Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, For Use of the
Commission Only (as
permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
U.S. Home & Garden Inc.
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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(1) Title of each class of securities to which
transaction applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid 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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U.S. HOME & GARDEN INC.
3590 EAST COLUMBIA STREET
TUCSON, ARIZONA 85714
April [ ], 2004
Dear Fellow Stockholders:
A Special Meeting of Stockholders will be held on Monday, April 19,
2004 at 9:00 A.M., at the offices of Blank Rome LLP, 405 Lexington Avenue - 24th
Floor, New York, New York 10174.
The Notice of Special Meeting and Proxy Statement which follow describe
the business to be conducted at the Special Meeting.
Whether or not you plan to attend the Special Meeting in person, it is
important that your shares be represented and voted. After reading the enclosed
Notice of Special Meeting and Proxy Statement, I urge you to complete, sign,
date and return your proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please advise our Transfer Agent,
Continental Stock Transfer & Trust Company, in writing, at 2 Broadway, New York,
New York 10004.
The Special Meeting will be held solely to tabulate the votes cast and
report on the results of the voting on those matters listed in the accompanying
proxy statement. No presentations or other business matters are planned for the
meeting.
Your vote is very important, and we will appreciate a prompt return of
your signed proxy card.
Cordially,
Robert Howard
Chairman of the Board
PRELIMINARY COPY
U.S. HOME & GARDEN INC.
3590 EAST COLUMBIA STREET
TUCSON, ARIZONA 85714
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 19, 2004
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To the Stockholders of U.S. Home & Garden Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of U.S.
Home & Garden Inc. (the "Company') will be held on Monday, April 19, 2004 at
9:00 A.M. local time at the offices of Blank Rome LLP, 405 Lexington Avenue -
24th Floor, New York, New York 10174 for the following purposes:
1. To consider and vote upon a proposed amendment of the Company's
Certificate of Incorporation to change the Company's name to Ionatron, Inc.
2. To consider and vote upon a proposed amendment of the Company's
Certificate of Incorporation to increase number of authorized shares of the
Company's common stock from 75,000,000 to 100,000,000;
3. To consider and vote upon a proposed amendment of the Company's
Certificate of Incorporation to classify the Company's Board of Directors into
three classes;
4. To approve the Company's 2004 Stock Incentive Plan; and
5. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record on the books of the Company at the close of
business on March 29, 2004 will be entitled to notice of and to vote at the
meeting or any adjournments thereof.
April [ ], 2004 By order of the Board of Directors
Robert Howard
Chairman of the Board
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE
PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
PRELIMINARY COPY
PROXY STATEMENT
U.S. HOME & GARDEN INC.
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 19, 2004
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of U.S. Home & Garden Inc. (the "Company")
for use at the Special Meeting of Stockholders to be held on Monday, April 19,
2004 (the "Special Meeting"), including any adjournment or adjournments thereof,
for the purposes set forth in the accompanying Notice of Meeting.
Management intends to mail this proxy statement and the accompanying
form of proxy to stockholders on or about April 5, 2004.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Special Meeting.
Any proxy given pursuant to such solicitation may be revoked by the stockholder
at any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the meeting and voting in person.
The address and telephone number of the principal executive offices of
the Company are:
3590 East Columbia Street
Tucson, Arizona 85714
Telephone: (520) 628-7415
OUTSTANDING STOCK AND VOTING RIGHTS
Only stockholders of record at the close of business on March 29, 2004
(the "Record Date") are entitled to notice of and to vote at the Special
Meeting. As of the Record Date, there were issued and outstanding 67,798,339
shares of the Company's Common Stock, $.001 par value per share (the "Common
Stock"), the Company's only class of voting securities. Each share of Common
Stock entitles the holder thereof to cast one vote on each matter submitted to a
vote at the Special Meeting.
VOTING PROCEDURES
At the Special Meeting, the proposed amendments to the Company's
Certificate of Incorporation set forth in Proposals I through III below will be
approved upon receiving the affirmative vote of the holders of a majority of the
shares of Common Stock outstanding on the Record Date. All other matters,
including the proposal to approve the Company's 2004 Stock Incentive Plan set
forth in Proposal IV below, to come before the Special Meeting will be decided
by the affirmative vote of the holders of a majority of the shares of Common
Stock represented at the Special Meeting and entitled to vote on the matter
presented in person or by proxy, provided a quorum is present. A quorum is
present if at least a majority of the shares of Common Stock outstanding as of
the Record Date are present in person or represented by proxy at the Special
Meeting. It is currently anticipated that votes will be counted and certified by
an Inspector of Election who is currently expected to be either an employee of
the Company or its legal counsel. In accordance with Delaware law, abstentions
and "broker non-votes" (i.e. proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owner or other
persons entitled to vote shares as to a matter with respect to which the brokers
or nominees do not have discretionary power to vote) will be treated as present
for purposes of determining the presence of a quorum. For purposes of
determining approval of a matter presented at the meeting, abstentions will be
deemed present and entitled to vote and will, therefore, have the same legal
effect as a vote "against" a matter presented at the meeting. Broker non-votes
will be deemed not entitled to vote on the subject matter as to which the
non-vote is indicated. Because of the requirement for an absolute majority of
the outstanding Common Stock to approve the proposed amendments to the
Certificate of Incorporation, broker non-votes will also have the same effect as
a vote "against" the proposed amendments to the Certificate of Incorporation.
Broker non-votes will, however, have no legal effect on the vote on any other
particular matter, which requires the affirmative vote of the holders of a
majority of the shares of Common Stock represented at the Special Meeting,
including the proposal to approve the Company's 2004 Stock Incentive Plan.
The officers of the Company who, in the aggregate own approximately 68%
of the outstanding common stock of the Company on the Record Date, have
indicated their intent to vote in favor of the proposals, which, if so voted, is
sufficient for approval of all of the proposals.
The enclosed proxies will be voted in accordance with the instructions
thereon. Unless otherwise stated, all shares represented by such proxy will be
voted as instructed. Proxies may be revoked as noted above.
The entire cost of soliciting proxies, including the costs of
preparing, assembling, printing and mailing this Proxy Statement, the proxy and
any additional soliciting material furnished to stockholders, will be borne by
the Company. Arrangements will be made with brokerage houses, banks and other
custodians, nominees and fiduciaries to send proxies and proxy materials to the
beneficial owners of stock, and the Company expects to reimburse such persons
for their reasonable out-of-pocket expenses. Proxies may also be solicited by
directors, officers or employees of the Company in person or by telephone,
telegram or other means. No additional compensation will be paid to such
individuals for these services.
CHANGE OF CONTROL
As a result of the merger on March 18, 2004 of Ionatron Acquisition
Corp., a wholly- owned subsidiary of the Company ("Merger Sub"), with and into
Ionatron, Inc. ("Ionatron"), making Ionatron, a wholly owned subsidiary of the
Company (the "Merger"), a change of control of the Company occurred. Pursuant to
the terms of the Amended and Restated Plan and Agreement of Merger (the "Merger
Agreement") by and among the Company, Merger Sub, Robert Kassel (for purposes of
Sections 5.9, 6.2(d), 6.2(j), 9.4 and 10.10 of the Merger Agreement only), Fred
Heiden (for purposes of Section 9.4 of the Merger Agreement only), Ionatron and
Robert Howard, Stephen W. McCahon, Thomas C. Dearmin and Joseph C. Hayden
(collectively, the "Ionatron Stockholders"), the Company issued an aggregate of
48,452,249 shares of Common Stock, of which the Ionatron Stockholders received
an aggregate of 46,127,898 shares of the Company's common stock in exchange for
all of the shares of stock of Ionatron and the remaining 2,324,3571 shares of
Common Stock were placed in escrow. The 48,452,249 shares of the Company's
Common Stock represented approximately 66.11% of the Common Stock of the Company
on a fully diluted basis immediately after the Merger. The consideration by the
Company in connection with the Merger was determined by negotiations among
certain parties to the Merger.
Prior to the negotiation of the Merger Agreement, there was no
relationship between the Company and Ionatron, their respective affiliates,
directors and officers, or any associate of any such director or officer.
Upon consummation of the acquisition, Mr. Howard, Mr. Dearmin, George
Farley, James Harlan and David Hurley were appointed directors and the former
directors of the Company resigned. Thereafter, Rear Admiral Thomas W. Steffens,
U.S. Navy (Ret.), was appointed as a member of the Board of Directors.
PROPOSAL I
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CHANGE THE COMPANY'S NAME TO "IONATRON, INC."
The Board of Directors has adopted a resolution proposing that the
Company amend its Certificate of Incorporation to change the name of the Company
to "Ionatron, Inc."
The Board of Directors and management of the Company believe that the
proposed change in the Company's name will enable the Company to establish an
image which identifies the Company's new business activities resulting from its
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recent acquisition of Ionatron, Inc. In the event that the proposed amendment is
not approved at the Annual Meeting, the Company will not change its name. If the
corporate name is changed, the Company intends to also change its common stock
trading symbol.
Recommendation
The Board of Directors believes that change in the Company's name to
"Ionatron, Inc." is in the best interests of the Company's stockholders and
recommends a vote "FOR" this proposed amendment to the Company's Certificate of
Incorporation to change the Company's name.
PROPOSAL II
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT AN INCREASE IN
AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted a resolution proposing that the
Company amend its Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 75,000,000 shares to 100,000,000 shares.
The Board of Directors considers this proposal advisable in order to
provide flexibility for capital raising, future acquisitions and other future
capital requirements. As a result of the Merger, approximately 73,800,000 shares
of Common Stock are issued and outstanding or reserved for future grant under
outstanding options and warrants. As a result, only approximately 1,200,000
shares of Common Stock remain as authorized and unissued and are not reserved.
The Board of Directors believes that it would be beneficial to the Company to be
in a position to make additional issuances of such Common Stock or convertible
securities if circumstances warrant such issuances. Approval by the stockholders
of this proposal at the Special Meeting will avoid the possible need to call and
hold a special meeting on an expedited basis for that purpose at a later date
thereby enabling the Company to act quickly where a potential capital raising or
acquisition opportunity arises or if the Board otherwise determines that it is
advisable to issue additional shares of Common Stock. The Company does not have
any plans, commitments or understanding with respect to any financings or
acquisitions at this time.
Once authorized, additional shares of Common Stock may be issued with
approval of the Board of Directors at such time or times, to such persons and
for such consideration as the Board deems appropriate, without further
stockholder action, unless stockholder approval is required by law or the
Company's Certificate of Incorporation or By-laws. Although such additional
shares could be used to dilute the share ownership of persons seeking to obtain
control of the Company, approval of this proposal is not being sought for that
purpose. Holders of Common Stock have no preemptive rights.
Recommendation
The Board of Directors believes that an increase in the Company's
authorized common stock is in the best interest of the Company's stockholders
and recommends a vote "FOR" this proposed amendment to the Company's Certificate
of Incorporation.
3
PROPOSAL III
AMENDMENT TO THE COMPANY'S CERTIFICATE
OF INCORPORATION TO CLASSIFY THE
COMPANY'S BOARD OF DIRECTORS
The Board of Directors has adopted a resolution proposing that the
Company amend its Certificate of Incorporation to classify the Company's Board
of Directors into three classes. The initial term of all classes of directors
will expire at the next Annual Meeting of Stockholders (the "Next Annual
Meeting"). Directors elected at the Next Annual Meeting as Class I directors
will hold office for an initial term expiring at the first annual meeting of
stockholders after the Next Annual Meeting; directors elected at the Next Annual
Meeting as Class II directors to hold office for an initial term expiring at the
second annual meeting of stockholders after the Next Annual Meeting; and
directors elected at the Next Annual Meeting as Class III directors to hold
office for an initial term expiring at the third annual meeting of stockholders
after the Next Annual Meeting; and, thereafter, the successors to the directors
of the class whose terms expire in that year shall be elected to hold office for
a term of three years.
The Company's Board of Directors believes that a classified Board of
Directors may facilitate stability of the Company's business and the Board of
Director's control of the direction of the Company. A classified Board of
Directors may also allow the Board of Directors the time required to consider
the long-term business strategies of the Company. A classified Board of
Directors could also have an anti-takeover effect. A classified Board of
Directors could enhance the Board of Directors' powers to cause hostile
acquirors to negotiate with the Board of Directors so that the stockholders of
the Company may receive full value for their shares and the fairest deal
possible.
Recommendation
The Board of Directors believes that a classified Board of Directors is
in the best interest of the Company's stockholders and recommends a vote "FOR"
this proposed amendment to the Company's Certificate of Incorporation to
classify the Company's Board of Directors.
PROPOSAL IV
APPROVAL OF 2004 STOCK INCENTIVE PLAN
On March 18, 2004, the Board of Directors adopted a resolution
recommending adoption by stockholders of the 2004 Stock Incentive Plan (the
"2004 Plan"). The Board believes that, to enable the Company to continue to
attract and retain personnel of the highest caliber, provide incentive for
officers, directors, employees and other key persons and to promote the
well-being of the Company, it is in the best interest of the Company and its
stockholders to provide to officers, directors, employees, consultants and other
independent contractors who perform services for the Company, through the
granting of stock options, restricted stock, deferred stock or other stock-based
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awards, the opportunity to participate in the value and/or appreciation in value
of the Company's Common Stock. The Board has found that the grant of options
under its existing stock option plans has proven to be a valuable tool in
attracting, retaining and motivating key employees and consultants. Accordingly,
the Board believes that the 2004 Plan, which provides the Board greater
flexibility with respect to certain terms under which awards that may be
granted, as well as different types of awards, (a) will provide the Company with
significant means to attract and retain talented personnel, (b) will result in
saving cash, which otherwise would be required to maintain current employees and
adequately attract and reward personnel and others who perform services for the
Company, and (c) consequently, will prove beneficial to the Company's ability to
be competitive. The Company believes that there is not a sufficient amount of
options and stock awards available for future grant under the Company's existing
stock option plans. The last sale price of the Common Stock on [ ], 2004 was $[
].
To date, no options or other awards have been granted under the 2004
Plan. If the 2004 Plan is approved by the stockholders, options or stock awards
may be granted under the 2004 Plan, the timing, amounts and specific terms of
which have not been determined at this time.
The following summary of the 2004 Plan does not purport to be complete,
and is subject to and qualified in its entirety by reference to the full text of
the 2004 Plan, set forth as Exhibit A to this Proxy Statement.
Summary of the 2004 Plan
The 2004 Plan provides for the grant of any or all of the following
types of awards (collectively, "Awards"): (a) stock options, (b) restricted
stock, (c) deferred stock and (d) other stock-based awards. Awards may be
granted singly, in combination, or in tandem, as determined by the Board of
Directors or the Committee (as defined below). Subject to anti-dilution
adjustments as provided in the 2004 Plan, (i) a total of 3,000,000 shares of
Common Stock have been reserved for distribution pursuant to the 2004 Plan, and
(ii) the maximum number of shares of Common Stock that may be issued to any
individual participant under the 2004 Plan may not exceed 2,000,000 shares
during the term of the 2004 Plan.
The 2004 Plan may be administered by the Board of Directors (the
"Board") or a Committee (the "Committee") consisting of two or more members of
the Board of Directors appointed by the Board. The Board or the Committee will
determine, among other things, the persons to whom Awards will be granted, the
type of Awards to be granted, the number of shares subject to each Award and the
share price. The Board or the Committee will also determine the term of each
Award, the restrictions or limitations thereon, and the manner in which each
such Award may be exercised or, if applicable, the extent and circumstances
under which Common Stock and other amounts payable with respect to an Award will
be deferred. The 2004 Plan will become effective upon its approval and adoption
at the Annual Meeting (the "Effective Date") and no Award shall be granted
pursuant to the 2004 Plan on or after the tenth anniversary of the Effective
Date.
Stock Options. The 2004 Plan provides for the grant of "incentive stock options"
("Incentive Stock Options"), as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and for options not qualifying as
Incentive Stock Options ("Non-Qualified Stock Options"). The Board or the
Committee, as the case may be, shall determine those persons to whom stock
options may be granted.
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Incentive Stock Options granted pursuant to the 2004 Plan are
nontransferable by the optionee during his lifetime. Options granted pursuant to
the 2004 Plan will expire if not exercised within 10 years of the grant (five
years in the case of Incentive Stock Options granted to an eligible employee
owning stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a parent or subsidiary of the Company
immediately before the grant ("10% Stockholder")), and under certain
circumstances set forth in the 2004 Plan, may be exercised within three (3)
months following termination of employment (one year in the event of death,
retirement or disability of the optionee), unless the term of the option,
pursuant to the stock option agreement, expires earlier. Options may be granted
to optionees in such amounts and at such prices as may be determined, from time
to time, by the Board or the Committee. The exercise price of an Incentive Stock
Option will not be less than the fair market value of the shares underlying the
option on the date the option is granted, provided, however, that the exercise
price of an Incentive Stock Option granted to a 10% Stockholder may not be less
than 110% of such fair market value. The exercise price of a Non-Qualified Stock
Option may be less than such fair market value on the date of grant.
Under the 2004 Plan, the Company may not, in the aggregate, grant
Incentive Stock Options that are first exercisable by any optionee during any
calendar year (under all such plans of the optionee's employer corporation and
its "parent" and "subsidiary" corporations, as those terms are defined in
Section 424 of the Code) to the extent that the aggregate fair market value of
the underlying stock (determined at the time the option is granted) exceeds
$100,000.
The 2004 Plan contains anti-dilution provisions authorizing appropriate
adjustments in certain circumstances. Shares of Common Stock subject to Awards
which expire without being exercised or which are cancelled as a result of the
cessation of employment are available for further grants. No shares of Common
Stock of the Company may be issued upon the exercise of any option granted under
the 2004 Plan until the full option price has been paid by the optionee. The
Board of Directors or the Committee may grant individual options under the 2004
Plan with more stringent provisions than those specified in the 2004 Plan.
Options become exercisable in such amounts, at such intervals and upon
such terms and conditions as the Board of Directors or the Committee provides.
Stock options granted under the 2004 Plan are exercisable until the earlier of
(i) a date set by the Board of Directors or Committee at the time of grant or
(ii) the close of business on the day before the tenth anniversary of the stock
option's date of grant (the day before the fifth anniversary in the case of an
Incentive Stock Option granted to a 10% Stockholder). The 2004 Plan will remain
in effect until all stock options are exercised or terminated. Notwithstanding
the foregoing, no options may be granted on or after the tenth anniversary of
the Effective Date.
Restricted and Deferred Stock Awards. Under the 2004 Plan, the Board or the
Committee may grant shares of restricted Common Stock either alone or in tandem
with other Awards. Restricted and Deferred Stock awards give the recipient the
right to receive a specified number of shares of Common Stock, subject to such
terms, conditions and restrictions as the Board or the Committee deems
appropriate. Restrictions may include limitations on the right to transfer the
stock until the expiration of a specified period of time and forfeiture of the
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stock upon the occurrence of certain events such as the termination of
employment prior to expiration of a specified period of time. In addition, a
participant in the 2004 Plan who has received a Deferred Stock Award may
request, under certain conditions, the Board or the Committee to defer the
receipt of an Award (or an installment of an Award) for an additional specified
period or until the occurrence of a specified event.
Other Stock Based Awards. Other Stock-Based Awards, which may include
performance shares and shares valued by reference to the performance of the
Company or any parent or subsidiary of the Company, may be granted either alone
or in tandem with other Awards.
Certain Federal Income Tax Consequences of the 2004 Plan
The following is a brief summary of the Federal income tax aspects of
Awards made under the 2004 Plan based upon statutes, regulations and
interpretations in effect on the date hereof. This summary is not intended to be
exhaustive, and does not describe state or local tax consequences.
1. Incentive Stock Options. The optionee will recognize no taxable
income upon the grant or exercise of an Incentive Stock Option. Upon a
disposition of the shares of Common Stock received upon exercise of an Incentive
Stock Option after the later of two years from the date of grant and one year
after the transfer of the shares to the optionee, (a) the optionee will
recognize the difference, if any, between the amount realized and the exercise
price as long-term capital gain or long-term capital loss (as the case may be)
if the shares are capital assets in his or her hands; and (b) the Company will
not qualify for any deduction in connection with the grant or exercise of the
options. The excess, if any, of the fair market value of the shares on the date
of exercise of an Incentive Stock Option over the exercise price will be treated
as an item of adjustment to the optionee for his or her taxable year in which
the exercise occurs and may result in an alternative minimum tax liability for
the optionee. In the case of a disposition of shares in the same taxable year as
the exercise where the amount realized on the disposition is less than the fair
market value of the shares on the date of exercise, there will be no adjustment
since the amount treated as an item of adjustment, for alternative minimum tax
purposes, is limited to the excess of the amount realized on such disposition
over the exercise price which is the same amount included in regular taxable
income.
If Common Stock acquired upon the exercise of an Incentive Stock Option
is disposed of prior to the expiration of the holding periods described above,
(a) the optionee will recognize ordinary compensation income in the taxable year
of disposition in an amount equal to the excess, if any, of the lesser of the
fair market value of the shares on the date of exercise or the amount realized
on the disposition of the shares, over the exercise price paid for such shares;
and (b) the Company will qualify for a deduction equal to any such amount
recognized, subject to the requirements that the compensation be reasonable and
not limited under Section 162(m) of the Code. The optionee will recognize the
excess, if any, of the amount realized over the fair market value of the shares
on the date of exercise, if the shares are capital assets in his or her hands,
as short-term or long-term capital gain, depending on the length of time that
the optionee held the shares, and the Company will not qualify for a deduction
with respect to such excess.
7
Subject to certain exceptions for disability or death, if an Incentive
Stock Option is exercised more than three months following the termination of
the optionee's employment, the option will generally be taxed as a Non-Qualified
Stock Option. See "Non-Qualified Stock Options."
2. Non-Qualified Stock Options. With respect to Non-Qualified Stock
Options, (a) upon grant of the option, the optionee will recognize no income;
(b) upon exercise of the option (if the shares are not subject to a substantial
risk of forfeiture), the optionee will recognize ordinary compensation income in
an amount equal to the excess, if any, of the fair market value of the shares on
the date of exercise over the exercise price, and the Company will qualify for a
deduction in the same amount, subject to the requirements that the compensation
be reasonable and not limited under Section 162(m) of the Code; (c) the Company
will be required to comply with applicable Federal income tax withholding
requirements with respect to the amount of ordinary compensation income
recognized by the optionee; and (d) on a sale of the shares, the optionee will
recognize gain or loss equal to the difference, if any, between the amount
realized and the sum of the exercise price and the ordinary compensation income
recognized. Such gain or loss will be treated as short-term or long-term capital
gain or loss if the shares are capital assets in the optionee's hands depending
upon the length of time that the optionee held the shares. If the optionee's
shares acquired upon exercise are subject to a substantial risk of forfeiture,
the optionee will have an election to treat the exercise as a taxable event or
defer the Federal income tax consequences according to the rules described below
in "Stock Awards."
3. Stock Awards. Unless a participant otherwise elects to be taxed upon
receipt of shares of restricted or deferred stock under the 2004 Plan, the
participant must include in his or her taxable income the difference between the
fair market value of the shares and the amount paid, if any, for the shares, as
of the first date the participant's interest in the shares is no longer subject
to a substantial risk of forfeiture or such shares become transferable. A
participant's rights in stock awarded under the 2004 Plan are subject to a
substantial risk of forfeiture if the rights to full enjoyment of the shares are
conditioned, directly or indirectly, upon the future performance of substantial
services by the participant. Where shares of stock received under the 2004 Plan
are subject to a substantial risk of forfeiture, the participant can elect to
report the difference between the fair market value of the shares on the date of
receipt and the amount paid, if any, for the stock as ordinary income in the
year of receipt. To be effective, the election must be filed with the Internal
Revenue Service within 30 days after the date the shares are transferred to the
participant. The Company is entitled to a Federal income tax deduction equal in
amount to the amount includable as compensation in the gross income of the
participant, subject to the requirements that the compensation be reasonable and
not limited under Section 162(m) of the Code. The amount of taxable gain arising
from a participant's sale of shares of restricted stock acquired pursuant to the
2004 Plan is equal to the excess of the amount realized on such sale over the
sum of the amount paid, if any, for the stock and the compensation element
included by the participant in taxable income.
4. Other Tax Matters. If unmatured installments of Awards are
accelerated as a result of a Change of Control (as defined in the 2004 Plan),
any amounts received from the exercise by a participant of a stock option, the
lapse of restrictions on restricted stock or the deemed satisfaction of
conditions of performance-based Awards may be included in determining whether or
not a participant has received an "excess parachute payment" under Section 280G
of the Code, which could result in (a) the imposition of a 20% Federal excise
tax (in addition to Federal income tax) payable by the participant on certain
payments of Common Stock or cash resulting from such exercise or deemed
satisfaction of conditions of performance Awards from such exercise or deemed
satisfaction of conditions of performance awards or, in the case of restricted
stock, on all or a portion of the fair market value of the shares on the date
the restrictions lapse and (b) the loss by the Company of a compensation
deduction.
8
Recommendation
The Board of Directors unanimously recommends that shareholders vote
"FOR" this proposal.
The following table sets forth certain information regarding
outstanding options, warrants and other rights to purchase Common Stock that
were outstanding on June 30, 2003.
(a) (b) (c)
Number of securities
Number of securities remaining for future
to be issued upon Weighted-average issuance under equity
exercise of exercise price of compensation plans
outstanding options, outstanding options, (excluding securities
Plan category warrants and rights warrants and rights (1) reflected in column (a))
------------------------- ------------------- ----------------------- ------------------------
Equity compensation plans
approved by security holders 3,099,000 $2.33 536,000
Equity compensation plans not
approved by security holders 3,069,000 (2) $1.71 -
Total 6,168,000 $2.02 536,000
---------------
(1) Subsequent to June 30, 2003, the exercise price of approximately
4,000,000 options and warrants was reduced to $0.63 per share.
(2) Represents the aggregate number of shares of common stock issuable upon
exercise of individual arrangements with option and warrant holders.
These options and warrants expire at various dates between 2005 and
2009 and contain anti-dilution provisions providing for adjustments of
the exercise price under certain circumstances.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock, based on information provided by the
persons named below in publicly available filings, as of the Record Date:
o each of the Company's directors and executive officers;
o all directors and executive officers of the Company as a
group; and
9
o each person who is known by the Company to beneficially own
more than five percent of the outstanding shares of the
Company's Common Stock.
Unless otherwise indicated, the address of each beneficial owner is care of the
Company, 3590 East Columbia Street, Tucson, Arizona 85714. Unless otherwise
indicated, the Company believes that all persons named in the following table
have sole voting and investment power with respect to all shares of common stock
that they beneficially own.
For purposes of this table, a person is deemed to be the beneficial owner of the
securities if that person has the right to acquire such securities within 60
days of the Record Date upon the exercise of options or warrants. In determining
the percentage ownership of the persons in the table above, the Company assumed
in each case that the person exercised all options and warrants which are
currently held by that person and which are exercisable within such 60 day
period, but that options and warrants held by all other persons were not
exercised, and based the percentage ownership on 67,798,339 shares outstanding
on the Record Date.
Percentage of
Shares
Name and Address of Number of Shares Beneficially Beneficially
Beneficial Owner Owned Owned
------------------- ----------------------------- ------------
Robert Howard(1) 24,447,786(2) 36.1%
Thomas Dearmin 9,225,580 13.6
Joseph C. Hayden 6,227,266 9.2
Stephen McCahon 6,227,266 9.2
George Farley 0(3) 0
James Harlan 0(4) 0
David Hurley 0(4) 0
Thomas W. Steffens 0(4) 0
All directors and executive officers as a group (8 persons) 46,127,898 68.0%
______________
* Less than 1%
(1) The address of Mr. Howard is 303 East 57th Street, New York, New York
10022.
(2) Does not include [ ] shares of common stock over which Mr. Howard has
voting and dispositive power as escrow agent. Mr. Howard disclaims
beneficial ownership of such shares.
(3) Does not include 75,000 shares of common stock issuable upon exercise
of stock options which vest more than 60 days following the Record
Date.
(4) Does not include 50,000 shares of common stock issuabe upon exercise of
stock options which vest more than 60 days following the Record Date.
10
OTHER INFORMATION
The Board of Directors is not aware of any matter which may be
presented for action at the Special Meeting other than matters set forth herein.
Should any other matter requiring a vote of stockholders arise, it is intended
that the enclosed Proxy will be voted with respect thereto in accordance with
the judgment of the persons named in said Proxy.
By order of the Board of Directors
Robert Howard,
Chairman of the Board
April [ ], 2004
11
U.S. HOME & GARDEN INC.
3590 East Columbia Street
Tucson, Arizona 85714
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 19, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas Dearmin and Nancy Miesen, and
each of them, Proxies, with full power of substitution in each of them, in the
name, place and stead of the undersigned, to vote at the Special Meeting of
Stockholders of U.S. Home & Garden Inc. on Monday, April 19, 2004, at the
offices of Blank Rome LLP, 405 Lexington Avenue - 24th Floor, New York, New York
10174, or at any adjournment or adjournments thereof, according to the number of
votes that the undersigned would be entitled to vote if personally present, upon
the following matters:
1. Proposal to amend the Company's Certificate of Incorporation to change
the Company's name to Ionatron, Inc.
|_| FOR |_| AGAINST |_| ABSTAIN
2. Proposal to amend the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's common stock
from 75,000,000 to 100,000,000
|_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal to amend the Company's Certificate of Incorporation to
classify the Company's Board of Directors.
|_| FOR |_| AGAINST |_| ABSTAIN
4. Proposal to adopt the Company's 2004 Stock Incentive Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before he meeting.
(continued and to be signed on reverse side)
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSALS LISTED ABOVE.
DATED: _____________________, 2004
Please sign exactly as name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as such. If
a corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
------------------------------------------
Signature
------------------------------------------
Signature if held jointly
Please mark, sign, date and return this proxy card promptly using
the enclosed envelope.
EXHIBIT A
U.S. HOME & GARDEN INC.
2004 Stock Incentive Plan
Section 1. Purposes; Definitions.
The purpose of the U.S. Home & Garden Inc. 2004 Stock Incentive Plan is
to enable U.S. Home & Garden Inc. to offer to those of its employees and to the
employees of its Subsidiaries and other persons who are expected to contribute
to the success of the Company, long term performance-based stock and/or other
equity interests in the Company, thereby enhancing their ability to attract,
retain and reward such key employees or other persons, and to increase the
mutuality of interests between those employees or other persons and the
shareholders of U.S. Home & Garden Inc.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Board" means the Board of Directors of U.S. Home & Garden
Inc.
(b) "Cause" shall have the meaning ascribed thereto in Section
5(b)(ix) below.
(c) "Change of Control" shall have the meaning ascribed thereto in
Section 9 below.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time and any successor thereto.
(e) "Committee" means any committee of the Board, which the Board
may designate.
(f) "Company" means U.S. Home & Garden Inc., a corporation
organized under the laws of the State of Delaware.
(g) "Deferred Stock" means Stock to be received, under an award
made pursuant to Section 7 below, at the end of a specified
deferral period.
(h) "Disability" means disability as determined under procedures
established by the Board or the Committee for purposes of the
Plan.
(i) "Early Retirement" means retirement, with the approval of the
Board or the Committee, for purposes of one or more award(s)
hereunder, from active employment with the Company or any
Parent or Subsidiary prior to age 65.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, as in effect from time to time.
(k) "Fair Market Value", unless otherwise required by any
applicable provision of the Code or any regulations issued
thereunder, means, as of any given date: (i) if the principal
market for the Stock is a national securities exchange or the
National Association of Securities Dealers Automated
Quotations System ("NASDAQ) or the Over The Counter Bulletin
Board, the closing sale price of the Stock on such day as
reported by such exchange or market system, or on a
consolidated tape reflecting transactions on such exchange or
market system or quotation medium, or (b) if the principal
market for the Stock is not a national securities exchange and
the Stock is not quoted on NASDAQ or the Over The Counter
Bulletin Board, the mean between the closing bid sale price
for the Stock on such day as reported by NASDAQ or the
National Quotation Bureau, Inc.; provided that if clauses (a)
and (b) of this paragraph are both inapplicable, or if no
trades have been made or no quotes are available for such day,
the Fair Market Value of the Stock shall be determined by the
Board of Directors or the Committee, as the case may be, which
determination shall be conclusive as to the Fair Market Value
of the Stock.
(l) "Incentive Stock Option" means any Stock Option which is
intended to be and is designated as an "incentive stock
option" within the meaning of Section 422 of the Code, or any
successor thereto.
(m) "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option.
(n) "Normal Retirement" means retirement from active employment
with the Company or any Subsidiary on or after age 65.
(o) "Other Stock-Based Award" means an award under Section 8 below
that is valued in whole or in part by reference to, or is
otherwise based upon, Stock.
(p) "Parent" means any present or future parent of the Company, as
such term is defined in Section 424(e) of the Code, or any
successor thereto.
(q) "Plan" means this U.S. Home & Garden Inc. 2004 Stock Incentive
Plan, as hereinafter amended from time to time.
(r) "Restricted Stock" means Stock, received under an award made
pursuant to Section 6 below, that is subject to restrictions
imposed pursuant to said Section 6.
(s) "Retirement" means Normal Retirement or Early Retirement.
(t) "Rule 16b-3" means Rule 16b-3 of the General Rules and
Regulations under the Exchange Act, as in effect from time to
time, and any successor thereto.
(u) "Securities Act" means the Securities Act of 1933, as amended,
as in effect from time to time.
(v) "Stock" means the Common Stock of the Company, $.001 par value
per share.
(w) "Stock Option" or "Option" means any option to purchase shares
of Stock which is granted pursuant to the Plan.
(x) "Subsidiary" means any present or future (A) subsidiary
corporation of the Company, as such term is defined in Section
424(f) of the Code, or any successor thereto, or (B)
unincorporated business entity in which the Company owns,
directly or indirectly, 50% or more of the voting rights,
capital or profits.
Section 2. Administration.
The Plan shall be administered by the Board, or at its discretion, the
Committee, the membership of which shall consist solely of two or more members
of the Board, each of whom shall serve at the pleasure of the Board and shall be
a "Non-Employee Director," as defined in Rule 16b-3, and an "outside director,"
as defined in Section 162(m) of the Code, and shall be at all times constituted
so as not to adversely affect the compliance of the Plan with the requirements
of Rule 16b-3 or with the requirements of any other applicable law, rule or
regulation.
The Board or the Committee, as the case may be, shall have the
authority to grant, pursuant to the terms of the Plan, to officers and other
employees or other persons eligible under Section 4 below: (i) Stock Options,
(ii) Restricted Stock, (iii) Deferred Stock, and/or (iv) Other Stock-Based
Awards.
-2-
For purposes of illustration and not of limitation, the Board or the
Committee, as the case may be, shall have the authority (subject to the express
provisions of the Plan):
(i) to select the officers, other employees of the Company or any
Parent or Subsidiary and other persons to whom Stock Options,
Restricted Stock, Deferred Stock and/or Other Stock-Based
Awards may be from time to time granted hereunder;
(ii) to determine the Incentive Stock Options, Non-Qualified Stock
Options, Restricted Stock, Deferred Stock and/or Other
Stock-Based Awards, or any combination thereof, if any, to be
granted hereunder to one or more eligible persons;
(iii) to determine the number of shares of Stock to be covered by
each award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder
(including, but not limited to, share price, any restrictions
or limitations, and any vesting acceleration, exercisability
and/or forfeiture provisions);
(v) to determine the terms and conditions under which awards
granted hereunder are to operate on a tandem basis and/or in
conjunction with or apart from other awards made by the
Company or any Parent or Subsidiary outside of the Plan;
(vi) to determine the extent and circumstances under which Stock
and other amounts payable with respect to an award hereunder
shall be deferred; and
(vii) to substitute (A) new Stock Options for previously granted
Stock Options, including previously granted Stock Options
having higher option exercise prices and/or containing other
less favorable terms, and (B) new of any other type for
previously granted awards of the same type, including
previously granted awards which contain less favorable terms.
Subject to Section 10 hereof, The Board or the Committee, as the case
may be, shall have the authority to (i) adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, (ii) interpret the terms and provisions of
the Plan and any award issued under the Plan (and to determine the form and
substance of all agreements relating thereto), and (iii) to otherwise supervise
the administration of the Plan.
Subject to the express provisions of the Plan, all decisions made by
the Board or the Committee, as the case may be, pursuant to the provisions of
the Plan shall be made in the Board or the Committee's sole and absolute
discretion and shall be final and binding upon all persons, including the
Company, its Parent and Subsidiaries and the Plan participants.
Section 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 3,000,000 shares. Such shares may consist,
in whole or in part, of authorized and unissued shares or treasury shares.
If any shares of Stock that have been optioned cease to be subject to a
Stock Option for any reason, or if any shares of Stock that are subject to any
Restricted Stock award, Deferred Stock award or Other Stock-Based award are
forfeited or any such award otherwise terminates without the issuance of such
shares, such shares shall again be available for distribution under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, extraordinary distribution with
respect to the Stock or other change in corporate structure affecting the Stock,
such substitution or adjustments shall be made in the (A) aggregate number of
shares of Stock reserved for issuance under the Plan, (B) number, kind and
exercise price of shares of Stock subject to outstanding Options granted under
-3-
the Plan, and (C) number, kind, purchase price and/or appreciation base of
shares of Stock subject to other outstanding awards granted under the Plan, as
may be determined to be appropriate by the Board or the Committee, as the case
may be, in order to prevent dilution or enlargement of rights; provided,
however, that the number of shares of Stock subject to any award shall always be
a whole number. Such adjusted exercise price shall also be used to determine the
amount which is payable to the optionee upon the exercise by the Board or the
Committee, as the case may be, of the alternative settlement right which is set
forth in Section 5(b)(xi) below.
Subject to the provisions of the immediately preceding paragraph, the
maximum numbers of shares subject to Options, Restricted Stock awards, Deferred
Stock awards, and other Stock-Based awards to each of the Company's chief
executive office and the four other highest compensated executive officers who
are employed by the Company on the last day of any taxable year of the Company,
shall be 2,000,000 shares during the term of the Plan.
Section 4. Eligibility.
Officers and other employees of the Company or any Parent or Subsidiary
(but excluding any person whose eligibility would adversely affect the
compliance of the Plan with the requirements of Rule 16b-3) who are at the time
of the grant of an award under the Plan employed by the Company or any Parent or
Subsidiary and who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company or any Parent or Subsidiary,
are eligible to be granted Options and awards under the Plan. In addition,
Non-Qualified Stock Options and other awards may be granted under the Plan to
any person, including, but not limited to, independent agents, consultants and
attorneys who the Board or the Committee, as the case may be, believes has
contributed or will contribute to the success of the Company. Eligibility under
the Plan shall be determined by the Board or the Committee, as the case may be.
The Board or the Committee, as the case may be, may, in its sole
discretion, include additional conditions and restrictions in the agreement
entered into in connection with such awards under the Plan. The grant of an
Option or other award under the Plan, and any determination made in connection
therewith, shall be made on a case by case basis and can differ among optionees
and grantees. The grant of an Option or other award under the Plan is a
privilege and not a right and the determination of the Board or the Committee,
as the case may be, can be applied on a non-uniform (discretionary) basis.
Section 5. Stock Options.
(a) Grant and Exercise. Stock Options granted under the Plan may
be of two types: (i) Incentive Stock Options and (ii)
Non-Qualified Stock Options. Any Stock Option granted under
the Plan shall contain such terms as the Board or the
Committee, as the case may be, may from time to time approve.
The Board or the Committee, as the case may be, shall have the
authority to grant to any optionee Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options,
and they may be granted alone or in addition to other awards
granted under the Plan. To the extent that any Stock Option is
not designated as an Incentive Stock Option or does not
qualify as an Incentive Stock Option, it shall constitute a
Non-Qualified Stock Option. The grant of an Option shall be
deemed to have occurred on the date on which the Board or the
Committee, as the case may be, by resolution, designates an
individual as a grantee thereof, and determines the number of
shares of Stock subject to, and the terms and conditions of,
said Option.
Anything in the Plan to the contrary notwithstanding, no term
of the Plan relating to Incentive Stock Options or any
agreement providing for Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be exercised, so as to
disqualify the Plan under Section 422 of the Code, or,
without the consent of the optionee(s) affected, to
disqualify any Incentive Stock Option under said Section 422.
(b) Terms and Conditions. Stock Options granted under the Plan
shall be subject to the following terms and conditions:
-4-
(i) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Board or the
Committee, as the case may be, at the time of grant but as to
Incentive Stock Options shall be not less than 100% (110% in
the case of an Incentive Stock Option granted to an optionee
("10% Shareholder") who, at the time of grant, owns Stock
possessing more than 10% of the total combined voting power of
all classes of stock of the Company or its Parent, if any, or
its Subsidiaries) of the Fair Market Value of the Stock at the
time of grant. The option price for Non-Qualified Stock
Options shall be determined by the Board or the Committee, as
the case may be, at the time of grant, subject to any
requirements of the Delaware General Corporation Law.
(ii) Option Term. The term of each Stock Option shall be fixed by
the Board or the Committee, as the case may be, but no
Incentive Stock Option shall be exercisable more than ten
years (five years, in the case of an Incentive Stock Option
granted to a 10% Shareholder) after the date on which the
Option is granted.
(iii) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as
shall be determined by the Board or the Committee, as the case
may be, at the time of grant. If the Board or the Committee,
as the case may be, provides, in its discretion, that any
Stock Option is exercisable only in installments, the Board or
the Committee, as the case may be, may waive such installment
exercise provisions at any time at or after the time of grant
in whole or in part, based upon such factors as the Board or
the Committee, as the case may be, shall determine.
(iv) Method of Exercise. Subject to whatever installment, exercise
and waiting period provisions are applicable in a particular
case, Stock Options may be exercised in whole or in part at
any time during the option period by giving written notice of
exercise to the Company specifying the number of shares of
Stock to be purchased. Such notice shall be accompanied by
payment in full of the purchase price, which shall be in cash
or, if provided in the Stock Option agreement referred to in
Section 5(b)(xii) below or otherwise provided by the Board, or
Committee, as athe case may be, either at or after the date of
grant of the Stock Option , in whole shares of Stock which are
already owned by the holder of the Option or partly in cash
and partly in such Stock. Cash payments shall be made by wire
transfer, certified or bank check or personal check, in each
case payable to the order of the Company; provided, however,
that the Company shall not be required to deliver certificates
for shares of Stock with respect to which an Option is
exercised until the Company has confirmed the receipt of good
and available funds in payment of the purchase price thereof.
If permitted, payments in the form of Stock (which shall be
valued at the Fair Market Value of a share of Stock on the
date of exercise) shall be made by delivery of stock
certificates in negotiable form which are effective to
transfer good and valid title thereto to the Company, free of
any liens or encumbrances. In addition to the foregoing,
payment of the exercise price may be made by delivery to the
Company by the optionee of an executed exercise form, together
with irrevocable instructions to a broker-dealer to sell or
margin a sufficient portion of the shares covered by the
option and deliver the sale or margin loan proceeds directly
to the Company. Except as otherwise expressly provided in the
Plan or in the Stock Option agreement referred to in Section
5(b)(xii) below or otherwise provided by the Board or
Committee, as the case may be, either at or after the date of
grant of the Option, no Option which is granted to a person
who is at the time of grant an employee of the Company or of a
Subsidiary or Parent of the Company may be exercised at any
time unless the holder thereof is then an employee of the
Company or of a Parent or a Subsidiary. The holder of an
Option shall have none of the rights of a shareholder with
respect to the shares subject to the Option until the optionee
has given written notice of exercise, has paid in full for
those shares of Stock and, if requested by the Board or
Committee, as the case may be, has given the representation
described in Section 12(a) below.
-5-
(v) Transferability; Exercisability. No Stock Option shall be
transferable by the optionee other than by will or by the laws
of descent and distribution, except as may be otherwise
provided with respect to a Non-Qualified Option pursuant to
the specific provisions of the Stock Option agreement pursuant
to which it was issued as referred to in Section 5(b)(xii)
below. Except as otherwise provided in the Stock Option
agreement relating to a Non-Qualified Stock Option, all Stock
Options shall be exercisable, during the optionee's lifetime,
only by the optionee or his or her guardian or legal
representative.
(vi) Termination by Reason of Death. Subject to Section 5(b)(x)
below, if an optionee's employment by the Company or any
Parent or Parent or Subsidiary terminates by reason of death,
any Stock Option held by such optionee may thereafter be
exercised, to the extent then exercisable or on such
accelerated basis as the Board or Committee, as the case may
be, may determine at or after the time of grant, for a period
of one year (or such other period as the Board or the
Committee, as the case may be, may specify at or after the
time of grant) from the date of death or until the expiration
of the stated term of such Stock Option, whichever period is
the shorter.
(vii) Termination by Reason of Disability. Subject to Section
5(b)(x) below, if an optionee's employment by the Company or
any Parent or Subsidiary terminates by reason of Disability,
any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at
the time of termination or on such accelerated basis as the
Board or the Committee, as the case may be, may determine at
or after the time of grant, for a period of one year (or such
other period as the Board or the Committee, as the case may
be, may specify at or after the time of grant) from the date
of such termination of employment or until the expiration of
the stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the optionee dies within
such one year period (or such other period as the Board or the
Committee, as the case may be, shall specify at or after the
time of grant), any unexercised Stock Option held by such
optionee shall thereafter be exercisable to the extent to
which it was exercisable at the time of death for a period of
one year from the date of death or until the expiration of the
stated term of such Stock Option, whichever period is the
shorter.
(viii) Termination by Reason of Retirement. Subject to Section
5(b)(x) below, if an optionee's employment by the Company or
any Parent or Subsidiary terminates by reason of Normal
Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was
exercisable at the time of termination or on such accelerated
basis as the Board or the Committee, as the case may be, may
determine at or after the time of grant, for a period of one
year (or such other period as the Board or the Committee, as
the case may be, may specify at or after the time of grant)
from the date of such termination of employment or the
expiration of the stated term of such Stock Option, whichever
period is the shorter; provided, however, that if the optionee
dies within such one year period (or such other period as the
Board or the Committee, as the case may be, shall specify at
or after the date of grant), any unexercised Stock Option held
y such optionee shall thereafter be exercisable to the extent
to which it was exercisable at the time of death for a period
of one year from the date of death or until the expiration of
the stated term of such Stock Option, whichever period is the
shorter. If an optionee's employment with the Company or any
Parent or Subsidiary terminates by reason of Early Retirement,
the Stock Option shall thereupon terminate; provided, however,
that if the Board or the Committee, as the case may be, so
approves at the time of Early Retirement, any Stock Option
held by the optionee may thereafter be exercised by the
optionee as provided above in connection with termination of
employment by reason of Normal Retirement.
(ix) Other Termination. Subject to the provisions of Section 12(g)
below and unless otherwise determined by the Committee at or
after the time of grant, if an optionee's employment by the
Company or any Parent or Subsidiary terminates for any reason
other than death, Disability or Retirement, the Stock Option
shall thereupon automatically terminate, except that if the
optionee is involuntarily terminated by the Company or any
Parent or a Subsidiary without Cause (as hereinafter defined),
such Stock Option may be exercised for a period of three
months (or such other period as the Board or the Committee, as
the case may be, shall specify at or after the time of grant)
from the date of such termination or until the expiration of
the stated terms of such Stock Option, whichever period is the
shorter. For purposes of the Plan, "Cause" shall mean (1) the
conviction of the optionee of a felony under Federal law or
the law of the state in which such action occurred, (2)
dishonesty by the optionee in the course of fulfilling his or
her employment duties, or (3) the failure on the part of the
optionee to perform his or her employment duties in any
material respect. In addition, with respect to an option
granted to an employee of the Company, a Parent or a
Subsidiary, for purposes of the Plan, "Cause" shall also
include any definition of "Cause" contained in any employment
agreement between the optionee and the Company, Parent or
Subsidiary, as the case may be.
-6-
(x) Additional Incentive Stock Option Limitation. In the case of
an Incentive Stock Option, the aggregate Fair Market Value of
Stock (determined at the time of grant of the Option) with
respect to which Incentive Stock Options are exercisable for
the first time by an optionee during any calendar year (under
all such plans of optionee's employer corporation and its
Parent and Subsidiaries) shall not exceed $100,000.
(xi) Alternative Settlement of Option. If provided for, upon the
receipt of written notice of exercise or otherwise provided
for by the Board or Committee, as the case may be, either at
or after the time of grant of the Stock Option, the Board or
the Committee, as the case may be, may elect to settle all or
part of any Stock Option by paying to the optionee an amount,
in cash or Stock (valued at Fair Market Value on the date of
exercise), equal to the product of the excess of the Fair
Market Value of one share of Stock, on the date of exercise
over the Option exercise price, multiplied by the number of
shares of Stock with respect to which the optionee proposes to
exercise the Option. Any such settlements which relate to
Options which are held by optionees who are subject to Section
16(b) of the Exchange Act shall comply with any "window
period" provisions of Rule 16b-3, to the extent applicable,
and with such other conditions as the Board or Committee, as
the case may be, may impose.
(xii) Stock Option Agreement. Each grant of a Stock Option shall be
confirmed by, and shall be subject to the terms of, an
agreement executed by the Company and the participant.
Section 6. Restricted Stock.
(a) Grant and Exercise. Shares of Restricted Stock may be issued
either alone or in addition to or in tandem with other awards
granted under the Plan. The Board or the Committee, as the
case may be, shall determine the eligible persons to whom, and
the time or times at which, grants of Restricted Stock will be
made, the number of shares to be awarded, the price (if any)
to be paid by the recipient, the time or times within which
such awards may be subject to forfeiture (the "Restriction
Period"), the vesting schedule and rights to acceleration
thereof, and all other terms and conditions of the awards. The
Board or the Committee, as the case may be, may condition the
grant of Restricted Stock upon the attainment of such factors
as the Board or the Committee, as the case may be, may
determine.
(b) Terms and Conditions. Each Restricted Stock award shall be
subject to the following terms and conditions:
(i) Restricted Stock, when issued, will be represented by
a stock certificate or certificates registered in the
name of the holder to whom such Restricted Stock
shall have been awarded. During the Restriction
Period, certificates representing the Restricted
Stock and any securities constituting Retained
Distributions (as defined below) shall bear a
restrictive legend to the effect that ownership of
the Restricted Stock (and such Retained
Distributions), and the enjoyment of all rights
related thereto, are subject to the restrictions,
terms and conditions provided in the Plan and the
Restricted Stock agreement referred to in Section
6(b)(iv) below. Such certificates shall be deposited
by the holder with the Company, together with stock
powers or other instruments of assignment, endorsed
in blank, which will permit transfer to the Company
of all or any portion of the Restricted Stock and any
securities constituting Retained Distributions that
shall be forfeited or that shall not become vested in
accordance with the Plan and the applicable
Restricted Stock agreement.
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(ii) Restricted Stock shall constitute issued and outstanding
shares of Common Stock for all corporate purposes, and the
issuance thereof shall be made for at least the minimum
consideration (if any) necessary to permit the shares of
Restricted Stock to be deemed to be fully paid and
nonassessable. The holder will have the right to vote such
Restricted Stock, to receive and retain all regular cash
dividends and other cash equivalent distributions as the Board
may in its sole discretion designate, pay or distribute on
such Restricted Stock and to exercise all other rights, powers
and privileges of a holder of Stock with respect to such
Restricted Stock, with the exceptions that (A) the holder will
not be entitled to delivery of the stock certificate or
certificates representing such Restricted Stock until the
Restriction Period shall have expired and unless all other
vesting requirements with respect thereto shall have been
fulfilled; (B) the Company will retain custody of the stock
certificate or certificates representing the Restricted Stock
during the Restriction Period; (C) other than regular cash
dividends and other cash equivalent distributions as the Board
may in its sole discretion designate, pay or distribute, the
Company will retain custody of all distributions ("Retained
Distributions") made or declared with respect to the
Restricted Stock (and such Retained Distributions will be
subject to the same restrictions, terms and conditions as are
applicable to the Restricted Stock) until such time, if ever,
as the Restricted Stock with respect to which such Retained
Distributions shall have been made, paid or declared shall
have become vested and with respect to which the Restriction
Period shall have expired; (D) the holder may not sell,
assign, transfer, pledge, exchange, encumber or dispose of the
Restricted Stock or any Retained Distributions during the
Restriction Period; and (E) a breach of any of the
restrictions, terms or conditions contained in the Plan or the
Restricted Stock agreement referred to in Section 6(b)(iv)
below, or otherwise established by the Board or Committee, as
the case may be, with respect to any Restricted Stock or
Retained Distributions will cause a forfeiture of such
Restricted Stock and any Retained Distributions with respect
thereto.
(iii) Upon the expiration of the Restriction Period with respect to
each award of Restricted Stock and the satisfaction of any
other applicable restrictions, terms and conditions (A) all or
part of such Restricted Stock shall become vested in
accordance with the terms of the Restricted Stock agreement
referred to in Section 6(b)(iv) below, and (B) any Retained
Distributions with respect to such Restricted Stock shall
become vested to the extent that the Restricted Stock related
thereto shall have become vested. Any such Restricted Stock
and Retained Distributions that do not vest shall be forfeited
to the Company and the holder shall not thereafter have any
rights with respect to such Restricted Stock and Retained
Distributions that shall have been so forfeited.
(iv) Each Restricted Stock award shall be confirmed by, and shall
be subject to the terms of, an agreement executed by the
Company and the participant.
Section 7. Deferred Stock.
(a) Grant and Exercise. Deferred Stock may be awarded either alone
or in addition to or in tandem with other awards granted under
the Plan. The Board or the Committee, as the case may be,
shall determine the eligible persons to whom and the time or
times at which Deferred Stock shall be awarded, the number of
shares of Deferred Stock to be awarded to any person, the
duration of the period (the "Deferral Period") during which,
and the conditions under which, receipt of the Deferred Stock
will be deferred, and all the other terms and conditions of
the awards. The Board or the Committee, as the case may be,
may condition the grant of the Deferred Stock upon the
attainment of such factors or criteria as the Board or the
Committee, as the case may be, shall determine.
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(b) Terms and Conditions. Each Deferred Stock award shall be
subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and Deferred
Stock agreement referred to in Section 7(b)(vii)
below, Deferred Stock awards may not be sold,
assigned, transferred, pledged or otherwise
encumbered during the Deferral Period. At the
expiration of the Deferral Period (or the Additional
Deferral Period referred to in Section 7(b)(vi)
below, where applicable), share certificates shall be
delivered to the participant, or his legal
representative, in a number equal to the shares of
Stock covered by the Deferred Stock award.
(ii) As determined by the Board or the Committee, as the
case may be, at the time of award, amounts equal to
any dividends declared during the Deferral Period (or
the Additional Deferral Period referred to in Section
7(b)(vi) below, where applicable) with respect to the
number of shares covered by a Deferred Stock award
may be paid to the participant currently or deferred
and deemed to be reinvested in additional Deferred
Stock.
(iii) Subject to the provisions of the Deferred Stock
agreement referred to in Section 7(b)(vii) below and
this Section 7 and Section 12(g) below, upon
termination of a participant's employment with the
Company or any Parent or Subsidiary for any reason
during the Deferral Period (or the Additional
Deferral Period referred to in Section 7(b)(vi)
below, where applicable) for a given award, the
Deferred Stock in question will vest or be forfeited
in accordance with the terms and conditions
established by the Board or the Committee, as the
case may be, at the time of grant.
(iv) The Board or the Committee, as the case may be, may,
after grant, accelerate the vesting of all or any
part of any Deferred Stock award and/or waive the
deferral limitations for all or any part of a
Deferred Stock award.
(v) In the event of hardship or other special
circumstances of a participant whose employment with
the Company or any Parent or Subsidiary is
involuntarily terminated (other than for Cause), the
Board or the Committee, as the case may be, may waive
in whole or in part any or all of the remaining
deferral limitations imposed hereunder or pursuant to
the Deferred Stock agreement referred to in Section
7(b)(vii) below with respect to any or all of the
participant's Deferred Stock.
(vi) A participant may request to, and the Board or the
Committee, as the case may be, may at any time, defer
the receipt of an award (or an installment of an
award) for an additional specified period or until a
specified period or until a specified event (the
"Additional Deferral Period"). Subject to any
exceptions adopted by the Board or the Committee, as
the case may be, such request must be made at least
one year prior to expiration of the Deferral Period
for such Deferred Stock award (or such installment).
(vii) Each Deferred Stock award shall be confirmed by, and
shall be subject to the terms of, an agreement
executed by the Company and the participant.
Section 8. Other Stock-Based Awards.
(a) Grant and Exercise. Other Stock-Based Awards, which may
include performance shares and shares valued by reference to
the performance of the Company or any Parent or Subsidiary,
may be granted either alone or in addition to or in tandem
with Stock Options, Restricted Stock or Deferred Stock. The
Board or the Committee, as the case may be, shall determine
the eligible persons to whom, and the time or times at which,
such awards shall be made, the number of shares of Stock to be
awarded pursuant to such awards, and all other terms and
conditions of the awards. The Board or the Committee, as the
case may be, may also provide for the grant of Stock under
such awards upon the completion of a specified performance
period.
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(b) Terms and Conditions. Each Other Stock-Based Award shall be
subject to the following terms and conditions:
(i) Shares of Stock subject to an Other Stock-Based Award
may not be sold, assigned, transferred, pledged or
otherwise encumbered prior to the date on which the
shares are issued, or, if later, the date on which
any applicable restriction or period of deferral
lapses.
(ii) The recipient of an Other Stock-Based Award shall be
entitled to receive, currently or on a deferred
basis, dividends or dividend equivalents with respect
to the number of shares covered by the award, as
determined by the Board or the Committee, as the case
may be, at the time of the award. The Board or the
Committee, as the case may be, may provide that such
amounts (if any) shall be deemed to have been
reinvested in additional Stock.
(iii) Any Other Stock-Based Award and any Stock covered by
any Other Stock-Based Award shall vest or be
forfeited to the extent so provided in the award
agreement referred to in Section 8(b)(v) below, as
determined by the Board or the Committee, as the case
may be.
(iv) In the event of the participant's Retirement,
Disability or death, or in cases of special
circumstances, the Board or the Committee, as the
case may be, may waive in whole or in part any or all
of the limitations imposed hereunder (if any) with
respect to any or all of an Other Stock-Based Award.
(v) Each Other Stock-Based Award shall be confirmed by,
and shall be subject to the terms of, an agreement
executed by the Company and by the participant.
Section 9. Change of Control Provisions.
(a) A "Change of Control" shall be deemed to have occurred on the
tenth day after:
(i) any individual, corporation or other entity or group
(as defined in Section 13(d)(3) of the Exchange Act),
becomes, directly or indirectly, the beneficial owner
(as defined in the General Rules and Regulations of
the Securities and Exchange Commission with respect
to Sections 13(d) and 13(g) of the Exchange Act) of
more than 50% of the then outstanding shares of the
Company's capital stock entitled to vote generally in
the election of directors of the Company; or
(ii) the commencement of, or the first public announcement
of the intention of any individual, firm, corporation
or other entity or of any group (as defined in
Section 13(d)(3) of the Exchange Act) to commence, a
tender or exchange offer subject to Section 14(d)(1)
of the Exchange Act for any class of the Company's
capital stock; or
(iii) the shareholders of the Company approve (A) a
definitive agreement for the merger or other business
combination of the Company with or into another
corporation pursuant to which the shareholders of the
Company do not own, immediately after the
transaction, more than 50% of the voting power of the
corporation that survives, or (B) a definitive
agreement for the sale, exchange or other disposition
of all or substantially all of the assets of the
Company, or (C) any plan or proposal for the
liquidation or dissolution of the Company;
provided, however, that a "Change of Control" shall
not be deemed to have taken place if beneficial
ownership is acquired (A) directly from the Company,
other than an acquisition by virtue of the exercise
or conversion of another security unless the security
so converted or exercised was itself acquired
directly from the Company, or (B) by, or a tender or
exchange offer is commenced or announced by, the
Company, any profit-sharing, employee ownership or
other employee benefit plan of the Company; or any
trustee of or fiduciary with respect to any such plan
when acting in such capacity.
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(b) In the event of a "Change of Control" as defined in Section
9(a) above, awards granted under the Plan will be subject to
the following provisions, unless the provisions of this
Section 9 are suspended or terminated by an affirmative vote
of a majority of the Board prior to the occurrence of such a
"Change of Control":
(i) all outstanding Stock Options which have been
outstanding for at least one year shall become
exercisable in full, whether or not otherwise
exercisable at such time, and any such Stock Option
shall remain exercisable in full thereafter until it
expires pursuant to its terms; and
(ii) all restrictions and deferral limitations contained
in Restricted Stock awards, Deferred Stock awards and
Other Stock-Based Awards granted under the Plan shall
lapse.
Section 10. Amendments and Termination.
The Board may at any time, and from time to time, amend any of the
provisions of the Plan, and may at any time suspend or terminate the Plan;
provided, however, that no such amendment shall be effective unless and until it
has been duly approved by the holders of the outstanding shares of Stock if the
failure to obtain such approval would adversely affect the compliance of the
Plan with the requirements of Rule 16b-3 or any other applicable law, rule or
regulation. The Board or the Committee, as the case may be, may amend the terms
of any Stock Option or other award theretofore granted under the Plan; provided,
however, that subject to Section 3 above, no such amendment may be made by the
Board or the Committee, as the case may be, which in any material respect
impairs the rights of the optionee or participant without the optionee's or
participant's consent, except for such amendments which are made to cause the
Plan to qualify for the exemption provided by Rule 16b-3.
Section 11. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those creditor of
the Company.
Section 12. General Provisions.
(a) The Board or the Committee, as the case may be, may require
each person acquiring shares of Stock pursuant to an Option or
other award under the Plan to represent to and agree with the
Company in writing that the optionee or participant is
acquiring the shares for investment without a view to
distribution thereof.
All certificates for shares of Stock delivered under the Plan
shall be subject to such stop transfer orders and other
restrictions as the Board or the Committee, as the case may
be, may deem to be advisable under the rules, regulations, and
other requirements of the Securities and Exchange Commission,
any stock exchange or association upon which the Stock is then
listed or traded, any applicable Federal or state securities
law, and any applicable corporate law, and the Board or the
Committee, as the case may be, may cause a legend or legends
to be put on any such certificates to make appropriate
reference to such restrictions.
(b) Nothing contained in the Plan shall prevent the Board from
adopting such other or additional incentive arrangements as it
may deem desirable, including, but not limited to, the
granting of stock options and the awarding of stock and cash
otherwise than under the Plan; and such arrangements may be
either generally applicable or applicable only in specific
cases.
(c) Nothing contained in the Plan or in any award hereunder shall
be deemed to confer upon any employee of the Company or any
Parent or Subsidiary any right to continued employment with
the Company or any Parent or Subsidiary, nor shall it
interfere in any way with the right of the Company or any
Parent or Subsidiary to terminate the employment of any of its
employees at any time.
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(d) No later than the date as of which an amount first becomes
includable in the gross income of the participant for Federal
income tax purposes with respect to any Option or other award
under the Plan, the participant shall pay to the Company, or
make arrangements satisfactory to the Board or the Committee,
as the case may be, regarding the payment of, any Federal,
state and local taxes of any kind required by law to be
withheld or paid with respect to such amount. If permitted by
the Board or the Committee, as the case may be, tax
withholding or payment obligations may be settled with Stock,
including Stock that is part of the award that gives rise to
the withholding requirement. The obligations of the Company
under the Plan shall be conditional upon such payment or
arrangements, and the Company or the participant's employer
(if not the Company) shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of
any kind otherwise due to the participant from the Company or
any Parent or Subsidiary.
(e) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws
of the State of Delaware (without regard to choice of law
provisions).
(f) Any Stock Option granted or other award made under the Plan
shall not be deemed compensation for purposes of computing
benefits under any retirement plan of the Company or any
Parent or Subsidiary and shall not affect any benefits under
any other benefit plan now or subsequently in effect under
which the availability or amount of benefits is related to the
level of compensation (unless required by specific reference
in any such other plan to awards under the Plan).
(g) A leave of absence, unless otherwise determined by the Board
or Committee prior to the commencement thereof, shall not be
considered a termination of employment. Any Stock Option
granted or awards made under the Plan shall not be affected by
any change of employment, so long as the holder continues to
be an employee of the Company or any Parent or Subsidiary.
(h) Except as otherwise expressly provided in the Plan or in any
Stock Option agreement, Restricted Stock agreement, Deferred
Stock agreement or any Other Stock-Based Award agreement, no
right or benefit under the Plan may be alienated, sold,
assigned, hypothecated, pledged, exchanged, transferred,
encumbranced or charged, and any attempt to alienate, sell,
assign, hypothecate, pledge, exchange, transfer, encumber or
charge the same shall be void. No right or benefit hereunder
shall in any manner be subject to the debts, contracts or
liabilities of the person entitled to such benefit.
(i) The obligations of the Company with respect to all Stock
Options and awards under the Plan shall be subject to (A) all
applicable laws, rules and regulations, and such approvals by
any governmental agencies as may be required, including,
without limitation, the effectiveness of a registration
statement under the Securities Act, and (B) the rules and
regulations of any securities exchange or association on which
the Stock may be listed or traded.
(j) If any of the terms or provisions of the Plan conflicts with
the requirements of Rule 16b-3 as in effect from time to time,
or with the requirements of any other applicable law, rule or
regulation, and with respect to Incentive Stock Options,
Section 422 of the Code, then such terms or provisions shall
be deemed inoperative to the extent they so conflict with the
requirements of said Rule 16b-3, and with respect to Incentive
Stock Options, Section 422 of the Code. With respect to
Incentive Stock Options, if the Plan does not contain any
provision required to be included herein under Section 422 of
the Code, such provision shall be deemed to be incorporated
herein with the same force and effect as if such provision had
been set out at length herein.
(k) The Board or the Committee, as the case may be, may terminate
any Stock Option or other award made under the Plan if a
written agreement relating thereto is not executed and
returned to the Company within 30 days after such agreement
has been delivered to the optionee or participant for his or
her execution.
(l) The grant of awards pursuant to the Plan shall not in any way
effect the right or power of the Company to make
reclassifications, reorganizations or other changes of or to
its capital or business structure or to merge, consolidate,
liquidate, sell or otherwise dispose of all or any part of its
business or assets.
Section 13. Effective Date of Plan.
The Plan shall be effective as of the date of the approval and
adoption thereof at a meeting of the shareholders of the Company.
Section 14. Term of Plan.
No Stock Option, Restricted Stock Award, Deferred Stock award or Other
Stock-Based Award shall be granted pursuant to the Plan after the tenth
anniversary of the effective date of the Plan, but awards granted on or prior to
such tenth anniversary may extend beyond that date.
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