of this financial statement in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statement. Actual
results could differ from those estimates.
Property and Equipment
Property and equipment are depreciated over the estimated useful life of
each asset. Annual depreciation is primarily computed using the
straight-line method.
Income Taxes
The Company's stockholders have elected to have the Company's income
taxed as an "S" Corporation under provisions of the Internal Revenue
Code and a similar section of the state income tax law; therefore,
taxable income or loss is reported to the individual stockholders for
inclusion in their respective tax returns. No provision for federal and
state income taxes is included in the financial statement.
Other Assets
Loan fees represent amounts paid to secure financing. These costs are
being amortized over the life of the loan using the straight-line
method.
F-5
Note 2: Notes Payable
Bank revolving credit agreement, $100,000 maximum
borrowings; interest payable at maturity accruing at
prime plus 1/2 percent; due on demand, or if demand is
not made, September 18, 2001; secured by all
receivables of the company, and personally guaranteed
by stockholders of the Company. $ 98,079
Note payable to individual, with interest at 4%, due March
15, 2002; unsecured. At the holder's option, this debt
can be converted into 3.5% of the Company's then
outstanding shares of common stock. 250,000
Note payable to investment firm, with interest at 4%, due
March 15, 2002; unsecured. At the holder's option, this
debt can be converted into 4.25% of the Company's then
outstanding shares of common stock. 250,000
---------------
$ 598,079
===============
Subsequent to November 30, 2001, the Company refinanced the bank
revolving credit agreement (Note 3).
Note 3: Related Party Transactions and Subsequent Events
During 2001, the Company and the majority stockholder were defendants in
a suit filed by a former stockholder. This suit was settled on December
21, 2001. As part of the settlement agreement, the Company agreed to
reimburse the former stockholder $22,000 for out-of-pocket expenses and
$15,000 in compensation for services previously performed and purchased
all his shares of Company stock for the treasury for $253,524. The
Company paid $10,000 in cash and issued a note payable to be paid
$10,000 per month for 29 consecutive months. The payments include
interest at 2 1/2% per annum. The settlement payable is included in
liabilities at its discounted value at date of settlement in the
accompanying financial statement. The financial statement also reflects
the out-of-pocket expenses, the compensation and the purchase of the
shares for the treasury.
On December 18, 2001, the existing bank revolving credit agreement and a
note payable to the bank held by two stockholders individually were
converted into one note. The note in the amount of $126,079 bears
interest at 7%, is due on demand, but if demand is not made, June 20,
2002, and is secured by substantially all assets of the Company and a
guarantee by the majority stockholder.
Due to stockholder consists of noninterest-bearing advances from the
majority common stockholder.
F-6
Note 4: Management's Consideration of Going Concern Matters
The Company has not yet earned any revenues from operations, has deficit
equity accumulated during the development stage and has debt obligations
coming due in the short-term. The financial statement has been prepared
assuming the Company will continue as a going concern, realizing assets
and liquidating liabilities in the ordinary course of business.
Management is considering several alternatives for mitigating these
conditions during the next year. These plans include completion of the
development of the Company's principal products and services and
marketing thereof, seeking additional financing from various sources and
possibly entering into a reverse merger with an existing publicly-traded
company. Although not currently planned, realization of assets and
incursion or satisfaction of liabilities in other than the ordinary
course of business to meet liquidity needs could incur losses not
reflected in the financial statement.
F-7
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 and, in accordance therewith, files reports and
other information with the Commission. The Registration Statement and such
reports and other information may be inspected without charge at the Public
Reference Room maintained by the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Office located at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained from the Public Reference Room of the Commission at 450
Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. Information on
the operation of the Public Reference Room is available by calling the
Commission at 1-800-SEC-0330. In addition, the Commission maintains an Internet
site where the Registration Statement and other information filed with the
Commission may be retrieved, and the address of such site is http://www.sec.gov.
Statements made in this Information Statement concerning the contents of any
document referred to herein are not necessarily complete.
INCORPORATION BY REFERENCE
The following documents filed with the Commission by the Company are
hereby incorporated by reference into this Information Statement:
1. Form 8-K Current Report dated December 31, 2001.
2. Schedule 14f-1 Information Statement re: change in Majority of
Directors filed January 17, 2002.
3. Form 10-KSB report for the year ended September 30, 2001.
4. Form 10-QSB report for the three months ended December 31,
2001.
/s/ Brendon K. Rennert
----------------------
Brendon K. Rennert
Sole Director
April 10, 2002
Attachments:
Appendix A - Form of Amended and Restated Certificate of Incorporation
Appendix B - 2002 Equity Incentive Plan
16
Appendix A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FOUNTAIN PHARMACEUTICALS, INC.
Fountain Pharmaceuticals, Inc., a corporation organized and existing
under the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Fountain Pharmaceuticals, Inc. The
date of filing of its original Certificate of Incorporation with the Secretary
of State was March 23, 1989 and the name under which the corporation was
originally incorporated was DFW Technologies, Inc. The name of the corporation
was changed to Fountain Pharmaceuticals, Inc. on April 10, 1989. On November 13,
1989 the corporation restated its Certificate of Incorporation to authorize,
among other things, its Class B Common Stock.
2. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of this
corporation by:
(a) combining its Class A common stock, $.001 par value, and
Class B common stock, $.001 par value, into one single class of common stock.
(b) combining each sixty outstanding shares of common stock,
$.001 par value into one share of new common stock and reducing the resulting
par value of such stock to $.001.
(b) increasing the number of authorized shares of common
stock, $.001 par value, to 50,000,000;
(c) increasing the number of authorized shares of preferred
stock, $.001 par value, from 2,000,000 to 5,000,000; and
(d) setting forth certain matters relating to the designation
of the relative rights, powers and preferences of qualification, limitations and
restrictions of one or more series of preferred stock.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is further amended hereby to read as herein set forth in
full:
"ARTICLE 1
The name of this corporation is SiriCOMM, Inc.
1
ARTICLE 2
The address of its registered offices in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE 3
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE 4
The total number of shares of stock of all classes which the
Corporation has authority to issue is 55,000,000 shares, of which 50,000,000
shares shall be common stock, with a par value of $.001 per share ("Common
Stock"), and 5,000,000 shares shall be preferred stock, with a par value of
$.001 per share ("Preferred Stock").
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions of the shares of each class of stock
are as follows:
PREFERRED STOCK
Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more series. Subject to the provisions hereof and
the limitations prescribed by law, the Board of Directors is hereby vested with
the authority and is expressly authorized, prior to issuance, by adopting
resolutions providing for the issuance of, or providing for a change in the
number of, shares of any particular series and, if and to the extent from time
to time required by law, by filing a certificate pursuant to the General
Corporation Law of the State of Delaware (or other law hereafter in effect
relating to the same or substantially similar subject matter), to establish or
change the number of shares to be included in each such series and to fix the
designation and powers, preferences and rights and the qualifications and
limitations or restrictions thereof relating to the shares of each such series,
all to the maximum extent permitted by the General Corporation Law of the State
of Delaware as in effect on the date hereof or as hereafter amended. The vested
authority of the Board of Directors with respect to each series shall include,
but not be limited to, the determination of the following:
(a) the distinctive serial designation of such series
and the number of shares constituting such series (provided that the
aggregate number of shares constituting all series of Preferred Stock
shall not exceed 5,000,000);
(b) the annual dividend rate, if any, on shares of
such series and the preferences, if any, over any other series (or of
any other series over such series) with respect to dividends, and
whether dividends shall be cumulative and, if so, from which date or
dates;
2
(c) whether the shares of such series shall be
redeemable and, if so, the terms and conditions of such redemption,
including the date or dates upon and after which such shares shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
(d) the obligation, if any, of the Corporation to
purchase or redeem shares of such series pursuant to a sinking fund or
purchase fund and, if so, the terms of such obligation;
(e) whether shares of such series shall be
convertible into, or exchangeable for, shares of stock of any other
class or classes, any stock of any series of the same class or any
other class or classes or any evidence of indebtedness and, if so, the
terms and conditions of such conversion or exchange, including the
price or prices or the rate or rates of conversion or exchange and the
terms of adjustment, if any;
(f) whether the shares of such series shall have
voting rights in addition to the voting rights provided by law, and, if
so, the terms of such voting rights, including, without limitation,
whether such shares shall have the right to vote with the Common Stock
on issues on an equal, greater or lesser basis;
(g) the rights of the shares of such series in the
event of a voluntary or involuntary liquidation, dissolution, winding
up or distribution of assets of the Corporation;
(h) whether the shares of such series shall be
entitled to the benefit of conditions and restrictions upon (i) the
creation of indebtedness of the Corporation or any subsidiary, (ii) the
issuance of any additional stock (including additional shares of such
series or of any other series) or (iii) the payment of dividends or the
making of other distributions on the purchase, redemption or other
acquisition by the Corporation or any subsidiary of any outstanding
stock of the Corporation; and
(i) any other relative rights, powers, preferences,
qualifications, limitations or restrictions thereof, including, but not
limited to, any that may be determined in connection with the adoption
of any stockholder rights plan after the date hereof, relating to any
such series.
Except where otherwise set forth in the resolution or resolutions
adopted by the Board of Directors providing for the issuance of any series of
Preferred Stock, the number of shares comprising such series may be increased or
decreased (but not below the number of shares then outstanding) from time to
time by like action of the Board of Directors.
Shares of any series of Preferred Stock that have been redeemed
(whether through the operation of a sinking fund or otherwise) or purchased by
the Corporation, or which, if convertible or exchangeable, have been converted
into, or exchanged for, shares of stock of any other class or classes or any
evidences of indebtedness shall have the status of authorized and unissued
shares of Preferred Stock and may be reissued as a part of the series of which
3
they were originally a part or may be reclassified and reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors or as part of any other series of Preferred Stock, all
subject to the conditions or restrictions on issuance set forth in the
resolution or resolutions adopted by the Board of Directors providing for the
issuance of any series of Preferred Stock and to any filing required by law.
COMMON STOCK
Subject to all of the rights of the Preferred Stock, and except as may
be expressly provided with respect to the Preferred Stock herein, by law or by
the Board of Directors pursuant to this Article 4:
(a) dividends may be declared and paid or set apart
for payment upon Common Stock out of any assets or funds of the
Corporation legally available for the payment of dividends and may be
payable in cash, stock or otherwise;
(b) the holders of Common Stock shall have the
exclusive right to vote for the election of directors (other than in
the case of newly created directorships and vacancies, which shall be
filled solely by the remaining directors as set forth in Article 6
hereof) and on all other matters requiring stockholder action, each
share being entitled to one vote; and
(c) upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the net assets of the
Corporation shall be distributed pro rata to the holders of Common
Stock in accordance with their respective rights and interests.
DENIAL OF PREEMPTIVE RIGHTS AND CUMULATIVE VOTING
No holder of any stock of the Corporation shall be entitled as such, as
a matter of right, to subscribe for or purchase any part of any new or
additional issue of stock of any class whatsoever of the Corporation, or of
securities convertible into stock of any class whatsoever, whether now or
hereafter authorized, or whether issued for cash or other consideration or by
way of dividend.
No holder of any stock of the Corporation shall have the right of
cumulative voting at any election of directors or upon any other matter.
ARTICLE 5
The Corporation is to have perpetual existence.
ARTICLE 6
All power of the Corporation shall be vested in and exercised by or
under the direction of the Board of Directors except as otherwise provided
herein or required by law.
4
For the management of the business and for the conduct of the affairs
of the Corporation, and in further creation, definition, limitation and
regulation of the power of the Corporation and of its directors and
stockholders, it is further provided:
A. ELECTIONS OF DIRECTORS. Elections of Directors need not be by
written ballot unless the Bylaws of the Corporation shall so provide.
B. NUMBER, ELECTION AND TERMS OF DIRECTORS. Except as otherwise fixed
pursuant to the provisions of Article 4 hereof relating to the rights of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation to elect additional directors under
specified circumstances, the number of directors of the Corporation shall be
fixed from time to time pursuant to the Bylaws. The directors, other than those
who may be elected by the holders of any class or series of stock having
preference over the Common Stock as to dividends or upon liquidation, shall hold
office until the next annual meeting at which their successors are elected and
qualified or until their earlier resignation or removal.
C. REMOVAL OF DIRECTORS. Subject to the rights of any class or series
of stock having preference over Common Stock as to dividends or upon liquidation
to elect directors under specified circumstances, at any regular meeting or
special meeting called expressly for that purpose, any director or the entire
Board of Directors may be removed with or without cause and a successor or
successors appointed by vote of the holders of in excess of fifty percent (50%)
of the shares then issued and outstanding and entitled to vote at an election of
directors.
Except as may otherwise be provided by law, cause for removal shall be
construed to exist only if during a director's term as a director of the
Corporation: (a) the director whose removal is proposed has been convicted of a
felony by a court of competent jurisdiction and such conviction is no longer
subject to direct appeal; (b) such director has been adjudicated by a court of
competent jurisdiction to be liable for gross negligence, recklessness or
misconduct in the performance of his or her duty to the Corporation in a manner
of substantial importance to the Corporation and such adjudication is no longer
subject to direct appeal; or (c) such director has been adjudicated by a court
of competent jurisdiction to be mentally incompetent, which mental incompetence
directly affects his or her ability as a director of the Corporation, and such
adjudication is no longer subject to direct appeal.
D. STOCKHOLDER ACTION. Any action required or permitted to be taken by
the stockholders of the corporation must be effected at a duly called annual or
special meeting of such holders or by consent in writing of the holders required
to take such action. Except as otherwise required by law and subject to the
rights of holders of any class or series of stock having a preference over
Common Stock as to dividends or upon liquidation, special meetings of
stockholders of the Corporation may be called only by the Chairman of the Board,
the Chief Executive Officer or the Board of Directors pursuant to a resolution
approved by a majority of the entire Board of Directors.
5
E. BYLAW AMENDMENTS. The Board of Directors shall have the power to
make, alter, amend and repeal the Bylaws (except so far as the Bylaws adopted by
the stockholders shall otherwise provide). Any Bylaws made by the Board of
Directors under the powers conferred hereby may be altered, amended or repealed
by the directors or by the stockholders.
F. LIABILITY OF DIRECTORS.
1. No director of the Corporation shall be liable to
the Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director; provided that this Article 6 shall not eliminate
or limit the liability of a director of the Corporation: (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit.
2. If the General Corporation Law of the State of
Delaware hereafter is amended to authorize the further elimination or limitation
of the liability of directors of the Corporation, then the liability of a
director of the Corporation shall be limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended, and such
limitation of liability shall be in addition to, and not in lieu of, the
limitation on the liability of a director of the Corporation provided by the
provisions of this Section F of this Article 6.
3. Any amendment, repeal or modification of this
Section F of this Article 6 shall be prospective only and shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such amendment, repeal or modification.
4. The Corporation shall be obligated at all times to
maintain the effectiveness of Bylaw provisions providing for the mandatory
indemnification of the directors of the Corporation to the maximum extent
permitted by the General Corporation Law of the State of Delaware.
ARTICLE 7
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute and this Certificate of Incorporation, and
all rights conferred upon stockholders herein are granted subject to this
reservation."
4. This Amended and Restated Certificate of Incorporation was duly
adopted by written consent of the stockholders in accordance with the applicable
provisions of Section 228, 242 and 245 of the General Corporation Law of the
State of Delaware and written notice of the adoption of this Amended and
Restated Certificate of Incorporation has been given as provided by Section 228
of the General Corporation Law of the State of Delaware to every stockholder
entitled to such notice.
6
5. As of the date of this Certificate, there are outstanding 5,875,796
shares of common stock, $.001 par value, 104,505 shares of Class B Common Stock,
$.001 par value and no shares of the Corporation's preferred stock, $.001 par
value. Upon filing of this Certificate of Amendment and Restatement, each share
of Class A and Class B common stock, $.001 par value, outstanding shall be
converted into 0.0167 shares of new common stock, $.001 par value.
IN WITNESS WHEREOF, said Fountain Pharmaceuticals, Inc. has caused this
Certificate to be signed by Brendon K. Rennert, its President this ____ day of
May, 2002.
FOUNTAIN PHARMACEUTICALS, INC.
By:
-------------------------------
Name: Brendon K. Rennert
Title: President
7
Appendix B
FOUNTAIN PHARMACEUTICALS, INC.
2002 EQUITY INCENTIVE PLAN
ARTICLE I - PLAN
1.1 PURPOSE. This Plan is a plan for key Employees (including officers
and employee directors) and Consultants of the Company and its Affiliates and is
intended to advance the best interests of the Company, its Affiliates, and its
stockholders by providing those persons who have substantial responsibility for
the management and growth of the Company and its Affiliates with additional
incentives and an opportunity to obtain or increase their proprietary interest
in the Company, thereby encouraging them to continue in the employ of the
Company or any of its Affiliates.
1.2 RULE 16B-3 PLAN. The Plan is intended to comply with all applicable
conditions of Rule 16b-3 (and all subsequent revisions thereof) promulgated
under the Securities Exchange Act of 1934, as amended (the "1934 Act"). To the
extent any provision of the Plan or action by the Board of Directors or
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee. In addition, the Board
of Directors may amend the Plan from time to time as it deems necessary in order
to meet the requirements of any amendments to Rule 16b-3 without the consent of
the shareholders of the Company.
1.3 EFFECTIVE DATE OF PLAN. The Plan shall be effective May 15, 2002
(the "Effective Date"), provided that within one year of the Effective Date, the
Plan shall have been approved by at least a majority vote of stockholders. No
Incentive Option, Nonqualified Option, Stock Appreciation Right, Restricted
Stock Award or Performance Stock Award shall be granted pursuant to the Plan ten
years after the Effective Date.
ARTICLE II - DEFINITIONS
The words and phrases defined in this Article shall have the meaning
set out in these definitions throughout this Plan, unless the context in which
any such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
2.1 "AFFILIATE" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of the action or transaction, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain. The term
"subsidiary corporation" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
action or transaction, each of the corporations other than the last corporation
1
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain.
2.2 "AWARD" means each of the following granted under this Plan:
Incentive Option, Nonqualified Option, Stock Appreciation Right, Restricted
Stock Award or Performance Stock Award.
2.3 "BONUS STOCK AWARD" means an Award of Bonus Stock.
2.4 "BOARD OF DIRECTORS" means the board of directors of the Company.
2.5 "CHANGE IN CONTROL" shall mean and include the following
transactions or situations:
(a) A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing thirty (30%) percent or more of the combined voting power of the
Company's then outstanding securities to any "Unrelated Person" or "Unrelated
Persons" acting in concert with one another. For purposes of this definition,
the term "Person" shall mean and include any individual, partnership, joint
venture, association, trust corporation, or other entity (including a "group" as
referred to in Section 13(d)(3) of the 1934 Act). For purposes of this
definition, the term "Unrelated Person" shall mean and include any Person other
than the Company, a wholly-owned subsidiary of the Company, or an employee
benefit plan of the Company; provided however, a sale to underwriters in
connection with a public offering of the Company's securities pursuant to a firm
commitment shall not be a Change of Control.
(b) A sale, transfer, or other disposition through a single transaction
or a series of transactions of all or substantially all of the assets of the
Company to an Unrelated Person or Unrelated Persons acting in concert with one
another.
(c) A change in the ownership of the Company through a single
transaction or a series of transactions such that any Unrelated Person or
Unrelated Persons acting in concert with one another become the "Beneficial
Owner," directly or indirectly, of securities of the Company representing at
least thirty (30%) percent of the combined voting power of the Company's then
outstanding securities. For purposes of this definition, the term "Beneficial
Owner" shall have the same meaning as given to that term in Rule 13d-3
promulgated under the 1934 Act, provided that any pledgee of voting securities
is not deemed to be the Beneficial Owner thereof prior to its acquisition of
voting rights with respect to such securities.
(d) Any consolidation or merger of the Company with or into an
Unrelated Person, unless immediately after the consolidation or merger the
holders of the common stock of the Company immediately prior to the
consolidation or merger are the beneficial owners of securities of the surviving
corporation representing at least fifty (50%) percent of the combined voting
power of the surviving corporation's then outstanding securities.
2
(e) During any period of two years, individuals who, at the beginning
of such period, constituted the Board of Directors of the Company cease, for any
reason, to constitute at least a majority thereof, unless the election or
nomination for election of each new director was approved by the vote of at
least two-thirds of the directors then still in office who were directors at the
beginning of such period.
(f) A change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the 1934 Act, or any successor regulation of similar
importance, regardless of whether the Company is subject to such reporting
requirement.
2.6 "CODE" means the Internal Revenue Code of 1986, as amended.
2.7 "COMMITTEE" means the Compensation Committee of the Board of
Directors or such other committee designated by the Board of Directors. The
Committee shall be comprised solely of at least two members who are both
Disinterested Persons and Outside Directors or by the Board of Directors in its
entirety.
2.8 "COMPANY" means Fountain Pharmaceuticals, Inc.
2.9 "CONSULTANT" means any person, including an advisor, engaged by the
Company or Affiliate to render services and who is compensated for such
services.
2.10 "DISINTERESTED PERSON" means a "disinterested person" as that term
is defined in Rule 16b-3 under the 1934 Act.
2.11 "ELIGIBLE PERSONS" shall mean, with respect to the Plan, those
persons who, at the time that an Award is granted, are (i) key personnel
(including officers and directors) of the Company or Affiliate, or (ii)
Consultants or independent contractors who provide valuable services to the
Company or Affiliate as determined by the Committee.
2.12 "EMPLOYEE" means a person employed by the Company or any Affiliate
to whom an Award is granted.
2.13 "FAIR MARKET VALUE" of the Stock as of any date means (a) the
average of the high and low sale prices of the Stock on that date on the
principal securities exchange on which the Stock is listed; or (b) if the Stock
is not listed on a securities exchange, the average of the high and low sale
prices of the Stock on that date as reported on the Nasdaq National Market
System; or (c) if the Stock is not listed on the Nasdaq National Market System,
the average of the high and low bid quotations for the Stock on that date as
reported by the National Quotation Bureau Incorporated; or (d) if none of the
foregoing is applicable, an amount at the election of the Committee equal to
(x), the average between the closing bid and ask prices per share of Stock on
the last preceding date on which those prices were reported or (y) that amount
as determined by the Committee in good faith.
3
2.14 "INCENTIVE OPTION" means an option to purchase Stock granted under
this Plan which is designated as an "Incentive Option" and satisfies the
requirements of Section 422 of the Code.
2.15 "NONQUALIFIED OPTION" means an option to purchase Stock granted
under this Plan other than an Incentive Option.
2.16 "OPTION" means both an Incentive Option and a Nonqualified Option
granted under this Plan to purchase shares of Stock.
2.17 "OPTION AGREEMENT" means the written agreement by and between the
Company and an Eligible Person which sets out the terms of an Option.
2.18 "OUTSIDE DIRECTOR" means a member of the Board of Directors
serving on the Committee who satisfies Section 162(m) of the Code.
2.19 "PLAN" means the Fountain Pharmaceuticals, Inc. 2002 Equity
Incentive Plan, as set out in this document and as it may be amended from time
to time.
2.20 "PLAN YEAR" means the Company's fiscal year.
2.21 "PERFORMANCE STOCK AWARD" means an award of shares of Stock to be
issued to an Eligible Person if specified predetermined performance goals are
satisfied as described in Article VII.
2.22 "RESTRICTED STOCK" means Stock awarded or purchased under a
Restricted Stock Agreement entered into pursuant to this Plan, together with (i)
all rights, warranties or similar items attached or accruing thereto or
represented by the certificate representing the stock and (ii) any stock or
securities into which or for which the stock is thereafter converted or
exchanged. The terms and conditions of the Restricted Stock Agreement shall be
determined by the Committee consistent with the terms of the Plan.
2.23 "RESTRICTED STOCK AGREEMENT" means an agreement between the
Company or any Affiliate and the Eligible Person pursuant to which the Eligible
Person receives a Restricted Stock Award subject to Article VI.
2.24 "RESTRICTED STOCK AWARD" means an Award of Restricted Stock.
2.25 "RESTRICTED STOCK PURCHASE PRICE" means the purchase price, if
any, per share of Restricted Stock subject to an Award. The Restricted Stock
Purchase Price shall be determined by the Committee. It may be greater than or
less than the Fair Market Value of the Stock on the date of the Stock Award.
2.26 "STOCK" means the common stock of the Company, $.001 par value or,
in the event that the outstanding shares of common stock are later changed into
4
or exchanged for a different class of stock or securities of the Company or
another corporation, that other stock or security.
2.27 "STOCK APPRECIATION RIGHT" and "SAR" means the right to receive
the difference between the Fair Market Value of a share of Stock on the grant
date and the Fair Market Value of the share of Stock on the exercise date.
2.28 "10% STOCKHOLDER" means an individual who, at the time the Option
is granted, owns Stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of any Affiliate. An individual
shall be considered as owning the Stock owned, directly or indirectly, by or for
his brothers and sisters (whether by the whole or half blood), spouse,
ancestors, and lineal descendants; and Stock owned, directly or indirectly, by
or for a corporation, partnership, estate, or trust, shall be considered as
being owned proportionately by or for its stockholders, partners, or
beneficiaries.
ARTICLE III - ELIGIBILITY
The individuals who shall be eligible to receive Awards shall be those
Eligible Persons of the Company or any of its Affiliates as the Committee shall
determine from time to time. However, no member of the Committee shall be
eligible to receive any Award or to receive Stock, Options, Stock Appreciation
Rights or any Performance Stock Award under any other plan of the Company or any
of its Affiliates, if to do so would cause the individual not to be a
Disinterested Person or Outside Director. The Board of Directors may designate
one or more individuals who shall not be eligible to receive any Award under
this Plan or under other similar plans of the Company.
ARTICLE IV - GENERAL PROVISIONS RELATING TO AWARDS
4.1 AUTHORITY TO GRANT AWARDS. The Committee may grant to those
Eligible Persons of the Company or any of its Affiliates as it shall from time
to time determine, Awards under the terms and conditions of this Plan. Subject
only to any applicable limitations set out in this Plan, the number of shares of
Stock to be covered by any Award to be granted to an Eligible Person shall be
determined by the Committee.
4.2 SHARES SUBJECT TO PLAN. The total number of shares of Stock set
aside for Awards may be granted under the Plan shall be 3,000,000 shares. The
shares may be treasury shares or authorized but unissued shares. The maximum
number of shares subject to options or stock appreciation rights which may be
issued to any eligible person under the plan during each plan year shall be
determined by the Committee. The maximum number of shares subject to restricted
stock awards which may be granted to any eligible person under the plan during
each plan year shall be determined by the Committee. The maximum number of
shares subject to performance stock awards which may be granted to any eligible
person during each plan year shall be determined by the Committee. The number of
shares stated in this Section 4.2 shall be subject to adjustment in accordance
with the provisions of Section 4.5. In the event that any outstanding Award
shall expire or terminate for any reason or any Award is surrendered, the shares
of Stock allocable to the unexercised portion of that Award may again be subject
to an Award under the Plan.
4.3 NON-TRANSFERABILITY. Awards shall not be transferable by the
Eligible Person otherwise than by will or under the laws of descent and
distribution, and shall be exercisable, during the Eligible Person's lifetime,
only by him. Restricted Stock shall be purchased by and/or become vested under a
Restricted Stock Agreement during the Eligible Person's lifetime, only by him.
5
Any attempt to transfer an Award other than under the terms of the Plan and the
Agreement shall terminate the Award and all rights of the Eligible Person to
that Award.
4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any Stock under any Award if issuing that Stock would constitute or result
in a violation by the Eligible Person or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of any Option or pursuant to any
Award, the Company shall not be required to issue any Stock unless the Committee
has received evidence satisfactory to it to the effect that the holder of that
Option or Award will not transfer the Stock except in accordance with applicable
law, including receipt of an opinion of counsel satisfactory to the Company to
the effect that any proposed transfer complies with applicable law. The
determination by the Committee on this matter shall be final, binding and
conclusive. The Company may, but shall in no event be obligated to, register any
Stock covered by this Plan pursuant to applicable securities laws of any country
or any political subdivision. In the event the Stock issuable on exercise of an
Option or pursuant to an Award is not registered, the Company may imprint on the
certificate evidencing the Stock any legend that counsel for the Company
considers necessary or advisable to comply with applicable law. The Company
shall not be obligated to take any other affirmative action in order to cause
the exercise of an Option or vesting under an Award, or the issuance of shares
pursuant thereto, to comply with any law or regulation of any governmental
authority.
4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
(a) The existence of outstanding Options or Awards shall not affect in
any way the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Stock or its rights, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise. If the Company shall effect a
subdivision or consolidation of shares or other capital readjustment, the
payment of a Stock dividend, or other increase or reduction of the number of
shares of the Stock outstanding, without receiving compensation for it in money,
services or property, then (a) the number, class, and per share price of shares
of Stock subject to outstanding Options under this Plan shall be appropriately
adjusted in such a manner as to entitle an Eligible Person to receive upon
exercise of an Option, for the same aggregate cash consideration, the equivalent
6
total number and class of shares he would have received had he exercised his
Option in full immediately prior to the event requiring the adjustment; and (b)
the number and class of shares of Stock then reserved to be issued under the
Plan shall be adjusted by substituting for the total number and class of shares
of Stock then reserved, that number and class of shares of Stock that would have
been received by the owner of an equal number of outstanding shares of each
class of Stock as the result of the event requiring the adjustment.
(b) If the Company is merged or consolidated with another corporation
and the Company is not the surviving corporation, or if the Company is
liquidated or sells or otherwise disposes of substantially all its assets while
unexercised Options remain outstanding under this Plan:
(i) subject to the provisions of clause (c) below, after
the effective date of the merger, consolidation,
liquidation, sale or other disposition, as the case
may be, each holder of an outstanding Option shall be
entitled, upon exercise of the Option, to receive, in
lieu of shares of Stock, the number and class or
classes of shares of stock or other securities or
property to which the holder would have been entitled
if, immediately prior to the merger, consolidation,
liquidation, sale or other disposition, the holder
had been the holder of record of a number of shares
of Stock equal to the number of shares as to which
the Option shall be so exercised;
(ii) the Board of Directors may waive any limitations set
out in or imposed under this Plan so that all
Options, from and after a date prior to the effective
date of the merger, consolidation, liquidation, sale
or other disposition, as the case may be, specified
by the Board of Directors, shall be exercisable in
full; and
(iii) all outstanding Options may be canceled by the Board
of Directors as of the effective date of any merger,
consolidation, liquidation, sale or other
disposition, if (i) notice of cancellation shall be
given to each holder of an Option and (ii) each
holder of an Option shall have the right to exercise
that Option in full (without regard to any
limitations set out in or imposed under this Plan or
the Option Agreement granting that Option) during a
period set by the Board of Directors preceding the
effective date of the merger, consolidation,
liquidation, sale or other disposition and, if in the
event all outstanding Options may not be exercised in
full under applicable securities laws without
registration of the shares of Stock issuable on
exercise of the Options, the Board of Directors may
limit the exercise of the Options to the number of
shares of Stock, if any, as may be issued without
registration. The method of choosing which Options
may be exercised, and the number of shares of Stock
for which Options may be exercised, shall be solely
within the discretion of the Board of Directors.
(c) After a merger of one or more corporations into the Company or
after a consolidation of the Company and one or more corporations in which the
7
Company shall be the surviving corporation, each Eligible Person shall be
entitled to have his Restricted Stock and shares earned under a Performance
Stock Award appropriately adjusted based on the manner the Stock was adjusted
under the terms of the agreement of merger or consolidation.
(d) In each situation described in this Section 4.5, the Committee will
make similar adjustments, as appropriate, in outstanding Stock Appreciation
Rights.
(e) The issuance by the Company 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 for them, or upon conversion of shares or obligations
of the Company convertible into shares or other securities, shall not affect,
and no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Awards.
4.6 ELECTION UNDER SECTION 83(B) OF THE CODE. No Employee shall
exercise the election permitted under Section 83(b) of the Code without written
approval of the Committee. Any Employee doing so shall forfeit all Awards issued
to him under this Plan.
ARTICLE V - OPTIONS AND STOCK APPRECIATION RIGHTS
5.1 TYPE OF OPTION. The Committee shall specify at the time of grant
whether a given Option shall constitute an Incentive Option or a Nonqualified
Option. Incentive Stock Options may only be granted to Employees.
5.2 OPTION PRICE. The price at which Stock may be purchased under an
Incentive Option shall not be less than the greater of: (a) 100% of the Fair
Market Value of the shares of Stock on the date the Option is granted or (b) the
aggregate par value of the shares of Stock on the date the Option is granted.
The Committee in its discretion may provide that the price at which shares of
Stock may be purchased under an Incentive Option shall be more than 100% of Fair
Market Value. In the case of any 10% Stockholder, the price at which shares of
Stock may be purchased under an Incentive Option shall not be less than 110% of
the Fair Market Value of the Stock on the date the Incentive Option is granted.
The price at which shares of Stock may be purchased under a Nonqualified Option
shall be such price as shall be determined by the Committee in its sole
discretion but in no event lower than the par value of the shares of Stock on
the date the Option is granted.
5.3 DURATION OF OPTIONS AND SARS. No Option or SAR shall be exercisable
after the expiration of ten (10) years from the date the Option or SAR is
granted. In the case of a 10% Stockholder, no Incentive Option shall be
exercisable after the expiration of five years from the date the Incentive
Option is granted.
5.4 AMOUNT EXERCISABLE -- INCENTIVE OPTIONS. Each Option may be
exercised from time to time, in whole or in part, in the manner and subject to
the conditions the Committee, in its sole discretion, may provide in the Option
Agreement, as long as the Option is valid and outstanding, and further provided
8
that no Option may be exercisable within six (6) months of the date of grant,
unless otherwise stated in the Option Agreement. To the extent that the
aggregate Fair Market Value (determined as of the time an Incentive Option is
granted) of the Stock with respect to which Incentive Options first become
exercisable by the optionee during any calendar year (under this Plan and any
other incentive stock option plan(s) of the Company or any Affiliate) exceeds
$100,000, the portion in excess of $100,000 of the Incentive Option shall be
treated as a Nonqualified Option. In making this determination, Incentive
Options shall be taken into account in the order in which they were granted.
5.5 EXERCISE OF OPTIONS. Each Option shall be exercised by the delivery
of written notice to the Committee setting forth the number of shares of Stock
with respect to which the Option is to be exercised, together with:
(a) cash, certified check, bank draft, or postal or express money order
payable to the order of the Company for an amount equal to the option price of
the shares,
(b) Stock at its Fair Market Value on the date of exercise, (if
approved in advance by the Committee),
(c) an election to make a cashless exercise through a registered
broker-dealer (if approved in advance by the Committee),
(d) an election to have shares of Stock, which otherwise would be
issued on exercise, withheld in payment of the exercise price (if approved in
advance by the Committee), and/or
(e) any other form of payment which is acceptable to the Committee,
including without limitation, payment in the form of a promissory note, and
specifying the address to which the certificates for the shares are to be
mailed.
As promptly as practicable after receipt of written notification and
payment, the Company shall deliver to the Eligible Person certificates for the
number of shares with respect to which the Option has been exercised, issued in
the Eligible Person's name. If shares of Stock are used in payment, the
aggregate Fair Market Value of the shares of Stock tendered must be equal to or
less than the aggregate exercise price of the shares being purchased upon
exercise of the Option, and any difference must be paid by cash, certified
check, bank draft, or postal or express money order payable to the order of the
Company. Delivery of the shares shall be deemed effected for all purposes when a
stock transfer agent of the Company shall have deposited the certificates in the
United States mail, addressed to the Eligible Person, at the address specified
by the Eligible Person.
Whenever an Option is exercised by exchanging shares of Stock owned by
the Eligible Person, the Eligible Person shall deliver to the Company
certificates registered in the name of the Eligible Person representing a number
of shares of Stock legally and beneficially owned by the Eligible Person, free
of all liens, claims, and encumbrances of every kind, accompanied by stock
powers duly endorsed in blank by the record holder of the shares represented by
the certificates (with signature guaranteed by a commercial bank or trust
company or by a brokerage firm having a membership on a registered national
9
stock exchange). The delivery of certificates upon the exercise of Options is
subject to the condition that the person exercising the Option provide the
Company with the information the Company might reasonably request pertaining to
exercise, sale or other disposition.
5.6 STOCK APPRECIATION RIGHTS. All Eligible Persons shall be eligible
to receive Stock Appreciation Rights. The Committee shall determine the SAR to
be awarded from time to time to any Eligible Person. The grant of an SAR to be
awarded from time to time shall neither entitle such person to, nor disqualify
such person, from participation in any other grant of awards by the Company,
whether under this Plan or any other plan of the Company. If granted as a
stand-alone SAR Award, the terms of the Award shall be provided in a Stock
Appreciation Rights Agreement.
5.7 STOCK APPRECIATION RIGHTS IN TANDEM WITH OPTIONS. Stock
Appreciation Rights may, at the discretion of the Committee, be included in each
Option granted under the Plan to permit the holder of an Option to surrender
that Option, or a portion of the part which is then exercisable, and receive in
exchange, upon the conditions and limitations set by the Committee, an amount
equal to the excess of the Fair Market Value of the Stock covered by the Option,
or the portion of it that was surrendered, determined as of the date of
surrender, over the aggregate exercise price of the Stock. The payment may be
made in shares of Stock valued at Fair Market Value, in cash, or partly in cash
and partly in shares of Stock, as the Committee shall decide in its sole
discretion. Stock Appreciation Rights may be exercised only when the Fair Market
Value of the Stock covered by the Option surrendered exceeds the exercise price
of the Stock. In the event of the surrender of an Option, or a portion of it, to
exercise the Stock Appreciation Rights, the shares represented by the Option or
that part of it which is surrendered, shall not be available for reissuance
under the Plan. Each Stock Appreciation Right issued in tandem with an Option
(a) will expire not later than the expiration of the underlying Option, (b) may
be for no more than 100% of the difference between the exercise price of the
underlying Option and the Fair Market Value of a share of Stock at the time the
Stock Appreciation Right is exercised, (c) is transferable only when the
underlying Option is transferable, and under the same conditions, and (d) may be
exercised only when the underlying Option is eligible to be exercised.
5.8 CONDITIONS OF STOCK APPRECIATION RIGHTS. All Stock Appreciation
Rights shall be subject to such terms, conditions, restrictions or limitations
as the Committee deems appropriate, including by way of illustration but not by
way of limitation, restrictions on transferability, requirement of continued
employment, individual performance, financial performance of the Company or
payment of any applicable employment or withholding taxes.
5.9 PAYMENT OF STOCK APPRECIATION RIGHTS. The amount of payment to
which the Eligible Person who reserves an SAR shall be entitled upon the
exercise of each SAR shall be equal to the amount, if any by which the Fair
Market Value of the specified shares of Stock on the exercise date exceeds the
Fair Market Value of the specified shares of Stock on the date of grant of the
SAR. The SAR shall be paid in either cash or Stock, as determined in the
discretion of the Committee as set forth in the SAR agreement. If the payment is
in Stock, the number of shares to be paid shall be determined by dividing the
amount of such payment by the Fair Market Value of Stock on the exercise date of
such SAR.
10
5.10 EXERCISE ON TERMINATION OF EMPLOYMENT. Unless it is expressly
provided otherwise in the Option or SAR agreement, Options and SAR granted to
Employees shall terminate one day less than three months after severance of
employment of the Employee from the Company and all Affiliates for any reason,
with or without cause, other than death, retirement under the then established
rules of the Company, or severance for disability. Whether authorized leave of
absence or absence on military or government service shall constitute severance
of the employment of the Employee shall be determined by the Committee at that
time.
5.11 DEATH. If, before the expiration of an Option or SAR, the Eligible
Person, whether in the employ of the Company or after he has retired or was
severed for disability, or otherwise dies, the Option or SAR shall continue
until the earlier of the Option's or SAR's expiration date or one year following
the date of his death, unless it is expressly provided otherwise in the Option
or SAR agreement. After the death of the Eligible Person, his executors,
administrators or any persons to whom his Option or SAR may be transferred by
will or by the laws of descent and distribution shall have the right, at any
time prior to the Option's or SAR's expiration or termination, whichever is
earlier, to exercise it, to the extent to which he was entitled to exercise it
immediately prior to his death, unless it is expressly provided otherwise in the
Option or SAR's agreement.
5.12 RETIREMENT. Unless it is expressly provided otherwise in the
Option Agreement, before the expiration of an Incentive Option, the Employee
shall be retired in good standing from the employ of the Company under the then
established rules of the Company, the Incentive Option shall terminate on the
earlier of the Option's expiration date or one day less than one year after his
retirement; provided, if an Incentive Option is not exercised within specified
time limits prescribed by the Code, it will become a Nonqualified Option by
operation of law. Unless it is expressly provided otherwise in the Option
Agreement, if before the expiration of a Nonqualified Option, the Employee shall
be retired in good standing from the employ of the Company under the then
established rules of the Company, the Nonqualified Option shall terminate on the
earlier of the Nonqualified Option's expiration date or one day less than one
year after his retirement. In the event of retirement, the Employee shall have
the right prior to the termination of the Nonqualified Option to exercise the
Nonqualified Option, to the extent to which he was entitled to exercise it
immediately prior to his retirement, unless it is expressly provided otherwise
in the Option Agreement. Upon retirement, an SAR shall continue to be
exercisable for the remainder of the term of the SAR agreement.
5.13 DISABILITY. If, before the expiration of an Option or SAR, the
Employee shall be severed from the employ of the Company for disability, the
Option or SAR shall terminate on the earlier of the Option's or SAR's expiration
date or one day less than one year after the date he was severed because of
disability, unless it is expressly provided otherwise in the Option or SAR
agreement. In the event that the Employee shall be severed from the employ of
the Company for disability, the Employee shall have the right prior to the
termination of the Option or SAR to exercise the Option, to the extent to which
he was entitled to exercise it immediately prior to his retirement or severance
of employment for disability, unless it is expressly provided otherwise in the
Option Agreement.
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5.14 SUBSTITUTION OPTIONS. Options may be granted under this Plan from
time to time in substitution for stock options held by employees of other
corporations who are about to become employees of or affiliated with the Company
or any Affiliate as the result of a merger or consolidation of the employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation, or the acquisition
by the Company or any Affiliate of stock of the employing corporation as the
result of which it becomes an Affiliate of the Company. The terms and conditions
of the substitute Options granted may vary from the terms and conditions set out
in this Plan to the extent the Committee, at the time of grant, may deem
appropriate to conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted.
5.15 RELOAD OPTIONS. Without in any way limiting the authority of the
Board of Directors or Committee to make or not to make grants of Options
hereunder, the Board of Directors or Committee shall have the authority (but not
an obligation) to include as part of any Option Agreement a provision entitling
the Eligible Person to a further Option (a "Reload Option") in the event the
Eligible Person exercises the Option evidenced by the Option Agreement, in whole
or in part, by surrendering other shares of Stock in accordance with this Plan
and the terms and conditions of the Option Agreement. Any such Reload Option (a)
shall be for a number of shares equal to the number of shares surrendered as
part or all of the exercise price of such Option; (b) shall have an expiration
date which is the greater of (i) the same expiration date of the Option the
exercise of which gave rise to such Reload Option or (ii) one year from the date
of grant of the Reload Option; and (c) shall have an exercise price which is
equal to one hundred percent (100%) of the Fair Market Value of the Stock
subject to the Reload Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Reload Option which is an Incentive Option and
which is granted to a 10% Stockholder, shall have an exercise price which is
equal to one hundred ten percent (110%) of the Fair Market Value of the Stock
subject to the Reload Option on the date of exercise of the original Option and
shall have a term which is no longer than five (5) years.
Any such Reload Option may be an Incentive Option or a Nonqualified
Option, as the Board of Directors or Committee may designate at the time of the
grant of the original Option; provided, however, that the designation of any
Reload Option as an Incentive Option shall be subject to the one hundred
thousand dollar ($100,000) annual limitation on exercisability of Incentive
Stock Options described in the Plan and in Section 422(d) of the Code. There
shall be no Reload Options on a Reload Option. Any such Reload Option shall be
subject to the availability of sufficient shares under Section 4.2 herein and
shall be subject to such other terms and conditions as the Board of Directors or
Committee may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
5.16 NO RIGHTS AS STOCKHOLDER. No Eligible Person shall have any rights
as a stockholder with respect to Stock covered by his Option until the date a
stock certificate is issued for the Stock.
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ARTICLE VI - RESTRICTED STOCK AWARDS
6.1 RESTRICTED STOCK AWARDS. The Committee may issue shares of Stock to
an Eligible Person subject to the terms of a Restricted Stock Agreement. The
Restricted Stock may be issued for no payment by the Eligible Person or for a
payment below the Fair Market Value on the date of grant. Restricted Stock shall
be subject to restrictions as to sale, transfer, alienation, pledge or other
encumbrance and generally will be subject to vesting over a period of time
specified in the Restricted Stock Agreement. The Committee shall determine the
period of vesting, the number of shares, the price, if any, of Stock included in
a Restricted Stock Award, and the other terms and provisions which are included
in a Restricted Stock Agreement.
6.2 RESTRICTIONS. Restricted Stock shall be subject to the terms and
conditions as determined by the Committee, including without limitation, any or
all of the following:
(a) a prohibition against the sale, transfer, alienation, pledge or
other encumbrance of the shares of Restricted Stock, such prohibition to lapse
(i) at such time or times as the Committee shall determine (whether in annual or
more frequent installments, at the time of the death, disability or retirement
of the holder of such shares, or otherwise);
(b) a requirement that the holder of shares of Restricted Stock
forfeit, or in the case of shares sold to an Eligible Person, resell back to the
Company at his cost, all or a part of such shares in the event of termination of
the Eligible Person's employment during any period in which the shares remain
subject to restrictions;
(c) a prohibition against employment of the holder of Restricted Stock
by any competitor of the Company or its Affiliates, or against such holder's
dissemination of any secret or confidential information belonging to the Company
or an Affiliate;
(d) unless stated otherwise in the Restricted Stock Agreement,
(i) if restrictions remain at the time of severance of
employment with the Company and all Affiliates, other
than for reason of disability or death, the
Restricted Stock shall be forfeited; and
(ii) if severance of employment is by reason of disability
or death, the restrictions on the shares shall lapse
and the Eligible Person or his heirs or estate shall
be 100% vested in the shares subject to the
Restricted Stock Agreement.
6.3 STOCK CERTIFICATE. Shares of Restricted Stock shall be registered
in the name of the Eligible Person receiving the Restricted Stock Award and
deposited, together with a stock power endorsed in blank, with the Company. Each
such certificate shall bear a legend in substantially the following form:
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"The transferability of this certificate and the shares of
Stock represented by it is restricted by and subject to the
terms and conditions (including conditions of forfeiture)
contained in the Fountain Pharmaceuticals, Inc. 2002 Equity
Incentive Plan, and an agreement entered into between the
registered owner and the Company. A copy of the Plan and
agreement is on file in the office of the Secretary of the
Company."
6.4 RIGHTS AS STOCKHOLDER. Subject to the terms and conditions of the
Plan, each Eligible Person receiving a certificate for Restricted Stock shall
have all the rights of a stockholder with respect to the shares of Stock
included in the Restricted Stock Award during any period in which such shares
are subject to forfeiture and restrictions on transfer, including without
limitation, the right to vote such shares. Dividends paid with respect to shares
of Restricted Stock in cash or property other than Stock in the Company or
rights to acquire stock in the Company shall be paid to the Eligible Person
currently. Dividends paid in Stock in the Company or rights to acquire Stock in
the Company shall be added to and become a part of the Restricted Stock.
6.5 LAPSE OF RESTRICTIONS. At the end of the time period during which
any shares of Restricted Stock are subject to forfeiture and restrictions on
sale, transfer, alienation, pledge, or other encumbrance, such shares shall vest
and will be delivered in a certificate, free of all restrictions, to the
Eligible Person or to the Eligible Person's legal representative, beneficiary or
heir; provided the certificate shall bear such legend, if any, as the Committee
determines is reasonably required by applicable law. By accepting a Stock Award
and executing a Restricted Stock Agreement, the Eligible Person agrees to remit
when due any federal and state income and employment taxes required to be
withheld.
6.6 RESTRICTION PERIOD. No Restricted Stock Award may provide for
restrictions continuing beyond ten (10) years from the date of grant.
ARTICLE VII - PERFORMANCE STOCK AWARDS
7.1 AWARD OF PERFORMANCE STOCK. The Committee may award shares of
Stock, without any payment for such shares, to designated Eligible Persons if
specified performance goals established by the Committee are satisfied. The
terms and provisions herein relating to these performance based awards are
intended to satisfy Section 162(m) of the Code and regulations issued
thereunder. The designation of an employee eligible for a specific Performance
Stock Award shall be made by the Committee in writing prior to the beginning of
the period for which the performance is measured (or within such period as
permitted by IRS regulations). The Committee shall establish the maximum number
of shares of Stock to be issued to a designated Employee if the performance goal
or goals are met. The Committee reserves the right to make downward adjustments
in the maximum amount of an Award if in its discretion unforeseen events make
such adjustment appropriate.
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7.2 PERFORMANCE GOALS. Performance goals determined by the Committee
may be based on specified increases in cash flow, net profits, Stock price,
Company, segment or Affiliate sales, market share, earnings per share, return on
assets, and/or return on stockholders' equity.
7.3 ELIGIBILITY. The employees eligible for Performance Stock Awards
are the senior officers (i.e., chief executive officer, president, vice
presidents, secretary, treasurer, and similar positions) of the Company and its
Affiliates, and such other employees of the Company and its Affiliates as may be
designated by the Committee.
7.4 CERTIFICATE OF PERFORMANCE. The Committee must certify in writing
that a performance goal has been attained prior to issuance of any certificate
for a Performance Stock Award to any Employee. If the Committee certifies the
entitlement of an Employee to the Performance Stock Award, the certificate will
be issued to the Employee as soon as administratively practicable, and subject
to other applicable provisions of the Plan, including but not limited to, all
legal requirements and tax withholding. However, payment may be made in shares
of Stock, in cash, or partly in cash and partly in shares of Stock, as the
Committee shall decide in its sole discretion. If a cash payment is made in lieu
of shares of Stock, the number of shares represented by such payment shall not
be available for subsequent issuance under this Plan.
ARTICLE VII - BONUS STOCK AWARDS
8.1 AWARD OF BONUS STOCK. The committee may award shares of Stock to
Eligible Persons, without any payment for such shares and without any specified
performance goals. The Committee reserves the right to issue such amount of
shares to Eligible Persons as the Committee deems fit.
8.2 ELIGIBILITY. The Employees eligible for Bonus Stock Awards are the
senior officers (i.e., chief executive officer, chief operating officer, chief
financial officer, president, vice presidents, secretary, treasurer, and similar
positions) and consultants of the Company and its Affiliates, and such other
employees of the Company and its Affiliates as may be designated by the
Committee.
ARTICLE IX - ADMINISTRATION
The Plan shall be administered by the Committee. All questions of
interpretation and application of the Plan and Awards shall be subject to the
determination of the Committee. A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by a majority of the members shall be as effective as if it had been made
by a majority vote at a meeting properly called and held. This Plan shall be
administered in such a manner as to permit the Options which are designated to
be Incentive Options to qualify as Incentive Options. In carrying out its
authority under this Plan, the Committee shall have full and final authority and
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discretion, including but not limited to the following rights, powers and
authorities, to:
(a) determine the Eligible Persons to whom and the time or times at
which Options or Awards will be made,
(b) determine the number of shares and the purchase price of Stock
covered in each Option or Award, subject to the terms of the Plan,
(c) determine the terms, provisions and conditions of each Option and
Award, which need not be identical,
(d) accelerate the time at which any outstanding Option or SAR may be
exercised, or Restricted Stock Award will vest,
(e) define the effect, if any, on an Option or Award of the death,
disability, retirement, or termination of employment of the Employee,
(f) prescribe, amend and rescind rules and regulations relating to
administration of the Plan, and
(g) make all other determinations and take all other actions deemed
necessary, appropriate, or advisable for the proper administration of this Plan.
The actions of the Committee in exercising all of the rights, powers,
and authorities set out in this Article and all other Articles of this Plan,
when performed in good faith and in its sole judgment, shall be final,
conclusive and binding on all parties.
ARTICLE X - AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend, terminate or suspend
this Plan at any time, in its sole and absolute discretion; provided, however,
that to the extent required to qualify this Plan under Rule 16b-3 promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended, no
amendment that would (a) materially increase the number of shares of Stock that
may be issued under this Plan, (b) materially modify the requirements as to
eligibility for participation in this Plan, or (c) otherwise materially increase
the benefits accruing to participants under this Plan, shall be made without the
approval of the Company's stockholders; provided further, however, that to the
extent required to maintain the status of any Incentive Option under the Code,
no amendment that would (a) change the aggregate number of shares of Stock which
may be issued under Incentive Options, (b) change the class of employees
eligible to receive Incentive Options, or (c) decrease the Option price for
Incentive Options below the Fair Market Value of the Stock at the time it is
granted, shall be made without the approval of the Company's stockholders.
Subject to the preceding sentence, the Board of Directors shall have the power
to make any changes in the Plan and in the regulations and administrative
provisions under it or in any outstanding Incentive Option as in the opinion of
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counsel for the Company may be necessary or appropriate from time to time to
enable any Incentive Option granted under this Plan to continue to qualify as an
incentive stock option or such other stock option as may be defined under the
Code so as to receive preferential federal income tax treatment.
ARTICLE XI - MISCELLANEOUS
11.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside
nor shall a trust fund of any kind be established to secure the rights of any
Eligible Person under this Plan. All Eligible Persons shall at all times rely
solely upon the general credit of the Company for the payment of any benefit
which becomes payable under this Plan.
11.2 NO EMPLOYMENT OBLIGATION. The granting of any Option or Award
shall not constitute an employment contract, express or implied, nor impose upon
the Company or any Affiliate any obligation to employ or continue to employ any
Eligible Person. The right of the Company or any Affiliate to terminate the
employment of any person shall not be diminished or affected by reason of the
fact that an Option or Award has been granted to him.
11.3 FORFEITURE. Notwithstanding any other provisions of this Plan, if
the Committee finds by a majority vote after full consideration of the facts
that an Eligible Person, before or after termination of his employment with the
Company or an Affiliate for any reason (a) committed or engaged in fraud,
embezzlement, theft, commission of a felony, or proven dishonesty in the course
of his employment by the Company or an Affiliate, which conduct damaged the
Company or Affiliate, or disclosed trade secrets of the Company or an Affiliate,
or (b) participated, engaged in or had a material, financial or other interest,
whether as an employee, officer, director, consultant, contractor, stockholder,
owner, or otherwise, in any commercial endeavor in the United States which is
competitive with the business of the Company or an Affiliate without the written
consent of the Company or Affiliate, the Eligible Person shall forfeit all
outstanding Options and all outstanding Awards, and including all exercised
Options and other situations pursuant to which the Company has not yet delivered
a stock certificate. Clause (b) shall not be deemed to have been violated solely
by reason of the Eligible Person's ownership of stock or securities of any
publicly owned corporation, if that ownership does not result in effective
control of the corporation.
The decision of the Committee as to the cause of an Employee's
discharge, the damage done to the Company or an Affiliate, and the extent of an
Eligible Person's competitive activity shall be final. No decision of the
Committee, however, shall affect the finality of the discharge of the Employee
by the Company or an Affiliate in any manner.
11.4 TAX WITHHOLDING. The Company or any Affiliate shall be entitled to
deduct from other compensation payable to each Eligible Person any sums required
by federal, state, or local tax law to be withheld with respect to the grant or
exercise of an Option or SAR, lapse of restrictions on Restricted Stock, or
award of Performance Stock. In the alternative, the Company may require the
Eligible Person (or other person exercising the Option, SAR or receiving the
Stock) to pay the sum directly to the employer corporation. If the Eligible
Person (or other person exercising the Option or SAR or receiving the Stock) is
required to pay the sum directly, payment in cash or by check of such sums for
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taxes shall be delivered within 10 days after the date of exercise or lapse of
restrictions. The Company shall have no obligation upon exercise of any Option
or lapse of restrictions on Stock until payment has been received, unless
withholding (or offset against a cash payment) as of or prior to the date of
exercise or lapse of restrictions is sufficient to cover all sums due with
respect to that exercise. The Company and its Affiliates shall not be obligated
to advise an Eligible Person of the existence of the tax or the amount which the
employer corporation will be required to withhold.
11.5 WRITTEN AGREEMENT. Each Option and Award shall be embodied in a
written agreement which shall be subject to the terms and conditions of this
Plan and shall be signed by the Eligible Person and by a member of the Committee
on behalf of the Committee and the Company or an executive officer of the
Company, other than the Eligible Person, on behalf of the Company. The agreement
may contain any other provisions that the Committee in its discretion shall deem
advisable which are not inconsistent with the terms of this Plan.
11.6 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. With
respect to administration of this Plan, the Company shall indemnify each present
and future member of the Committee and the Board of Directors against, and each
member of the Committee and the Board of Directors shall be entitled without
further act on his part to indemnity from the Company for, all expenses
(including attorney's fees, the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his being or having been a member of the Committee
and/or the Board of Directors, whether or not he continues to be a member of the
Committee and/or the Board of Directors at the time of incurring the expenses,
including, without limitation, matters as to which he shall be finally adjudged
in any action, suit or proceeding to have been found to have been negligent in
the performance of his duty as a member of the Committee or the Board of
Directors. However, this indemnity shall not include any expenses incurred by
any member of the Committee and/or the Board of Directors in respect of matters
as to which he shall be finally adjudged in any action, suit or proceeding to
have been guilty of gross negligence or willful misconduct in the performance of
his duty as a member of the Committee and the Board of Directors. In addition,
no right of indemnification under this Plan shall be available to or enforceable
by any member of the Committee and the Board of Directors unless, within 60 days
after institution of any action, suit or proceeding, he shall have offered the
Company, in writing, the opportunity to handle and defend same at its own
expense. This right of indemnification shall inure to the benefit of the heirs,
executors or administrators of each member of the Committee and the Board of
Directors and shall be in addition to all other rights to which a member of the
Committee and the Board of Directors may be entitled as a matter of law,
contract, or otherwise.
11.7 GENDER. If the context requires, words of one gender when used in
this Plan shall include the others and words used in the singular or plural
shall include the other.
11.8 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of the Plan and shall
not be used in construing the terms of the Plan.
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11.9 OTHER COMPENSATION PLANS. The adoption of this Plan shall not
affect any other stock option, incentive or other compensation or benefit plans
in effect for the Company or any Affiliate, nor shall the Plan preclude the
Company from establishing any other forms of incentive or other compensation for
employees of the Company or any Affiliate.
11.10 OTHER OPTIONS OR AWARDS. The grant of an Option or Award shall
not confer upon the Eligible Person the right to receive any future or other
Options or Awards under this Plan, whether or not Options or Awards may be
granted to similarly situated Eligible Persons, or the right to receive future
Options or Awards upon the same terms or conditions as previously granted.
11.11 GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Delaware.
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