FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of July 2006
Commission File Number 000-51780
EUROSEAS LTD.
Aethrion Center
40 Ag. Konstantinou Street
151 24 Maroussi, Greece
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [_]
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1): [_]
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7): [_]
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes [_] No [X]
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-______________.
ITEM 1. INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Attached as Exhibit 1, is a copy of the Notice of Annual Meeting of
Shareholders of Euroseas Ltd. (the "Company") in connection with the Annual
Meeting of Shareholders of the Company to be held August 8, 2006.
EXHIBIT 1
July 14, 2006
TO THE SHAREHOLDERS OF EUROSEAS LTD.
Enclosed is a Notice of the Annual Meeting of Shareholders of Euroseas
Ltd. (the "Company") which will be held at Cetner House, Petrothalassa, 21300
Kranidi, Argolida, Greece on August 8, 2006 at 10 A.M.
At this Annual Meeting (the "Meeting"), shareholders of the Company
will consider and vote upon proposals:
1. To elect three Class A Directors to serve for a term of two years
until the 2008 Annual Meeting of Shareholders and to elect two Class B
Directors for a term of three years until the 2009 Annual Meeting of
Shareholders ("Proposal One");
2. To approve an amendment to our Articles of Incorporation to effect a
reverse stock split of all outstanding and authorized shares of the
Company's common stock by a ratio of not less than one-for-two and not
more than one-for-four at any time prior to September 1, 2007, with
the exact ratio to be set at a number within this range to be
determined by the Board of Directors in its discretion ("Proposal
Two");
3. To approve the Euroseas Ltd. 2006 Stock Incentive Plan ("Proposal
Three");
4. To approve the appointment of Deloitte, Hadjipavlou, Sofianos &
Cambanis S.A. as the Company's independent auditors for the fiscal
year ending December 31, 2006 ("Proposal Four"); and
5. To transact other such business as may properly come before the
meeting or any adjournment thereof.
Adoption of Proposal One requires the affirmative vote of a plurality
of the shares of common stock represented at the Meeting. Adoption of Proposal
Two, Proposal Three and Proposal Four each require the affirmative vote of a
majority of the shares of common stock represented at the Meeting.
You are cordially invited to attend the Meeting in person. If you
attend the Meeting, you may revoke your proxy and vote your shares in person.
IT IS IMPORTANT TO VOTE. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE, WHICH DOES NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES. THE
VOTE OF EVERY SHAREHOLDER IS IMPORTANT AND YOUR COOPERATION IN RETURNING YOUR
EXECUTED PROXY PROMPTLY WILL BE APPRECIATED. ANY SIGNED PROXY RETURNED AND NOT
COMPLETED WILL BE VOTED IN FAVOR OF ALL THE PROPOSALS PRESENTED IN THE PROXY
STATEMENT.
Very truly yours,
/s/ Aristides J. Pittas
--------------------------
Aristides J. Pittas
Chief Executive Officer
EUROSEAS LTD.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AUGUST 8, 2006
NOTICE IS HEREBY given that the Annual Meeting of the shareholders of
Euroseas Ltd. (the "Company") will be held on August 8, 2006, at 10 A.M., at
Cetner House, Petrothalassa, 21300 Kranidi, Argolida, Greece, for the following
purposes, of which items 1, 2 and 3 are more completely set forth in the
accompanying Proxy Statement:
1. To elect three Class A Directors to serve for a term of two years
until the 2008 Annual Meeting of Shareholders and to elect two Class B
Directors for a term of three years until the 2009 Annual Meeting of
Shareholders ("Proposal One");
2. To approve an amendment to our Articles of Incorporation to effect a
reverse stock split of all outstanding and authorized shares of the
Company's common stock by a ratio of not less than one-for-two and not
more than one-for-four at any time prior to September 1, 2007, with
the exact ratio to be set at a number within this range to be
determined by the Board of Directors in its discretion ("Proposal
Two");
3. To approve the Euroseas Ltd. 2006 Stock Incentive Plan ("Proposal
Three");
4. To approve the appointment of Deloitte, Hadjipavlou, Sofianos &
Cambanis S.A. as the Company's independent auditors for the fiscal
year ending December 31, 2006 ("Proposal Four"); and
5. To transact other such business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on July 7, 2006
as the record date for the determination of the shareholders entitled to receive
notice and to vote at the Annual Meeting or any adjournment thereof.
IT IS IMPORTANT TO VOTE. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE, WHICH DOES NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES. THE
VOTE OF EVERY SHAREHOLDER IS IMPORTANT AND YOUR COOPERATION IN RETURNING YOUR
EXECUTED PROXY PROMPTLY WILL BE APPRECIATED. ANY SIGNED PROXY RETURNED AND NOT
COMPLETED WILL BE VOTED IN FAVOR OF ALL THE PROPOSALS PRESENTED IN THE PROXY
STATEMENT.
If you attend the annual meeting, you may revoke your proxy and vote in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Stephania Karmiri
-----------------------------------
Stephania Karmiri
Secretary
July 14, 2006
Maroussi, Greece
EUROSEAS LTD.
AETHRION CENTER
40 AG. KONSTANTINOU STREET
151 24 MAROUSSI, GREECE
----------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 8, 2006
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors
(the "Board" or the "Directors") of Euroseas Ltd., a Marshall Islands
corporation (the "Company"), for use at the Annual Meeting of Shareholders to be
held at Cetner House, Petrothalassa, 21300 Kranidi, Argolida, Greece, on August
8, 2006, at 10 A.M., or at any adjournment or postponement thereof (the
"Meeting"), for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Shareholders. This Proxy Statement and the accompanying form
of proxy are expected to be mailed to shareholders of the Company entitled to
vote at the Meeting on or about July 14, 2006.
VOTING RIGHTS AND OUTSTANDING SHARES
On July 7, 2006 (the "Record Date"), the Company had outstanding
37,860,341 shares of common stock, par value $0.01 per share (the "Common
Shares"). Each shareholder of record at the close of business on the Record Date
is entitled to one vote for each Common Share then held. One or more
shareholders representing at least a majority of the total voting rights of the
Company present in person or by proxy at the Meeting shall be a quorum for the
purposes of the Meeting. The Common Shares represented by any proxy in the
enclosed form will be voted in accordance with the instructions given on the
proxy if the proxy is properly executed and is received by the Company prior to
the close of voting at the Meeting or any adjournment or postponement thereof.
Any proxies returned without instructions will be voted FOR the proposals set
forth on the Notice of Annual Meeting of Shareholders.
The Common Shares are listed on the OTCBB under the symbol "ESEAF.OB."
REVOCABILITY OF PROXIES
A shareholder giving a proxy may revoke it at any time before it is
exercised unless such proxy is irrevocable. A proxy may be revoked by filing
with the Secretary of the Company at the Company's executive office, Euroseas
Ltd., Aethrion Center, 40 AG Konstantinou Street, 151 24 Maroussi, Greece, a
written notice of revocation by a duly executed proxy bearing a later date, or
by attending the Meeting and voting in person.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company currently has seven directors divided into three classes.
As provided in the Company's Bylaws, each director is elected to serve for a
three year term and until such director's successor is elected and has
qualified. The term of our three Class A Directors expired in 2005, the term of
our two Class B Directors expires in 2006 and the term of our two Class C
Directors expires in 2007. Since the Company was formed in May 2005, we did not
hold an annual meeting in 2005. Accordingly, the existing Class A Directors have
continued to serve in their capacities as Class A Directors. The Board of
Directors has nominated Aristides J. Pittas, Dr. Anastasios Aslidis and
Aristides P. Pittas, each Class A Directors, for re-election as Class A
Directors whose term would expire at the 2008 Annual Meeting (i.e., three years
from 2005 when their term would have otherwise expired). The Board has also
nominated Panagiotis Kyriakopoulos and George Skarvelis, both Class B Directors,
for re-election as Class B Directors whose term would expire at the 2009 Annual
Meeting.
Unless the proxy is marked to indicate that such authorization is
expressly withheld, the persons named in the enclosed proxy intend to vote the
shares authorized thereby "FOR" the election of the following five nominees. It
is expected that each of these nominees will be able to serve, but if before the
election it develops that any of the nominees is unavailable, the persons named
in the accompanying proxy will vote for the election of such substitute nominee
or nominees as the current Board may recommend.
Nominees for Election to the Company's Board of Directors
Information concerning the nominees for Director of the Company is set
forth below:
Name Age Position
----- ---- ------------
Aristides J. Pittas 47 Director, Class A
Dr. Anastasios Aslidis 46 Director, Class A
Aristides P. Pittas 54 Director, Class A
Panagiotis Kyriakopoulos 45 Director, Class B
George Skarvelis 45 Director, Class B
Aristides J. Pittas has been a member of our board of directors and
our Chairman and CEO since our inception on May 5, 2005. Since 1997, Mr. Pittas
has also been the President of Eurochart S.A., our affiliate. Eurochart is a
shipbroking company specializing in chartering and selling and purchasing ships.
Since 1997, Mr. Pittas has also been the President of Eurotrade, a ship
operating company and our affiliate. Since January 1995, Mr. Pittas has been the
President and Managing Director of Eurobulk, our affiliate. He resigned as
Managing Director in June 2005. Eurobulk is a ship management company that
provides ocean transportation services. From September 1991 to December 1994,
Mr. Pittas was the Vice President of Oceanbulk Maritime SA, a ship management
company. From March 1990 to August 1991, Mr. Pittas served both as the Assistant
to the General Manager and the Head of the Planning Department of Varnima
International SA, a shipping company operating tanker vessels. From June 1987
until February 1990, Mr. Pittas was the head of the Central Planning department
of Eleusis Shipyards S.A. From January 1987 to June 1987, Mr. Pittas served as
Assistant to the General Manager of Chios Navigation Shipping Company in London,
a company that provides ship management services. From December 1985 to January
1987, Mr. Pittas worked in the design department of Eleusis Shipyards S.A. where
he focused on shipbuilding and ship repair. Mr. Pittas has a B.Sc. in Marine
Engineering from University of Newcastle -- Upon-Tyne and a MSc in both Ocean
Systems Management and Navel Architecture and Marine Engineering from the
Massachusetts Institute of Technology.
Dr. Anastasios Aslidis has been our CFO and Treasurer and member of
our Board since September 2005. Prior to joining Euroseas, Dr. Aslidis was a
partner at Marsoft, an international consulting firm focusing on investment and
risk management in the maritime industry. Dr. Aslidis has more than 18 years of
experience in the maritime industry. Between 2003 and 2005, he worked on
financial risk management methods for shipowners and banks lending to the
maritime industry, especially as pertaining to compliance to the Basel II
Capital Accords; he was, also, consultant to the Board of Directors of shipping
companies (public and private) advising in strategy development, asset selection
and investment timing. Between 1993 and 2003, as part of his tenure at Marsoft,
he worked on various projects including development of portfolio and risk
management methods for shipowners, establishment of investments funds and
structuring private equity in the maritime industry and business development for
Marsoft's services. Between 1989 and 1993, Dr. Aslidis worked on economic
modeling of the offshore drilling industry and on the development of a trading
support system for the drybulk shipping industry on behalf of a major European
owner. Dr. Aslidis holds a diploma in Naval Architecture and Marine Engineering
from the National Technical University of Athens (1983), M.S. in Ocean Systems
Management (1984) and Operations Research (1987) from the Massachusetts
Institute of Technology, and a Ph.D. in Ocean Systems Management (1989) also
from Massachusetts Institute of Technology.
Aristides P. Pittas has been a member of our board of directors since
our inception on May 5, 2005 and our Vice Chairman since September 1, 2005. Mr.
Pittas has been a shareholder in over 70 oceangoing vessels during the last 20
years. Since February 1989, Mr. Pittas has been the Vice President of Oceanbulk
Maritime SA, a ship management company. From November 1987 to February 1989, Mr.
Pittas was employed in the supply department of Drytank SA, a shipping company.
From November 1981 to June 1985, Mr. Pittas was employed at Trust Marine
Enterprises, a brokerage house as a S+P broker. From September 1979 to November
1981, Mr. Pittas worked at Gourdomichalis Maritime SA in the operation and
Freight Collection department. Mr. Pittas has a B.Sc in Economics from Athens
School of Economics.
Panagiotis Kyriakopoulos has been a member of our board of directors
since our inception on May 5, 2005. Since July 2002, he has been the C.E.O. of
New Television S.A., one of the leading Mass Media Companies in Greece, running
television and radio stations. From July 1997 to July 2002 he was the C.E.O. of
the Hellenic Post Group, the Universal Postal Service Provider, having the
largest retail network in Greece for postal and financial services products.
From March 1996 until July 1997, Mr. Kyriakopoulos was the General Manager of
ATEMKE SA, one of the leading construction companies in Greece listed on the
Athens Stock Exchange. From December 1986 to March 1996, he was the Managing
Director of Globe Group of Companies, a group active in the areas of shipowning
and management, textiles and food and distribution. The company was listed on
the Athens Stock Exchange. From June 1983 to December 1986, Mr. Kyriakopoulos
was an assistant to the Managing Director of Armada Marine S.A., a company
active in international trading and shipping, owning and managing a fleet of 12
vessels. Presently he is a member of the Board of Directors of the Hellenic Post
and General Secretary of the Hellenic Private Television Owners Union. He has
also been an investor in the shipping industry for more than 20 years. Mr.
Kyriakopoulos has a B.Sc. degree in Marine Engineering from the University of
Newcastle upon Tyne and a MSc. degree in Naval Architecture and Marine
Engineering with specialization in Management from the Massachusetts Institute
of Technology.
George Skarvelis has been a member of our board of directors since our
inception on May 5, 2005. He has been active in shipping since 1982. In 1992, he
founded Marine Spirit S.A., a ship management company. Between 1999 and 2003,
Marine Spirit acted as one of the crewing managers for Eurobulk. From 1986 until
1992, Mr. Skarvelis was operations director at Markos S. Shipping Ltd. From 1982
until 1986, he worked with Glysca Compania Naviera, a management company of five
vessels. Over the years Mr. Skarvelis has been a shareholder in numerous ships.
He has a B.Sc. in economics from the Athens University Law School.
Audit Committee. The Board has established an Audit Committee,
consisting of three members, which is responsible for reviewing the Company's
accounting controls and the appointment of the Company's outside auditors. The
members of the Audit Committee are Mr. Panos Kyriakopoulos (Chairman and
financial expert), Mr. Gerald Turner and Mr. George Taniskidis.
Required Vote. Approval of Proposal One will require the affirmative
vote of the plurality of the votes cast by shareholders entitled to vote and
voting at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE PROPOSED
DIRECTORS. UNLESS REVOKED AS PROVIDED ABOVE, PROXIES RECEIVED BY MANAGEMENT WILL
BE VOTED IN FAVOR OF THE PROPOSED DIRECTORS UNLESS A CONTRARY VOTE IS SPECIFIED.
PROPOSAL TWO
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO EFFECT A
REVERSE STOCK SPLIT OF THE ISSUED AND OUTSTANDING COMMON STOCK AT A
RATIO OF NOT LESS THAN ONE-FOR-TWO AND NOT MORE THAN ONE-FOR-FOUR AT
ANY TIME PRIOR TO SEPTEMBER 1, 2007, WITH THE EXACT RATIO TO BE
DETERMINED BY THE BOARD OF DIRECTORS
General
The Board has approved and is hereby soliciting Shareholder approval
of an amendment to the Company's Articles of Incorporation to effect a reverse
stock split of the Company's issued and outstanding Common Stock at a ratio of
not less than one-for-two and not more than one-for-four (the "Amendment"). A
vote FOR Proposal 2 will constitute approval of the Amendment providing for the
combination of any number of shares of Common Stock between and including two
and four into one share of Common Stock and will grant the Board the authority
to select which of the approved exchange ratios within that range will be
implemented. If the Shareholders approve this proposal, the Board will have the
authority, but not the obligation, in its sole discretion, and without further
action on the part of the Shareholders, to select one of the approved reverse
stock split ratios and effect the approved reverse stock split by filing the
Amendment with the Registrar of Corporations of the Republic of the Marshall
Islands at any time after the approval of the Amendment. If the Amendment has
not been filed with the Registrar of Corporations of the Republic of the
Marshall Islands by the close of business on September 1, 2007, the Board of
Directors will abandon the Amendment constituting the reverse stock split. If
this Proposal Two becomes effective, it will not change the number of authorized
shares of the Company's Common Stock. Except for any changes as a result of the
treatment of fractional shares, each Shareholder will continue to hold the same
percentage of Common Stock outstanding immediately prior to the reverse stock
split as such Shareholder held immediately prior to the reverse stock split.
The Board believes that by reducing the number of shares of Common
Stock outstanding through the reverse stock split and thereby proportionately
increasing the per share price of the Company's Common Stock, the Company's
Common Stock will be able to satisfy the minimum price per share listing
requirement for listing the Common Stock on the Nasdaq National Market. In
addition, an increased per share price may be more appealing to institutional
investors and institutional funds. The Board also believes that the Shareholders
may benefit from a higher priced stock because of improved liquidity as a result
of trading on the Nasdaq National Market instead of the Over The Counter
Bulletin Board ("OTCBB"), the possible increased interest from institutional
investors and investment funds and lower trading costs.
The Board believes that Shareholder approval of an exchange ratio
range (rather than an exact exchange ratio) provides the Board with maximum
flexibility to achieve the purposes of the reverse stock split. If the
Shareholders approve Proposal 2, the reserve stock split will be effected, if at
all, only upon a determination by the Board that the reverse stock split is in
the Company's and the Shareholders' best interests at that time. In connection
with any determination to effect the reverse stock split, the Board will set the
time for such a split and select a specific ratio within the range. These
determinations will be made by the Board with the intention to create the
greatest marketability for the Company's Common Stock based upon prevailing
market conditions at that time.
The Board reserves its right to elect not to proceed, and abandon, the
reverse stock split if it determines, in its sole discretion, that this proposal
is no longer in the best interests of the Company's Shareholders.
Purpose of the Reverse Stock Split
The purpose of the reverse stock split is to increase the per share
trading value of the Company's Common Stock. The Board intends to effect the
proposed reverse stock split only if it believes that a decrease in the number
of shares outstanding is likely to improve the trading price for the Company's
Common Stock, and only if the implementation of a reverse stock split is
determined by the Board to be in the best interest of the Company and its
Shareholders. The Board may exercise its discretion not to implement a reverse
stock split.
The Company believes that by effecting the reverse split it will be
able to satisfy the minimum price per share listing requirement for listing the
Common Stock on the Nasdaq National Market. In addition, the Company believes
that a number of institutional investors and investment funds are reluctant to
invest, and in some cases may be prohibited from investing, in lower-priced
stocks and that brokerage firms are reluctant to recommend lower-priced stocks
to their clients. By effecting a reverse stock split, the Company believes it
may be able to raise its Common Stock price to a level where the Company's
Common Stock could be viewed more favorably by potential investors.
Other investors may also be dissuaded from purchasing lower-priced
stocks because the brokerage commissions, as a percentage of the total
transaction, tend to be higher for lower-priced stocks. A higher stock price
after a reverse stock split could alleviate this concern.
The combination of being listed on the Nasdaq National Market and the
lower transaction costs and increased interest from institutional investors and
investment funds could have the effect of improving the trading liquidity of the
Company's Common Stock.
The Company's Common Stock currently trades on the OTCBB under the
symbol "ESEAF.OB". The Company would like to trade on the Nasdaq National
Market. The Nasdaq National Market has several listing criteria that companies
must satisfy in order to initially be listed. One of these criteria is that the
Company's Common Stock have a trading price that is greater than or equal to
$5.00 per share. Currently, the Company does not satisfy this requirement. The
Company believes that by effecting a reverse split, it will be able to satisfy
this listing requirement.
Certain Risk Factors Associated with the Reverse Stock Split
o While the Board believes that a higher stock price may help generate
investor interest, there can be no assurance that the reverse stock
split will result in any particular price for the Company's Common
Stock or result in a per-share price that will attract institutional
investors or investment funds or that such share price will satisfy
the investing guidelines of institutional investors or investment
funds. As a result, the trading liquidity of the Company's Common
Stock may not necessarily improve.
o There can be no assurance that the market price per new share of the
Company's Common Stock after a reverse stock split will remain
unchanged or increase in proportion to the reduction in the number of
old shares of the Company's Common Stock outstanding before the
reverse stock split. For example, based on the closing price of the
Company's Common Stock on July 5, 2006 of $3.10 per share, if the
reverse stock split was implemented and approved for a reverse stock
split ratio of 1-for-3, there can be no assurance that the post-split
market price of the Company's Common Stock would be $9.30 or greater.
Accordingly, the total market capitalization of the Company's Common
Stock after the reverse stock split may be lower than the total market
capitalization before the reverse stock split. Moreover, in the
future, the market price of the Company's Common Stock following the
reverse stock split may not exceed or remain higher than the market
price prior to the reverse stock split.
o If the reverse stock split is effected and the market price of the
Company's Common Stock declines, the percentage decline may be greater
than would occur in the absence of a reverse stock split. The market
price of the Company's Common Stock will, however, also be based on
performance and other factors, which are unrelated to the number of
shares outstanding. Furthermore, the liquidity of the Company's Common
Stock could be adversely affected by the reduced number of shares that
would be outstanding after the reverse stock split.
Impact of the Proposed Reverse Stock Split if Implemented
If approved and effected, the reverse stock split will be realized
simultaneously and in the same ratio for all of the Company's Common Stock. The
reverse stock split will affect all holders of the Company's Common Stock
uniformly and will not affect any Shareholder's percentage ownership interest in
the Company, except to the extent that the reverse stock split would result in
any holder of the Company's Common Stock receiving fractional shares, in which
event such fractional share shall be rounded up to the next whole share. As
described below, a holder of the Company's Common Stock otherwise entitled to a
fractional share as a result of the reverse stock split will have such
fractional share rounded up to the next whole share. In addition, the reverse
stock split will not affect any Shareholder's proportionate voting power
(subject to the treatment of fractional shares). After the reverse stock split,
the number of authorized shares of Common Stock will remain at 100,000,0000
shares and the number of unissued shares of Common Stock will be approximately
81,069,830 to 90,534,915 shares depending upon the reverse stock split ratio
selected by the Board. The Company does not have any current plans, proposals or
arrangements (written or otherwise) to issue any additional shares other than
pursuant to exercise of outstanding warrants.
The principal effects of the reverse stock split will be that:
o depending on the ratio for the reverse stock split selected by the
Board, a certain number of shares of the Company's Common Stock owned
by a Shareholder will be combined into one new share of Common Stock;
o the number of shares of Common Stock issued and outstanding will be
reduced from 37,860,341 shares to a range of approximately 9,465,085
shares to 18,930,170 shares, depending upon the reverse stock split
ratio selected by the Board, but the number of authorized shares of
Common Stock will remain the same; and
o based upon the reverse stock split ratio selected by the Board,
proportionate adjustments will be made to the per-share exercise price
and the number of shares issuable upon the exercise of all outstanding
warrants entitling the holders to purchase shares of Common Stock,
which will result in approximately the same aggregate price being
required to be paid for such warrants upon exercise immediately
preceding the reverse stock split.
In addition, if approved and implemented, the reverse stock split may
result in some Shareholders owning "odd lots" of less than 100 shares of Common
Stock. Odd lot shares may be more difficult to sell, and brokerage commissions
and other costs of transactions in odd lots are generally somewhat higher than
the costs of transactions in "round lots" of even multiples of 100 shares. The
Board believes, however, that these potential effects are substantially
outweighed by the benefits of the reverse stock split.
Effective Date
The proposed reverse stock split of the Common Stock would become
effective as of 11:59 p.m., Eastern Time, (the "Effective Date") on the date of
filing the Amendment with the office of the Registrar of Corporations of the
Republic of the Marshall Islands. On the Effective Date, shares of the Company's
Common Stock issued and outstanding immediately prior thereto will be combined,
automatically and without any action on the part of the Shareholders, into one
share of the Company's Common Stock in accordance with the reverse stock split
ratio determined by the Board.
After the Effective Date, the Company will continue to be subject to
periodic reporting and other requires of the Securities Exchange Act of 1934, as
amended. The Company's Common Stock will continue to be reported on the OTCBB
under the symbol "ESEAF.OB" until such time as it qualifies for listing on the
Nasdaq National Market.
Board Discretion to Implement the Reverse Stock Split
If the reverse stock split is approved by the Company's Shareholders,
it will be effected, if at all, only upon a determination by the Board that a
reverse stock split (at a ratio determined by the Board as described above) is
in the best interests of the Company and the Shareholders. The Board's
determination as to whether the reverse stock split will be effected and, if so,
at what ratio, will be based upon certain factors, including existing and
expected marketability and liquidity of the Company's Common Stock, prevailing
market conditions and the likely effect on the market price of the Company's
Common Stock. If the Board determines to effect the reverse stock split, the
Board will consider various factors in selecting the ratio including the overall
market conditions at the time and the recent trading history of the Common
Stock.
Fractional Shares
Shareholders will not receive fractional post-reverse stock split
shares in connection with the reverse stock split. Instead, each fractional
share will be rounded up to the next whole share ("Round Up Share").
If a Shareholder does not hold sufficient shares of the Company's
Common Stock to receive at least one share in the reverse stock split and wants
to continue to hold the Company's Common Stock after the reverse stock split, a
Shareholder may do so by taking either of the following actions far enough in
advance so that it is completed by the Effective Date:
1) purchase a sufficient number of shares of the Company's Common Stock
so that the Shareholder holds at least an amount of shares of the
Company's Common Stock in their account prior to the reverse stock
split that would entitle the Shareholder to receive at least one share
of the Company's Common Stock on a post-reverse stock split basis; or
2) if applicable, consolidate the Shareholder's accounts so that the
Shareholder holds at least an amount of shares of the Company's Common
Stock in one account prior to the reverse stock split that would
entitle the Shareholder to receive at least one share of Common Stock
on a post-reverse stock split basis. Shares held in registered form
(that is, by the Shareholder in the Shareholder's name in the
Company's stock records maintained by the Company's transfer agent)
and shares held in "street name" (that is, shares held by a
Shareholder through a bank, broker or other nominee), for the same
investor will be considered held in separate accounts and will not be
aggregated when effecting the reverse stock split.
Effect on Beneficial Holders of Common Stock (i.e. Shareholders who hold in
"street name")
Upon the reverse stock split, the Company intends to treat shares held
by Shareholders in "street name," through a bank, broker or other nominee, in
the same manner as registered Shareholders whose shares are registered in their
names. Banks, brokers or other nominees will be instructed to effect the reverse
stock split for their beneficial holders holding the Company's Common Stock in
"street name". However, these banks, brokers or other nominees may have
different procedures than registered Shareholders for processing the reverse
stock split. If a Shareholder holds shares of the Company's Common Stock with a
bank, broker or other nominee and has any questions in this regard, Shareholders
are encouraged to contact their bank, broker or other nominee.
Effect on Registered "Book-Entry" Holders of Common Stock (i.e. Shareholders
that are registered on the transfer agent's books and records but do not hold
stock certificates)
Certain of the Company's registered holders of Common Stock may hold
some or all of their shares electronically in book-entry form with the Company's
transfer agent. These Shareholders do not have stock certificates evidencing
their ownership of the Company's Common Stock. They are, however, provided with
a statement reflecting the number of shares registered in their accounts.
If a Shareholder holds registered shares in book-entry form with the
transfer agent, no action needs to be taken to receive post-reverse stock split
shares. If a Shareholder is entitled to post-reverse stock split shares, a
transaction statement will automatically be sent to the Shareholder's address of
record indicating the number of shares of Common Stock held following the
reverse stock split.
Effect on Certificated Shares
Shareholders holding shares of the Company's Common Stock in
certificate form will be sent a transmittal letter by American Stock Transfer
and Trust Company as soon as practicable after the Effective Date. The letter of
transmittal will contain instructions on how a Shareholder should surrender his
or her certificate(s) representing shares of the Company's Common Stock ("Old
Certificates") to the transfer agent in exchange for certificates representing
the appropriate number of whole shares of post-reverse stock split Common Stock
("New Certificates"). No New Certificates will be issued to a Shareholder until
such Shareholder has surrendered all Old Certificates, together with a properly
completed and executed letter of transmittal, to the transfer agent. No
Shareholder will be required to pay a transfer or other fee to exchange his, her
or its certificates.
Shareholders will then receive a New Certificate(s) representing the
number of whole shares of Common Stock to which they are entitled as a result of
the reverse stock split. Until surrendered, the Company will deem outstanding
Old Certificates held by Shareholders to be canceled and only to represented the
number of whole shares of post-reverse stock split Common Stock to which these
Shareholders are entitled.
Any Old Certificates submitted for exchange, whether because of a
sale, transfer or other disposition of stock, will automatically be exchanged
for New Certificates.
If an Old Certificate has a restrictive legend on the back of the Old
Certificate(s), the New Certificate will be issued with the same restrictive
legends that are on the back of the Old Certificate(s).
SHAREHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT
ANY STOCK CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Accounting Matters
The reverse stock split will not affect the stated capital
attributable to the Common Stock. The par value of a share of the Company's
Common Stock will be adjusted proportionally. Reported per-share net income or
loss will be higher because there will be fewer shares of Common Stock
outstanding.
Potential Anti-Takeover Effect
The proportion of unissued authorized shares to issued shares could,
under certain circumstances, have an anti-takeover effect. For example, the
issuance of a large block of Common Stock could dilute the stock ownership of a
person seeking to effect a change in the composition of the Board or
contemplating a tender offer or other transaction for the combination of the
Company with another company. However, the reverse stock split proposal is not
being proposed in response to any effort of which the Company is aware to
accumulate shares of Common stock or obtain control of the Company, nor is it
part of a plan by management to recommend to the Board and Shareholders a series
of amendments to the Company's Articles of Incorporation. Other than the
proposal for the reverse stock split, the Board does not currently contemplate
recommending the adoption of any other amendments to the Company's Articles of
Incorporation that could be construed to reduce or interfere with the ability of
third parties to take over or change the control of the Company.
No Appraisal Rights
Under the Marshall Islands Business Corporations Act, the Company's
Shareholders are not entitled to appraisal rights with respect to the reverse
stock split, and the Company will not independently provide Shareholders with
any such right.
United States Federal Income Tax Consequences Of The Reverse Stock Split
The following is summary of certain material United Stated federal
income tax consequences of the reverse stock split and does not purport to be a
complete discussion of all of the possible federal income tax consequences of
the reverse stock split. This summary is included for general information only.
Further, it does not address any state, local or foreign income or other tax
consequences. Also, it does not address the tax consequences to holders that are
subject to special tax rules, such as banks, insurance companies, regulated
investment companies, personal holding companies, foreign entities, nonresident
alien individuals, broker-dealers and tax-exempt entities. The discussion is
based on the provision of the United States federal income tax law as of the
date hereof, which is subject to change retroactively as well as prospectively.
This summary also assumes that the pre-reverse stock split shares were, and the
post-reverse stock split shares will be, held as a "capital asset," as defined
in the Internal Revenue Code of 1986, as amended (i.e., generally, property held
for investment) (the "Code"). The tax treatment of a shareholder may vary
depending upon the particular facts and circumstances of such shareholder. Each
shareholder is urged to consult with such shareholder's own tax advisor with
respect to the tax consequences of the reverse stock split. As used herein, the
term "United States holder" means a shareholder that is, for federal income tax
purposes: a citizen or resident of the United States; a corporation or other
entity taxed as a corporation created or organized in or under the laws of the
United States, any state of the United States or the District of Columbia; an
estate the income of which is subject to federal income tax regardless of its
source; or a trust if a U.S. court is able to exercise primary supervision over
the administration of the trust and one or more U.S. persons have the authority
to control all substantial decision of the trust.
No gain or loss should be recognized by a United States holder upon
such shareholder's exchange of pre-reverse stock split shares for post-reverse
stock split shares pursuant to the reverse stock split.
In the reverse stock split, the tax basis will be the same as the
United States holder's aggregate tax basis in the pre-reverse stock split shares
exchanged therefore. In general, United States holders who receive Round Up
Shares in exchange for their fractional share interests in the post-reverse
stock split shares as a result of the reverse stock split will not recognize
gain or loss as a result of receiving such Round Up Shares. The United States
holder's holding period for the post-reverse stock split shares (including
Round-Up Shares) will include the period during which the United States holder
held the pre-reverse stock split shares surrendered in the reverse stock split.
The Company's view regarding the tax consequences of the reverse stock
split is not binding on the Internal Revenue Service or the courts. Accordingly,
each United States holder should consult with his or her own tax advisor with
respect to all of the potential tax consequences to him or her of the reverse
stock split.
TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, SHAREHOLDERS ARE
HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS PROXY
STATEMENT IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED
UPON BY SHAREHOLDERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED
ON SHAREHOLDERS UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS INCLUDED
HEREIN BY THE COMPANY IN CONNECTION WITH THE PROMOTION OR MARKETING (WITHIN THE
MEANING OF CIRCULAR 230) BY THE COMPANY OF THE TRANSACTIONS OR MATTERS ADDRESSED
HEREIN; AND (C) SHAREHOLDERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR
CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
This summary is of a general nature only and is not intended to be,
and should not be construed to be, legal or tax advice to any particular
shareholder. Shareholders are urged to consult their own tax advisors as to the
tax consequences in their particular circumstances.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE ARTICLES
OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT AT A RATIO OF NOT LESS THAN
ONE-FOR-TWO AND NOR MORE THAN ONE-FOR-FOUR ANY TIME PRIOR TO SEPTEMBER 1, 2007,
WITH THE EXACT RATIO TO BE DETERMINED BY THE BOARD OF DIRECTORS. UNLESS REVOKED
AS PROVIDED ABOVE, PROXIES RECEIVED BY MANAGEMENT WILL BE VOTED IN FAVOR OF SUCH
APPROVAL UNLESS A CONTRARY VOTE IS SPECIFIED.
PROPOSAL THREE
APPROVAL OF THE EUROSEAS LTD. 2006 STOCK INCENTIVE PLAN
The Board is submitting for approval at the Meeting the Euroseas Ltd.
2006 Stock Incentive Plan.
The following is a summary of the Euroseas Ltd. 2006 Stock Incentive
Plan (the "Plan"). This summary is qualified in its entirety by reference to the
complete text of the Plan. Shareholders are urged to read the actual text of the
Plan in its entirety which is set forth as Appendix "A" to this Proxy Statement.
Purpose
The Plan is designed to provide certain key persons with incentives to
(a) enter into and remain in the service of the Company, (b) acquire a
proprietary interest in the success of the Company, (c) maximize their
performance and (d) enhance the long-term performance of the Company.
Administration
The Plan shall be administered by the Company's Board of Directors
(the "Administrator"). The Administrator shall have the authority to (i)
exercise all of the powers granted to it under the Plan, (ii) construe,
interpret and implement the Plan and any award agreements in connection
therewith (the "Award Agreements") in its sole discretion, (iii) prescribe,
amend and rescind rules and regulations relating to the Plan, (iv) make all
determinations necessary or advisable in administering the Plan and (v) correct
any defect, supply any omission and reconcile any inconsistency in the Plan.
Except to the extent prohibited by applicable law or the applicable rules of a
stock exchange, the Administrator may allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities to any person or persons selected by it.
Persons Eligible for Awards
The persons eligible to receive awards under the Plan are those
officers, directors, and executive, managerial, administrative and professional
employees of the Company, (collectively, "key persons") as the Administrator in
its sole discretion shall select based upon such factors as the Administrator
shall deem relevant.
Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive stock
options, (b) non-qualified stock options, (c) stock appreciation rights, (d)
dividend equivalent rights, (e) restricted stock, (f) unrestricted stock, (g)
restricted stock units and (h) performance shares. The term "award" means any of
the foregoing.
Shares Available for Awards
The aggregate number of shares of common stock of the Company ("Common
Stock") with respect to which options or restricted shares may at any time be
granted under the Plan are 1,800,000 shares of Common Stock. Upon certain
changes in Common Stock, the number of shares of Common Stock available for
issuance with respect to awards that may be granted under the Plan, shall be
adjusted pursuant to the terms of the Plan.
Grant of Stock Options, Stock Appreciation Rights, Restricted Stock Units and
Dividend Equivalent Rights
The Administrator may grant (i) incentive stock options and
non-qualified stock options ("options") to purchase shares of Common Stock from
the Company, (ii) share appreciation rights and (iii) restricted stock units, to
such key persons, and in such amounts and subject to such vesting and forfeiture
provisions and other terms and conditions, as the Administrator shall determine,
in its sole discretion, subject to the provisions of the Plan.
The option exercise price per share shall be determined by the
Administrator in its sole discretion; provided, however, that the option
exercise price of an incentive stock option shall be at least 100% of the fair
market value of a share of Common Stock on the date the option is granted, and
provided further that in no event shall the option exercise price be less than
the par value of a share of Common Stock.
An incentive stock option may not be granted under the Plan to 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 his
employer corporation or of its parent or subsidiary corporations (as such
ownership may be determined for purposes of section 422(b)(6) of the Code)
unless (i) at the time such incentive stock option is granted the option
exercise price is at least 110% of the fair market value of the shares subject
thereto and (ii) the incentive stock option by its terms is not exercisable
after the expiration of 5 years from the date it is granted.
The period during which an option or stock appreciation right may be
exercised shall be determined by the Administrator in its sole discretion;
provided, however, that no option or a stock appreciation right shall be
exercisable more than 10 years after the date of grant, and provided further
that, except as and to the extent otherwise provided in the Plan, no option or
stock appreciation right shall be exercisable prior to the first anniversary of
the date of grant.
The Administrator may, in its sole discretion, include in any Award
Agreement with respect to an option, stock appreciation right or performance
shares, a dividend equivalent right entitling the grantee to receive amounts
equal to the ordinary dividends that would be paid, during the time such award
is outstanding and unexercised, on the shares of Common Stock covered by such
award if such shares were then outstanding. The Administrator shall also
determine such terms and conditions as the Administrator shall deem appropriate.
Exercise of Options, Stock Appreciation Rights and Restricted Stock Units
Options, stock appreciation rights and restricted stock units shall be
exercisable at such times and under such conditions as set forth in the
corresponding Award Agreement, but in no event shall any such award be
exercisable prior to the first anniversary or subsequent to the tenth
anniversary of the date on which such award was granted.
Termination of Employment
Except to the extent otherwise provided in the Plan, a grantee who
incurs a termination of employment may exercise any outstanding option or stock
appreciation right on the following terms and conditions: (i) exercise may be
made only to the extent that the grantee was entitled to exercise the award on
the termination of employment date; and (ii) exercise must occur within three
months after termination of employment but in no event after the original
expiration date of the award.
If a grantee incurs a termination of employment as the result of a
dismissal for cause or resignation without the Company's prior consent, as
applicable, all options and stock appreciation rights not theretofore exercised
shall terminate upon the grantee's termination of employment.
If a grantee incurs a termination of employment as the result of his
retirement, disability or death, then any outstanding option, stock appreciation
right or restricted stock unit shall be exercisable pursuant to its terms.
Transferability of Options, Stock Appreciation Rights and Restricted Stock Units
Except as otherwise provided in an applicable Award Agreement
evidencing an option, stock appreciation right or restricted stock unit, during
the lifetime of a grantee, each such award granted to a grantee shall be
exercisable only by the grantee and no such award shall be assignable or
transferable otherwise than by will or by the laws of descent and distribution.
Grant of Restricted Stock
The Administrator may grant restricted shares of Common Stock to such
key persons, in such amounts, and subject to such vesting and forfeiture
provisions and other terms and conditions as the Administrator shall determine
in its sole discretion, subject to the provisions of the Plan. Restricted stock
awards may be made independently of or in connection with any other award under
the Plan. Shares of restricted stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as otherwise specifically
provided in the Plan or the applicable restricted stock agreement. A grantee's
termination of employment for any reason (including death) shall cause the
immediate forfeiture of all shares of restricted stock that have not yet vested
as of the date of such termination of employment. All dividends paid on such
shares also shall be forfeited.
Grant of Unrestricted Stock
The Administrator may grant (or sell at a purchase price at least
equal to par value) shares of Common Stock free of restrictions under the Plan
to such key persons and in such amounts and subject to such forfeiture
provisions as the Administrator shall determine in its sole discretion. Shares
may be thus granted or sold in respect of past services or other valid
consideration.
Grant of Performance Shares
The Administrator may grant performance share awards to such key
persons, and in such amounts and subject to such vesting and forfeiture
provisions and other terms and conditions, as the Administrator shall in its
sole discretion determine, subject to the provisions of the Plan. Such an award
shall entitle the grantee to acquire shares of Common Stock, or to be paid the
value thereof in cash, as the Administrator shall determine, if specified
performance goals are met. Performance shares may be awarded independently of,
or in connection with, any other award under the Plan. Except as may otherwise
be provided by the Administrator at any time prior to a grantee's termination of
employment, the rights of a grantee of a performance share award shall
automatically terminate upon the grantee's termination of employment by the
Company or its subsidiaries for any reason (including death). Performance shares
may not be sold, assigned, transferred, pledged or otherwise encumbered or
disposed of except as otherwise specifically provided in the Plan or the
applicable Award Agreement.
Amendment of the Plan; Modification of Awards
The Board may from time to time suspend, discontinue, revise or amend
the Plan in any respect whatsoever, except that no such amendment shall
materially impair any rights or materially increase any obligations under any
award theretofore made under the Plan without the consent of the grantee (or,
upon the grantee's death, the person having the right to exercise the award).
Stockholder approval shall be required with respect to any amendment
to the Plan that (i) increases the aggregate number of shares that may be issued
pursuant to incentive stock options or changes the class of employees eligible
to receive such options; or (ii) materially increases the benefits under the
Plan to persons whose transactions in Common Stock are subject to section 16(b)
of the Securities Exchange Act of 1934 Act, as amended, or increases the
benefits under the Plan to such person, or materially increases the number of
shares which may be issued to such persons, or materially modifies the
eligibility requirements affecting such persons.
The Administrator may cancel any award under the Plan. The
Administrator may also amend any outstanding Award Agreement, including, without
limitation, by amendment which would: (i) accelerate the time or times at which
the award becomes unrestricted or may be exercised, provided that, except as
otherwise provided in the Plan, no option, stock appreciation right or
restricted stock unit shall be exercisable prior to the first anniversary of its
date of grant; (ii) waive or amend any goals, restrictions or conditions set
forth in the Award Agreement; or (iii) waive or amend certain provisions of the
Plan with respect to the termination of the award upon termination of
employment. However, any such cancellation or amendment (other than in certain
specified instances) that materially impairs the rights or materially increases
the obligations of a grantee under an outstanding award shall be made only with
the consent of the grantee (or, upon the grantee's death, the person having the
right to exercise the award).
Nonassignability
Except as otherwise provided in the Plan: (a) no award or right
granted to any person under the Plan or under any Award Agreement shall be
assignable or transferable other than by will or by the laws of descent and
distribution; and (b) all rights granted under the Plan or any Award Agreement
shall be exercisable during the life of the grantee only by the grantee or the
grantee's legal representative.
Withholding Taxes
Whenever cash is to be paid pursuant to an award under the Plan, the
Company shall be entitled to deduct therefrom an amount sufficient in its
opinion to satisfy all federal, state and other governmental tax withholding
requirements related to such payment. Whenever shares of Common Stock are to be
delivered pursuant to an award under the Plan, the Company shall be entitled to
require as a condition of delivery that the grantee remit to the Company an
amount sufficient in the opinion of the Company to satisfy all federal, state
and other governmental tax withholding requirements related thereto.
Change in Control
Unless the Administrator provides otherwise in a Award Agreement, upon
the occurrence of a Change in Control (as defined in Section 3.8 of the Plan):
(a) any award then outstanding shall become fully vested and any award in the
form of an option, stock appreciation right or restricted stock unit shall be
immediately exercisable; (b) to the extent permitted by law, the Administrator
may, in its sole discretion, amend any Award Agreement in such manner as it
deems appropriate; and (c) a grantee who incurs a termination of employment for
any reason, other than a dismissal for cause, concurrent with or within one year
following the Change in Control may exercise any outstanding option, stock
appreciation right or restricted stock unit, but only to the extent that the
grantee was entitled to exercise the award on his termination of employment
date.
Termination of Plan
Unless sooner terminated by the Board, the provisions of the Plan
respecting the grant of incentive stock options shall terminate on the tenth
anniversary of the adoption of the Plan by the Board, and no incentive stock
option awards shall thereafter be made under the Plan. All such awards made
under the Plan prior to its termination shall remain in effect until such awards
have been satisfied or terminated in accordance with the terms and provisions of
the Plan and the applicable Award Agreements.
Federal Income Tax Consequences
Restricted Stock. The recognition of income from an award of
restricted stock for federal income tax purposes depends on the restrictions
imposed on the shares. Generally, taxation will be deferred until the first
taxable year the shares are no longer subject to substantial risk of forfeiture.
At the time the restrictions lapse, the employee will recognize ordinary income
equal to the then fair market value of the stock. The employee may, however,
make an election to include the value of the shares in gross income in the year
of award despite such restrictions. Generally, the Company will be entitled to
deduct the fair market value of the shares transferred to the employee as a
business expense in the year the employee includes the compensation in income.
Restricted Stock Units. Generally, an employee will not recognize
ordinary income until Common Stock, cash, or other property become payable under
the restricted stock unit, even if the award vests in an earlier year. The
Company will generally be entitled to deduct the amount the employee includes in
income as a business expense in the year of payment.
Nonqualified Stock Options. Nonqualified stock options granted under
the Plan will not be taxable to an employee at grant but generally will result
in taxation at exercise, at which time the employee will recognize ordinary
income in an amount equal to the difference between the option's exercise price
and the fair market value of the shares on the exercise date. The Company will
be entitled to deduct a corresponding amount as a business expense in the year
the employee recognizes this income.
Incentive Stock Options. An employee will generally not recognize
ordinary income on receipt or exercise of an incentive stock option so long as
he or she has been an employee of the Company or its subsidiaries from the date
the incentive stock option was granted until three months before the date of
exercise; however, the amount by which the fair market value of the shares on
the exercise date exceeds the exercise price is an adjustment in computing the
employee's alternative minimum tax in the year of exercise. If the employee
holds the shares of Common Stock received on exercise of the incentive stock
option for one year after the date of exercise (and for two years from the date
of grant of the incentive stock option), any difference between the amount
realized upon the disposition of the shares and the amount paid for the shares
will be treated as long-term capital gain (or loss, if applicable) to the
employee. If the employee exercises an incentive stock option and satisfies
these holding period requirements, the Company may not deduct any amount in
connection with the incentive stock option.
If an employee exercises an incentive stock option but engages in a
"disqualifying disposition" by selling the shares acquired on exercise before
the expiration of the one and two-year holding periods described above, the
employee generally will recognize ordinary income (for regular income tax
purposes only) in the year of the disqualifying disposition equal to the excess,
if any, of the fair market value of the shares on the date of exercise over the
exercise price; and any excess of the amount realized on the disposition over
the fair market value on the date of exercise will be taxed as long- or
short-term capital gain (as applicable). If, however, the fair market value of
the shares on the date of disqualifying disposition is less than on the date of
exercise, the employee will recognize ordinary income equal only to the
difference between the amount realized on the disqualifying disposition and the
exercise price. In either event, the Company will be entitled to deduct an
amount equal to the amount constituting ordinary income to the employee in the
year of the disqualifying disposition.
Stock Appreciation Rights. In general, there are no immediate tax
consequences to an employee when a stock appreciation right is granted. When an
employee exercises the right to the appreciation in fair market value of shares
represented by a stock appreciation right, payments made in Common Stock are
normally includable in the employee's gross income for regular income tax
purposes. The Company will be entitled to deduct the same amount as a business
expense in the same year. The includable amount and corresponding deduction each
equal the fair market value of the Common Stock payable on the date of exercise.
Other Stock-Based Awards/Incentive Awards. Any cash payments or the
fair market value of any Common Stock or other property an employee receives in
connection with other stock-based awards, incentive awards, or as unrestricted
payments equivalent to dividends on unfunded awards or on restricted stock are
includable in income in the year received or made available to the employee
without substantial limitations or restrictions. Generally, the Company will be
entitled to deduct the amount the employee includes in income as a business
expense in the year of payment.
Deductibility of Awards. Section 162(m) of the United States Internal
Revenue Code places a $1,000,000 annual limit on the amount of compensation paid
to certain of its executives which may be deducted by the Company. The limit,
however, does not apply to "qualified performance-based compensation." The Plan
will be operated in a manner so that any awards paid thereunder are treated as
"qualified performance-based compensation."
Other Tax Consequences. State tax consequences may in some cases
differ from those described above. Awards under the Plan may in some instances
be made to employees who are subject to tax in jurisdictions other than the
United States and may result in tax consequences differing from those described
above.
Required Vote. Approval of Proposal Three will require the affirmative
vote of the majority of the votes cast by shareholders entitled to vote in the
election.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
EUROSEAS 2006 STOCK INCENTIVE PLAN. UNLESS REVOKED AS PROVIDED ABOVE, PROXIES
RECEIVED BY MANAGEMENT WILL BE VOTED IN FAVOR OF SUCH APPROVAL UNLESS A CONTRARY
VOTE IS SPECIFIED.
PROPOSAL FOUR
APPROVAL OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board is submitting for approval at the Meeting the selection of
Deloitte, Hadjipavlou, Sofianos & Cambanis S.A. as the Company's independent
auditors for the fiscal year ending December 31, 2006.
Deloitte, Hadjipavlou, Sofianos & Cambanis S.A. has advised the
Company that the firm does not have any direct or indirect financial interest in
the Company, nor has such firm had any such interest in connection with the
Company during the past three fiscal years other than in its capacity as the
Company's independent auditors.
All services rendered by the independent auditors are subject to
review by the Audit Committee.
Required Vote. Approval of Proposal Four will require the affirmative
vote of the majority of the votes cast by shareholders entitled to vote in the
election.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
APPOINTMENT OF DELOITTE, HADJIPAVLOU, SOFIANOS & CAMBANIS S.A. AS INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2006. UNLESS
REVOKED AS PROVIDED ABOVE, PROXIES RECEIVED BY MANAGEMENT WILL BE VOTED IN FAVOR
OF SUCH APPROVAL UNLESS A CONTRARY VOTE IS SPECIFIED.
SOLICITATION
The cost of preparing and soliciting proxies will be borne by the
Company. Solicitation will be made primarily by mail, but shareholders may be
solicited by telephone, e-mail, or personal contact.
EFFECT OF ABSTENTIONS
Abstentions will not be counted in determining whether Proposals One,
Two, Three or Four have been approved.
OTHER MATTERS
No other matters are expected to be presented for action at the
Meeting. Should any additional matter come before the Meeting, it is intended
that proxies in the accompanying form will be voted in accordance with the
judgment of the person or persons named in the proxy.
By Order of the Directors
/s/ Stephania Karmiri
-------------------------------
Stephania Karmiri
Secretary
July 14, 2006
Maroussi, Greece
APPENDIX A
EUROSEAS LTD.
2006 STOCK INCENTIVE PLAN
ARTICLE I.
General
1.1 Purpose
The Euroseas Ltd. 2006 Stock Incentive Plan (the "Plan") is designed
to provide certain key persons, on whose initiative and efforts the successful
conduct of the business of Euroseas Ltd. (the "Company") depends, with
incentives to (a) enter into and remain in the service of the Company, (b)
acquire a proprietary interest in the success of the Company, (c) maximize their
performance, and (d) enhance the long-term performance of the Company.
1.2 Administration
(a) Administration by Board of Directors. The Plan shall be
administered by the Company's Board of Directors (the "Administrator"), which
shall act at all times so as to avoid inclusion of any amount in gross income
pursuant to Section 409A of the Code. The Administrator shall have the authority
(i) to exercise all of the powers granted to it under the Plan, (ii) to
construe, interpret and implement the Plan and any Award Agreements executed
pursuant to Section 2.1 in its sole discretion with all such determinations
being final, binding and conclusive, (iii) to prescribe, amend and rescind rules
and regulations relating to the Plan, including rules governing its own
operations, (iv) to make all determinations necessary or advisable in
administering the Plan, and (v) to correct any defect, supply any omission and
reconcile any inconsistency in the Plan.
(b) Administrator Action. Actions of the Administrator shall be taken
by the vote of a majority of its members. Any action may be taken by a written
instrument signed by a majority of the Administrator members, and action so
taken shall be fully as effective as if it had been taken by a vote at a
meeting. Except to the extent prohibited by applicable law or the applicable
rules of a stock exchange, the Administrator may allocate all or any portion of
its responsibilities and powers to any one or more of its members and may
delegate all or any part of its responsibilities to any person or persons
selected by it, and may revoke any such allocation or delegation at any time.
1.3 Persons Eligible for Awards
The persons eligible to receive awards under the Plan are those
officers, directors, and executive, managerial, administrative and professional
employees of the Company, (collectively, "key persons") as the Administrator in
its sole discretion shall select, taking into account the duties of the key
persons, their present and potential contributions to the success of the
Company, and such other factors as the Administrator shall deem relevant in
connection with accomplishing the purpose of the Plan. The Administrator may
from time to time, in its sole discretion, determine that any key person shall
be ineligible to receive awards under the Plan.
1.4 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive stock
options, (b) non-qualified stock options, (c) stock appreciation rights, (d)
dividend equivalent rights, (e) restricted stock, (f) unrestricted stock, (g)
restricted stock units, and (h) performance shares, all as more fully set forth
in Article II. The term "award" means any of the foregoing. No incentive stock
option may be granted to a person who is not an employee of the Company on the
date of grant. Notwithstanding any provision of the Plan, to the extent any
award would be subject to Section 409A of the Code, no such award may be granted
if it would fail to comply with the requirements set forth in Section 409A of
the Code.
1.5 Shares Available for Awards
(a) Aggregate Number Available. Subject to the provisions of this
Section 1.5, the aggregate number of shares of common stock of the Company
("Common Stock") with respect to which options or restricted shares may at any
time be granted under the Plan are 1,800,000 shares of Common Stock.
(b) Shares Issued; Certificate Legends. Shares issued pursuant to the
Plan may be authorized but unissued Common Stock. The Administrator may direct
that any stock certificate evidencing shares issued pursuant to the Plan shall
bear a legend setting forth such restrictions on transferability as may apply to
such shares.
(c) Adjustment Upon Changes in Common Stock. Upon certain changes in
Common Stock, the number of shares of Common Stock available for issuance with
respect to awards that may be granted under the Plan pursuant to Section 1.5(a),
shall be adjusted pursuant to Section 3.7.
(d) Certain Shares to Become Available Again. The following shares of
Common Stock shall again become available for awards under the Plan: any shares
that are subject to an award under the Plan and that remain unissued upon the
cancellation or termination of such award for any reason whatsoever; any shares
of restricted stock forfeited pursuant to Section 2.7(e), provided that any
dividends paid on such shares are also forfeited pursuant to such Section
2.7(e); and any shares in respect of which a stock appreciation right or
performance share award is settled for cash.
(e) Individual Limit. Except for the limits set forth in this Section
1.5(e) and 2.2(i), no provision of this Plan shall be deemed to limit the number
or value of shares with respect to which the Administrator may make awards to
any eligible person. Subject to adjustment as provided in Section 3.7, the total
number of shares of Common Stock with respect to which awards may be granted to
any one employee of the Company during any one calendar year shall not exceed
600,000 shares. Stock options and stock appreciation rights granted and
subsequently canceled or deemed to be canceled in a calendar year count against
this limit even after their cancellation. The provisions of this Section 1.5(e)
shall not apply in any circumstance with respect to which the Administrator
determines that compliance with Section 162(m) of the Code is not necessary.
1.6 Definitions of Certain Terms
(a) The "Fair Market Value" of a share of Common Stock on any day
shall be the closing price on the Nasdaq National Market (or the Over the
Counter Bulletin Board, if not trading on the Nasdaq National Market) as
reported for such day in The Wall Street Journal or, if no such price is
reported for such day, the average of the high bid and low asked price of Common
Stock as reported for such day. If no quotation is made for the applicable day,
the Fair Market Value of a share of Common Stock on such day shall be determined
in the manner set forth in the preceding sentence using quotations for the next
preceding day for which there were quotations, provided that such quotations
shall have been made within the ten (10) business days preceding the applicable
day. Notwithstanding the foregoing, if deemed necessary or appropriate by the
Administrator, the Fair Market Value of a share of Common Stock on any day shall
be determined by the Administrator based on independent pricing sources. In no
event shall the Fair Market Value of any share of Common Stock be less than its
par value.
(b) The term "incentive stock option" means an option that is intended
to qualify for special federal income tax treatment pursuant to sections 421 and
422 of the Code as now constituted or subsequently amended, or pursuant to a
successor provision of the Code, and which is so designated in the applicable
Award Agreement. Any option that is not specifically designated as an incentive
stock option shall under no circumstances be considered an incentive stock
option. Any option that is not an incentive stock option is referred to herein
as a "non-qualified stock option."
(c) The term "cause" in connection with a termination of employment or
Board membership by reason of a dismissal for cause shall mean:
(i) to the extent that there is an employment, severance or other
agreement governing the relationship between the grantee and the
Company, a Company subsidiary or a Company joint venture, which
agreement contains a definition of "cause," cause shall consist of
those acts or omissions that would constitute "cause" under such
agreement; and otherwise,
(ii) the grantee's termination of employment or Board membership
by the Company or an affiliate on account of any one or more of the
following:
(A) any failure by the grantee substantially to perform the
grantee's employment or Board membership duties;
(B) any excessive unauthorized absenteeism by the grantee;
(C) any refusal by the grantee to obey the lawful orders of
the Board or any other person or Administrator to whom the
grantee reports;
(D) any act or omission by the grantee that is or may be
injurious to the Company, monetarily or otherwise;
(E) any act by the grantee that is inconsistent with the
best interests of the Company;
(F) the grantee's material violation of any of the Company's
policies, including, without limitation, those policies relating
to discrimination or sexual harassment;
(G) the grantee's unauthorized (a) removal from the premises
of the Company or an affiliate of any document (in any medium or
form) relating to the Company or an affiliate or the customers or
clients of the Company or an affiliate or (b) disclosure to any
person or entity of any of the Company's, or its affiliates'
confidential or proprietary information;
(H) the grantee's commission of any felony, or any other
crime involving moral turpitude; and
(I) the grantee's commission of any act involving dishonesty
or fraud.
Any rights the Company may have hereunder in respect of the events
giving rise to cause shall be in addition to the rights the Company may have
under any other agreement with a grantee or at law or in equity. Any
determination of whether a grantee's employment or Board membership is (or is
deemed to have been) terminated for cause shall be made by the Administrator in
its discretion, which determination shall be final, binding and conclusive on
all parties. If, subsequent to a grantee's voluntary termination of employment
or involuntary termination of employment without cause, it is discovered that
the grantee's employment could have been terminated for cause, the Administrator
may deem such grantee's employment or Board membership to have been terminated
for cause. A grantee's termination of employment or Board membership for cause
shall be effective as of the date of the occurrence of the event giving rise to
cause, regardless of when the determination of cause is made.
(d) The term "Code" means the Internal Revenue Code of 1986, as
amended.
ARTICLE II.
Awards Under The Plan
2.1 Agreements Evidencing Awards
Each award granted under the Plan (except an award of unrestricted
stock) shall be evidenced by a written certificate ("Award Agreement") which
shall contain such provisions as the Administrator may, in its sole discretion,
deem necessary or desirable. By executing an Award Agreement pursuant to the
Plan, a grantee thereby agrees that the award shall be subject to all of the
terms and provisions of the Plan and the applicable Award Agreement.
2.2 Grant of Stock Options, Stock Appreciation Rights, Restricted Stock
Units and Dividend Equivalent Rights
(a) Stock Option Grants. The Administrator may grant incentive stock
options and non-qualified stock options ("options") to purchase shares of Common
Stock from the Company, to such key persons, and in such amounts and subject to
such vesting and forfeiture provisions and other terms and conditions, as the
Administrator shall determine, in its sole discretion, subject to the provisions
of the Plan. The Administrator may not grant incentive stock options to
non-employee directors.
(b) Stock Appreciation Right Grants; Types of Stock Appreciation
Rights. The Administrator may grant stock appreciation rights to such key
persons, and in such amounts and subject to such vesting and forfeiture
provisions and other terms and conditions, as the Administrator shall determine,
in its sole discretion, subject to the provisions of the Plan. The terms of a
stock appreciation right may provide that it shall be automatically exercised
for a cash payment upon the happening of a specified event that is outside the
control of the grantee, and that it shall not be otherwise exercisable. Stock
appreciation rights may be granted in connection with all or any part of, or
independently of, any option granted under the Plan. A stock appreciation right
granted in connection with an option may be granted at or after the time of
grant of such option.
(c) Nature of Stock Appreciation Rights. The grantee of a stock
appreciation right shall have the right, subject to the terms of the Plan and
the applicable Award Agreement, to receive from the Company an amount equal to
(i) the excess of the Fair Market Value of a share of Common Stock on the date
of exercise of the stock appreciation right over the Fair Market Value of a
share of Common Stock on the date of grant (or over the option exercise price if
the stock appreciation right is granted in connection with an option),
multiplied by (ii) the number of shares with respect to which the stock
appreciation right is exercised. Payment upon exercise of a stock appreciation
right shall be in cash or in shares of Common Stock (valued at their Fair Market
Value on the date of exercise of the stock appreciation right) or both, all as
the Administrator shall determine in its sole discretion; provided, however,
that a stock appreciation right settled in cash shall be exercisable only to the
extent that such exercise complies with Section 409A of the Code. Upon the
exercise of a stock appreciation right granted in connection with an option, the
number of shares subject to the option shall be reduced by the number of shares
with respect to which the stock appreciation right is exercised. Upon the
exercise of an option in connection with which a stock appreciation right has
been granted, the number of shares subject to the stock appreciation right shall
be reduced by the number of shares with respect to which the option is
exercised.
(d) Option Exercise Price. Each Award Agreement with respect to an
option shall set forth the amount (the "option exercise price") payable by the
grantee to the Company upon exercise of the option evidenced thereby. The option
exercise price per share shall be determined by the Administrator in its sole
discretion and in accordance with the requirements of Section 409A of the Code;
provided, however, that the option exercise price of an incentive stock option
shall be at least 100% of the Fair Market Value of a share of Common Stock on
the date the option is granted, and provided further that in no event shall the
option exercise price be less than the par value of a share of Common Stock.
(e) Exercise Period. Each Award Agreement with respect to an option or
stock appreciation right shall set forth the periods during which the award
evidenced thereby shall be exercisable, whether in whole or in part. Such
periods shall be determined by the Administrator in its sole discretion;
provided, however, that no option or a stock appreciation right shall be
exercisable more than 10 years after the date of grant, and provided further
that, except as and to the extent that the Administrator may otherwise provide
pursuant to Sections 2.5, 3.7 or 3.8, no option or stock appreciation right
shall be exercisable prior to the first anniversary of the date of grant. (See
the default exercise period provided for under Sections 2.3(a) and (b).)
(f) Reload Options. The Administrator may, in its sole discretion,
include in any Award Agreement with respect to an option (the "original option")
a provision that an additional option (the "reload option") shall be granted to
any grantee who, pursuant to Section 2.3(e)(ii), delivers shares of Common Stock
in partial or full payment of the exercise price of the original option. The
reload option shall be for a number of shares of Common Stock equal to the
number thus delivered, shall have an exercise price equal to the Fair Market
Value of a share of Common Stock on the date of exercise of the original option,
and shall have an expiration date no later than the expiration date of the
original option. In the event that an Award Agreement provides for the grant of
a reload option, such Agreement shall also provide that the exercise price of
the original option be no less than the Fair Market Value of a share of Common
Stock on its date of grant, and that any shares that are delivered pursuant to
Section 2.3(e)(ii) in payment of such exercise price shall have been held for at
least six months.
(g) Dividend Equivalent Rights. The Administrator may, in its sole
discretion and subject to the requirements of Section 409A of the Code, include
in any Award Agreement with respect to an option, stock appreciation right or
performance shares, a dividend equivalent right entitling the grantee to receive
amounts equal to the ordinary dividends that would be paid, during the time such
award is outstanding and unexercised, on the shares of Common Stock covered by
such award if such shares were then outstanding. In the event such a provision
is included in an Award Agreement, the Administrator shall determine whether
such payments shall be made in cash or in shares of Common Stock, whether they
shall be conditioned upon the exercise of the award to which they relate, the
time or times at which they shall be made, and such other vesting and forfeiture
provisions and other terms and conditions as the Administrator shall deem
appropriate.
(h) Restricted Stock Units. The Administrator may, in its sole
discretion, grant restricted stock units to such key persons, and in such
amounts and subject to such vesting and forfeiture provisions and other terms
and conditions, as the Administrator shall determine, in its sole discretion,
subject to the provisions of the Plan. A restricted stock unit granted under the
Plan shall confer upon the grantee a right to receive from the Company, upon the
occurrence of an event specified in the Award Agreement, such grantee's vested
restricted stock units multiplied by the Fair Market Value of a share of Common
Stock. Restricted stock units may be granted in connection with all or any part
of, or independently of, any award granted under the Plan. A restricted stock
unit granted in connection with another award may be granted at or after the
time of grant of such award.
(i) Incentive Stock Option Limitation: Exercisability. To the extent
that the aggregate Fair Market Value (determined as of the time the option is
granted) of the stock with respect to which incentive stock options are first
exercisable by any employee during any calendar year shall exceed $100,000, or
such higher amount as may be permitted from time to time under section 422 of
the Code, such options shall be treated as non-qualified stock options.
(j) Incentive Stock Option Limitation; 10% Owners. Notwithstanding the
provisions of paragraphs (d) and (e) of this Section 2.2, an incentive stock
option may not be granted under the Plan to 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 his employer corporation or of its
parent or subsidiary corporations (as such ownership may be determined for
purposes of section 422(b)(6) of the Code) unless (i) at the time such incentive
stock option is granted the option exercise price is at least 110% of the Fair
Market Value of the shares subject thereto and (ii) the incentive stock option
by its terms is not exercisable after the expiration of 5 years from the date it
is granted.
2.3 Exercise of Options, Stock Appreciation Rights and Restricted Stock
Units
Subject to the other provisions of this Article II, each option, stock
appreciation right and restricted stock unit granted under the Plan shall be
exercisable as follows:
(a) Timing and Extent of Exercise. Options, stock appreciation rights
and restricted stock units shall be exercisable at such times and under such
conditions as set forth in the corresponding Award Agreement, but in no event
shall any such award be exercisable prior to the first anniversary or subsequent
to the tenth anniversary of the date on which such award was granted. Unless the
applicable Award Agreement otherwise provides, an option, stock appreciation
right or restricted stock unit may be exercised from time to time as to all or
part of the shares or units as to which such award is then exercisable. A stock
appreciation right granted in connection with an option may be exercised at any
time when, and to the same extent that, the related option may be exercised.
(b) Notice of Exercise. An option, stock appreciation right or
restricted stock unit shall be exercised by the filing of a written notice with
the Company or the Company's designated exchange agent (the "exchange agent"),
on such form and in such manner as the Administrator shall in its sole
discretion prescribe.
(c) Payment of Exercise Price. Any written notice of exercise of an
option shall be accompanied by payment for the shares being purchased. Such
payment shall be made: (i) by certified or official bank check (or the
equivalent thereof acceptable to the Company or its exchange agent) for the full
option exercise price; or (ii) with the consent of the Administrator, by
delivery of shares of Common Stock having a Fair Market Value (determined as of
the exercise date) equal to all or part of the option exercise price and a
certified or official bank check (or the equivalent thereof acceptable to the
Company or its exchange agent) for any remaining portion of the full option
exercise price; or (iii) at the discretion of the Administrator and to the
extent permitted by law, by such other provision, consistent with the terms of
the Plan, as the Administrator may from time to time prescribe (whether directly
or indirectly through the exchange agent).
(d) Delivery of Certificates Upon Exercise. Subject to the provision
of section 2.3(e), promptly after receiving payment of the full option exercise
price, or after receiving notice of the exercise of a stock appreciation right
for which payment will be made partly or entirely in shares, the Company or its
exchange agent shall, subject to the provisions of Section 3.2, deliver to the
grantee or to such other person as may then have the right to exercise the
award, a certificate or certificates for the shares of Common Stock for which
the award has been exercised. If the method of payment employed upon option
exercise so requires, and if applicable law permits, an optionee may direct the
Company or its exchange agent, as the case may be, to deliver the stock
certificate(s) to the optionee's stockbroker.
(e) Investment Purpose and Legal Requirements. Notwithstanding the
foregoing, at the time of the exercise of any option, the Company may, if it
shall deem it necessary or advisable for any reason, require the holder of such
option (i) to represent in writing to the Company that it is the optionee's then
intention to acquire the Shares with respect to which the option is to be
exercised for investment and not with a view to the distribution thereof, or
(ii) to postpone the date of exercise until such time as the Company has
available for delivery to the optionee a prospectus meeting the requirements of
all applicable securities laws; and no shares shall be issued or transferred
upon the exercise of any option unless and until all legal requirements
applicable to the issuance or transfer of such Shares have been complied with to
the satisfaction of the Company. The Company shall have the right to condition
any issuance of shares to any optionee hereunder on such optionee's undertaking
in writing to comply with such restrictions on the subsequent transfer of such
shares as the Company shall deem necessary or advisable as a result of any
applicable law, regulation or official interpretation thereof, and certificates
representing such shares may contain a legend to reflect any such restrictions.
(f) No Shareholder Rights. No grantee of an option, stock appreciation
right or restricted stock unit (or other person having the right to exercise
such award) shall have any of the rights of a shareholder of the Company with
respect to shares subject to such award until the issuance of a stock
certificate to such person for such shares. Except as otherwise provided in
Section 1.5, no adjustment shall be made for dividends, distributions or other
rights (whether ordinary or extraordinary, and whether in cash, securities or
other property) for which the record date is prior to the date such stock
certificate is issued.
2.4 Compensation in Lieu of Exercise of an Option
Upon written application of the grantee of an option, the Administrator
may in its sole discretion determine to substitute, for the exercise of such
option, compensation to the grantee not in excess of the difference between the
option exercise price and the Fair Market Value of the shares covered by such
written application on the date of such application. Such compensation may be in
cash, in shares of Common Stock, or both, and the payment thereof may be subject
to conditions, all as the Administrator shall determine in its sole discretion.
In the event compensation is substituted pursuant to this Section 2.4 for the
exercise, in whole or in part, of an option, the number of shares subject to the
option shall be reduced by the number of shares for which such compensation is
substituted.
2.5 Termination of Employment
(a) General Rule. Except to the extent otherwise provided in
paragraphs (b), (c), (d) or (e) of this Section 2.5 or Section 3.8(b)(iii), a
grantee who incurs a termination of employment may exercise any outstanding
option or stock appreciation right on the following terms and conditions: (i)
exercise may be made only to the extent that the grantee was entitled to
exercise the award on the termination of employment date; and (ii) exercise must
occur within three months after termination of employment but in no event after
the original expiration date of the award.
(b) Dismissal for Cause; Resignation. If a grantee incurs a
termination of employment as the result of a dismissal for cause or resignation
without the Company's prior consent, as applicable, all options and stock
appreciation rights not theretofore exercised shall terminate upon the grantee's
termination of employment.
(c) Retirement. If a grantee incurs a termination of employment as the
result of his retirement, then any outstanding option, stock appreciation right
or restricted stock unit shall be exercisable pursuant to its terms. For this
purpose "retirement" shall mean a grantee's termination of employment, under
circumstances other than those described in paragraph (b) above, on or after:
(x) his 65th birthday, (y) the date on which he has attained age 60 and
completed at least five years of service with the Company, as applicable, (using
any method of calculation the Administrator deems appropriate) or (z) if
approved by the Administrator, on or after he has completed at least 20 years of
service.
(d) Disability. If a grantee incurs a termination of employment by
reason of a disability (as defined below), then any outstanding option, stock
appreciation right or restricted stock unit shall be exercisable pursuant to its
terms. For this purpose "disability" shall mean, except in connection with any
physical or mental condition that would qualify a grantee for a disability
benefit under the long-term disability plan maintained by the Company, if there
is no such plan, a physical or mental condition that prevents the grantee from
performing the essential functions of the grantee's position (with or without
reasonable accommodation) for a period of six consecutive months. The existence
of a disability shall be determined by the Administrator in its sole and
absolute discretion.
(e) Death.
(i) Termination of Employment as a Result of Grantee's Death. If
a grantee incurs a termination of employment as the result of his
death, then any outstanding option, stock appreciation right or
restricted stock unit shall be exercisable pursuant to its terms.
(ii) Restrictions on Exercise Following Death. Any such exercise
of an award following a grantee's death shall be made only by the
grantee's executor or administrator or other duly appointed
representative reasonably acceptable to the Administrator, unless the
grantee's will specifically disposes of such award, in which case such
exercise shall be made only by the recipient of such specific
disposition. If a grantee's personal representative or the recipient
of a specific disposition under the grantee's will shall be entitled
to exercise any award pursuant to the preceding sentence, such
representative or recipient shall be bound by all the terms and
conditions of the Plan and the applicable Award Agreement which would
have applied to the grantee including, without limitation, the
provisions of Sections 3.2 and 3.5 hereof.
(f) Special Rules for Incentive Stock Options. No option that remains
exercisable for more than three months following a grantee's termination of
employment for any reason other than death or disability, or for more than one
year following a grantee's termination of employment as the result of his
becoming disabled, may be treated as an incentive stock option.
(g) Administrator Discretion. The Administrator, in the applicable
Award Agreement, may waive or modify the application of the foregoing provisions
of this Section 2.5 to the extent such waiver or modification is consistent with
favorable tax treatment of amounts payable hereunder.
2.6 Transferability of Options, Stock Appreciation Rights and
Restricted Stock Units
Except as otherwise provided in an applicable Award Agreement
evidencing an option, stock appreciation right or restricted stock unit, during
the lifetime of a grantee, each such award granted to a grantee shall be
exercisable only by the grantee and no such award shall be assignable or
transferable otherwise than by will or by the laws of descent and distribution.
The Administrator may, in any applicable Award Agreement evidencing an option
(other than an incentive stock option to the extent inconsistent with the
requirements of section 422 of the Code applicable to incentive stock options),
permit a grantee to transfer all or some of the options to (A) the grantee's
spouse, children or grandchildren ("Immediate Family Members"), (B) a trust or
trusts for the exclusive benefit of such Immediate Family Members, or (C) other
parties approved by the Administrator in its sole and absolute discretion.
Following any such transfer, any transferred options shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
the transfer.
2.7 Grant of Restricted Stock
(a) Restricted Stock Grants. The Administrator may grant restricted
shares of Common Stock to such key persons, in such amounts, and subject to such
vesting and forfeiture provisions and other terms and conditions as the
Administrator shall determine in its sole discretion, subject to the provisions
of the Plan. Restricted stock awards may be made independently of or in
connection with any other award under the Plan. A grantee of a restricted stock
award shall have no rights with respect to such award unless such grantee
accepts the award within such period as the Administrator shall specify by
accepting delivery of a restricted stock agreement in such form as the
Administrator shall determine and, in the event the restricted shares are newly
issued by the Company, makes payment to the Company its exchange agent by
certified or official bank check (or the equivalent thereof acceptable to the
Company) in an amount at least equal to the par value of the shares covered by
the award.
(b) Issuance of Stock Certificate(s). Promptly after a grantee accepts
a restricted stock award, the Company or its exchange agent shall issue to the
grantee a stock certificate or stock certificates for the shares of Common Stock
covered by the award or shall establish an account evidencing ownership of the
stock in uncertificated form. Upon the issuance of such stock certificate(s), or
establishment of such account, the grantee shall have the rights of a
shareholder with respect to the restricted stock, subject to: (i) the
nontransferability restrictions and forfeiture provision described in paragraphs
(d) and (e) of this Section 2.7; (ii) in the Administrator's discretion, to a
requirement that any dividends paid on such shares shall be held in escrow until
all restrictions on such shares have lapsed; and (iii) any other restrictions
and conditions contained in the applicable restricted stock agreement.
(c) Custody of Stock Certificate(s). Unless the Administrator shall
otherwise determine, any stock certificates issued evidencing shares of
restricted stock shall remain in the possession of the Company until such shares
are free of any restrictions specified in the applicable restricted stock
agreement. The Administrator may direct that such stock certificate(s) bear a
legend setting forth the applicable restrictions on transferability.
(d) Nontransferability. Shares of restricted stock may not be sold,
assigned, transferred, pledged or otherwise encumbered or disposed of except as
otherwise specifically provided in this Plan or the applicable restricted stock
agreement. The Administrator at the time of grant shall specify the date or
dates (which may depend upon or be related to the attainment of performance
goals and other conditions) on which the nontransferability of the restricted
stock shall lapse.
(e) Consequence of Termination of Employment. A grantee's termination
of employment for any reason (including death) shall cause the immediate
forfeiture of all shares of restricted stock that have not yet vested as of the
date of such termination of employment. All dividends paid on such shares also
shall be forfeited, whether by termination of any escrow arrangement under which
such dividends are held, by the grantee's repayment of dividends he received
directly, or otherwise.
2.8 Grant of Unrestricted Stock
The Administrator may grant (or sell at a purchase price at least
equal to par value) shares of Common Stock free of restrictions under the Plan,
to such key persons and in such amounts and subject to such forfeiture
provisions as the Administrator shall determine in its sole discretion. Shares
may be thus granted or sold in respect of past services or other valid
consideration.
2.9 Grant of Performance Shares
(a) Performance Share Grants. The Administrator may grant performance
share awards to such key persons, and in such amounts and subject to such
vesting and forfeiture provisions and other terms and conditions, as the
Administrator shall in its sole discretion determine, subject to the provisions
of the Plan. Such an award shall entitle the grantee to acquire shares of Common
Stock, or to be paid the value thereof in cash, as the Administrator shall
determine, if specified performance goals are met. Performance shares may be
awarded independently of, or in connection with, any other award under the Plan.
A grantee shall have no rights with respect to a performance share award unless
such grantee accepts the award by accepting delivery of an Award Agreement at
such time and in such form as the Administrator shall determine.
(b) Shareholder Rights. The grantee of a performance share award will
have the rights of a shareholder only as to shares for which a stock certificate
has been issued pursuant to the award and not with respect to any other shares
subject to the award.
(c) Consequence of Termination of Employment. Except as may otherwise
be provided by the Administrator at any time prior to a grantee's termination of
employment, the rights of a grantee of a performance share award shall
automatically terminate upon the grantee's termination of employment by the
Company or its subsidiaries for any reason (including death).
(d) Exercise Procedures; Automatic Exercise. At the discretion of the
Administrator, the applicable Award Agreement may set out the procedures to be
followed in exercising a performance share award or it may provide that such
exercise shall be made automatically after satisfaction of the applicable
performance goals.
(e) Tandem Grants; Effect on Exercise. Except as otherwise specified
by the Administrator, (i) a performance share award granted in tandem with an
option may be exercised only while the option is exercisable, (ii) the exercise
of a performance share award granted in tandem with any other award shall reduce
the number of shares subject to such other award in the manner specified in the
applicable Award Agreement, and (iii) the exercise of any award granted in
tandem with a performance share award shall reduce the number of shares subject
to the latter in the manner specified in the applicable Award Agreement.
(f) Nontransferability. Performance shares may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as otherwise
specifically provided in this Plan or the applicable Award Agreement. The
Administrator at the time of grant shall specify the date or dates (which may
depend upon or be related to the attainment of performance goals and other
conditions) on which the nontransferability of the performance shares shall
lapse.
ARTICLE III.
Miscellaneous
3.1 Amendment of the Plan; Modification of Awards
(a) Amendment of the Plan. The Board may from time to time suspend,
discontinue, revise or amend the Plan in any respect whatsoever, except that no
such amendment shall materially impair any rights or materially increase any
obligations under any award theretofore made under the Plan without the consent
of the grantee (or, upon the grantee's death, the person having the right to
exercise the award). For purposes of this Section 3.1, any action of the Board
or the Administrator that in any way alters or affects the tax treatment of any
award shall not be considered to materially impair any rights of any grantee.
(b) Shareholder Approval Requirement. Shareholder approval shall be
required with respect to any amendment to the Plan that (i) increases the
aggregate number of shares that may be issued pursuant to incentive stock
options or changes the class of employees eligible to receive such options; or
(ii) materially increases the benefits under the Plan to persons whose
transactions in Common Stock are subject to section 16(b) of the Securities
Exchange Act of 1934, as amended, or increases the benefits under the Plan to
such person, or materially increases the number of shares which may be issued to
such persons, or materially modifies the eligibility requirements affecting such
persons.
(c) Modification of Awards. The Administrator may cancel any award
under the Plan. Subject to the requirements of Section 409A of the Code, the
Administrator also may amend any outstanding Award Agreement, including, without
limitation, by amendment which would: (i) accelerate the time or times at which
the award becomes unrestricted or may be exercised, provided that, except as and
to the extent that the Administrator may otherwise provide pursuant to Section
2.5, 3.7 or 3.8, no option, stock appreciation right or restricted stock unit
shall be exercisable prior to the first anniversary of its date of grant; (ii)
waive or amend any goals, restrictions or conditions set forth in the Agreement;
or (iii) waive or amend the operation of Section 2.5 with respect to the
termination of the award upon termination of employment. However, any such
cancellation or amendment (other than an amendment pursuant to Sections 3.7 or
3.8(b)) that materially impairs the rights or materially increases the
obligations of a grantee under an outstanding award shall be made only with the
consent of the grantee (or, upon the grantee's death, the person having the
right to exercise the award).
3.2 Consent Requirement
(a) No Plan Action Without Required Consent. If the Administrator
shall at any time determine that any Consent (as hereinafter defined) is
necessary or desirable as a condition of, or in connection with, the granting of
any award under the Plan, the issuance or purchase of shares or other rights
thereunder, or the taking of any other action thereunder (each such action being
hereinafter referred to as a "Plan Action"), then such Plan Action shall not be
taken, in whole or in part, unless and until such Consent shall have been
effected or obtained to the full satisfaction of the Administrator.
(b) Consent Defined. The term "Consent" as used herein with respect to
any Plan Action means (i) any and all listings, registrations or qualifications
in respect thereof upon any securities exchange or under any federal, state or
local law, rule or regulation, (ii) any and all written agreements and
representations by the grantee with respect to the disposition of shares, or
with respect to any other matter, which the Administrator shall deem necessary
or desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement that any such
listing, qualification or registration be made and (iii) any and all consents,
clearances and approvals in respect of a Plan Action by any governmental or
other regulatory bodies.
3.3 Nonassignability
Except as provided in Sections 2.5(e), 2.6, 2.7(d) and 2.9(f): (a) no
award or right granted to any person under the Plan or under any Award Agreement
shall be assignable or transferable other than by will or by the laws of descent
and distribution; and (b) all rights granted under the Plan or any Award
Agreement shall be exercisable during the life of the grantee only by the
grantee or the grantee's legal representative.
3.4 Requirement of Notification of Election Under Section 83(b) of the Code
If any grantee shall, in connection with the acquisition of shares of
Common Stock under the Plan, make the election permitted under section 83(b) of
the Code (i.e., an election to include in gross income in the year of transfer
the amounts specified in section 83(b)), such grantee shall notify the Company
of such election within 10 days of filing notice of the election with the
Internal Revenue Service, in addition to any filing and notification required
pursuant to regulations issued under the authority of Code section 83(b).
3.5 Requirement of Notification Upon Disqualifying Disposition Under
Section 421(b) of the Code
Each Award Agreement with respect to an incentive stock option shall
require the grantee to notify the Company of any disposition of shares of Common
Stock issued pursuant to the exercise of such option under the circumstances
described in section 421(b) of the Code (relating to certain disqualifying
dispositions), within 10 days of such disposition.
3.6 Withholding Taxes
(a) With Respect to Cash Payments. Whenever cash is to be paid
pursuant to an award under the Plan, the Company shall be entitled to deduct
therefrom an amount sufficient in its opinion to satisfy all federal, state and
other governmental tax withholding requirements related to such payment.
(b) With Respect to Delivery of Common Stock. Whenever shares of
Common Stock are to be delivered pursuant to an award under the Plan, the
Company shall be entitled to require as a condition of delivery that the grantee
remit to the Company an amount sufficient in the opinion of the Company to
satisfy all federal, state and other governmental tax withholding requirements
related thereto. With the approval of the Administrator, which the Administrator
shall have sole discretion whether or not to give, the grantee may satisfy the
foregoing condition by electing to have the Company withhold from delivery
shares having a value equal to the amount of tax to be withheld. Such shares
shall be valued at their Fair Market Value as of the date on which the amount of
tax to be withheld is determined. Fractional share amounts shall be settled in
cash. Such a withholding election may be made with respect to all or any portion
of the shares to be delivered pursuant to an award.
3.7 Adjustment Upon Changes in Common Stock
(a) Shares Available for Grants. In the event of any change in the
number of shares of Common Stock outstanding by reason of any stock dividend or
split, reverse stock split, recapitalization, merger, consolidation, combination
or exchange of shares or similar corporate change, the maximum number of shares
of Common Stock with respect to which the Administrator may grant awards under
Article II hereof, as described in Section 1.5(a), and the individual annual
limit described in Section 1.5(e), shall be appropriately adjusted by the
Administrator. In the event of any change in the number of shares of Common
Stock outstanding by reason of any other event or transaction, the Administrator
may, but need not, make such adjustments in the number and class of shares of
Common Stock with respect to which awards: (i) may be granted under Article II
hereof and (ii) granted to any one employee of the Company or a subsidiary
during any one calendar year, in each case as the Administrator may deem
appropriate.
(b) Outstanding Restricted Stock and Performance Shares. Unless the
Administrator in its sole and absolute discretion otherwise determines, any
securities or other property (including dividends paid in cash) received by a
grantee with respect to a share of restricted stock, the issue date with respect
to which occurs prior to such event, but which has not vested as of the date of
such event, as a result of any dividend, stock split, reverse stock split,
recapitalization, merger, consolidation, combination, exchange of shares or
otherwise will not vest until such share of restricted stock vests, and shall be
promptly deposited with the Company or other custodian designated pursuant to
Section 2.7(c) hereof.
The Administrator may, in its absolute discretion, adjust any grant of
shares of restricted stock, the issue date with respect to which has not
occurred as of the date of the occurrence of any of the following events, or any
grant of performance shares, to reflect any dividend, stock split, reverse stock
split, recapitalization, merger, consolidation, combination, exchange of shares
or similar corporate change as the Administrator may deem appropriate to prevent
the enlargement or dilution of rights of grantees.
(c) Outstanding Options, Stock Appreciation Rights and Dividend
Equivalent Rights--Increase or Decrease in Issued Shares Without Consideration.
Subject to any required action by the shareholders of the Company, in the event
of any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or consolidation of shares of Common Stock or the
payment of a stock dividend (but only on the shares of Common Stock), or any
other increase or decrease in the number of such shares effected without receipt
of consideration by the Company, the Administrator shall proportionally adjust
the number of shares of Common Stock subject to each outstanding option and
stock appreciation right, and the exercise price-per-share of Common Stock of
each such option and stock appreciation right and the number of any related
dividend equivalent rights.
(d) Outstanding Options, Stock Appreciation Rights, Restricted Stock
Units and Dividend Equivalent Rights--Certain Mergers. Subject to any required
action by the shareholders of the Company, in the event that the Company shall
be the surviving corporation in any merger or consolidation (except a merger or
consolidation as a result of which the holders of shares of Common Stock receive
securities of another corporation), each option, stock appreciation right and
dividend equivalent right outstanding on the date of such merger or
consolidation shall pertain to and apply to the securities which a holder of the
number of shares of Common Stock subject to such option, stock appreciation
right, restricted stock unit or dividend equivalent right would have received in
such merger or consolidation.
(e) Outstanding Options, Stock Appreciation Rights, Restricted Stock
Units and Dividend Equivalent Rights--Certain Other Transactions. In the event
of (i) a dissolution or liquidation of the Company, (ii) a sale of all or
substantially all of the Company's assets, (iii) a merger or consolidation
involving the Company in which the Company is not the surviving corporation or
(iv) a merger or consolidation involving the Company in which the Company is the
surviving corporation but the holders of shares of Common Stock receive
securities of another corporation and/or other property, including cash, the
Administrator shall, in its absolute discretion, have the power to:
(i) cancel, effective immediately prior to the occurrence of such
event, each option, stock appreciation right and restricted stock unit
(including each dividend equivalent right related thereto) outstanding
immediately prior to such event (whether or not then exercisable), and, in
full consideration of such cancellation, pay to the grantee to whom such
option or stock appreciation right was granted an amount in cash, for each
share of Common Stock subject to such option or stock appreciation right,
respectively, equal to the excess of (x) the value, as determined by the
Administrator in its absolute discretion applied in accordance with Section
409A of the Code, of the property (including cash) received by the holder
of a share of Common Stock as a result of such event over (y) the exercise
price of such option or stock appreciation right; or
(ii) provide for the exchange of each option, stock appreciation right
and restricted stock unit (including any related dividend equivalent right)
outstanding immediately prior to such event (whether or not then
exercisable) for an option on, stock appreciation right, restricted stock
unit and dividend equivalent right with respect to, as appropriate, some or
all of the property which a holder of the number of shares of Common Stock
subject to such option, stock appreciation right or restricted stock unit
would have received and, incident thereto, make an equitable adjustment as
determined by the Administrator in its absolute discretion applied in
accordance with Section 409A of the Code in the exercise price of the
option, stock appreciation right or restricted stock unit, or the number of
shares or amount of property subject to the option, stock appreciation
right, restricted stock unit or dividend equivalent right or, if
appropriate, provide for a cash payment to the grantee to whom such option,
stock appreciation right or restricted stock unit was granted in partial
consideration for the exchange of the option, stock appreciation right or
restricted stock unit.
(f) Outstanding Options, Stock Appreciation Rights, Restricted Stock
Units and Dividend Equivalent Rights--Other Changes. In the event of any change
in the capitalization of the Company or a corporate change other than those
specifically referred to in Sections 3.7(c), (d) or (e) hereof, the
Administrator may, in its absolute discretion exercised in accordance with
Section 409A of the Code, make such adjustments in the number and class of
shares subject to options, stock appreciation rights, restricted stock units and
dividend equivalent rights outstanding on the date on which such change occurs
and in the per-share exercise price of each such option, stock appreciation
right and restricted stock unit as the Administrator may consider appropriate to
prevent dilution or enlargement of rights. In addition, if and to the extent the
Administrator determines it is appropriate, the Administrator may elect to
cancel each option, stock appreciation right and restricted stock unit
(including each dividend equivalent right related thereto) outstanding
immediately prior to such event (whether or not then exercisable), and, in full
consideration of such cancellation, pay to the grantee to whom such option,
stock appreciation right or restricted stock unit was granted an amount in cash,
for each share of Common Stock subject to such option, stock appreciation right
or restricted stock unit, respectively, equal to the excess of (i) the Fair
Market Value of Common Stock on the date of such cancellation over (ii) the
exercise price of such option, stock appreciation right or restricted stock
unit.
(g) No Other Rights. Except as expressly provided in the Plan, no
grantee shall have any rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any dividend, any increase or
decrease in the number of shares of stock of any class or any dissolution,
liquidation, merger or consolidation of the Company or any other corporation.
Except as expressly provided in the Plan, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Common Stock subject to an award or the
exercise price of any option or stock appreciation right.
3.8 Change in Control
(a) Change in Control Defined. For purposes of this Section 3.8,
"Change in Control" shall mean the occurrence of any of the following: (i) any
person or "group" (within the meaning of Section 13(d)(3) of the 1934 Act),
other than entities which the President of the Company directly or indirectly
controls (as defined in Rule 12b-2 under the 1934 Act), acquiring "beneficial
ownership" (as defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, of fifty percent (50%) or more of the aggregate voting power of the
capital stock ordinarily entitled to elect directors of the Company;
(ii) the sale of all or substantially all of the Company's assets
in one or more related transactions to a person other than such a sale
to a subsidiary of the Company which does not involve a change in the
equity holdings of the Company or to an entity which the President
directly or indirectly controls; or
(iii) any merger, consolidation, reorganization or similar event
of the Company or any of its subsidiaries, as a result of which the
holders of the voting stock of the Company immediately prior to such
merger, consolidation, reorganization or similar event do not directly
or indirectly hold at least fifty-one percent (51%) of the aggregate
voting power of the capital stock of the surviving entity.
Notwithstanding the foregoing, for each award subject to Section 409A
of the Code, a Change in Control shall be deemed to occur under this Plan with
respect to such Award only if a change in the ownership or effective control of
the Company or a change in the ownership of a substantial portion of the assets
of the Company shall also be deemed to have occurred under Section 409A of the
Code.
(b) Effect of a Change in Control. Unless the Administrator provides
otherwise in an Award Agreement, upon the occurrence of a Change in Control:
(i) notwithstanding any other provision of this Plan, any award
then outstanding shall become fully vested and any award in the form
of an option, stock appreciation right or restricted stock unit shall
be immediately exercisable;
(ii) to the extent permitted by law, the Administrator may, in
its sole discretion, amend any Award Agreement in such manner as it
deems appropriate;
(iii) a grantee who incurs a termination of employment for any
reason, other than a dismissal for cause, concurrent with or within
one year following the Change in Control may exercise any outstanding
option, stock appreciation right or restricted stock unit, but only to
the extent that the grantee was entitled to exercise the award on his
termination of employment date, until the earlier of (A) the original
expiration date of the award and (B) the later of (x) the date
provided for under the terms of Section 2.5 without reference to this
Section 3.8(b)(iii) and (y) the first anniversary of the grantee's
termination of employment.
(c) Miscellaneous. Whenever deemed appropriate by the Administrator,
any action referred to in paragraph (b)(ii) of this Section 3.8 may be made
conditional upon the consummation of the applicable Change in Control
transaction.
3.9 Right of Discharge Reserved
Nothing in the Plan or in any Award Agreement shall confer upon any
grantee the right to continue his employment with the Company or affect any
right that the Company may have to terminate such employment.
3.10 Non-Uniform Determinations
The Administrator's determinations under the Plan need not be uniform
and may be made by it selectively among persons who receive, or who are eligible
to receive, awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Administrator
shall be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Award Agreements, as
to (a) the persons to receive awards under the Plan, and (b) the terms and
provisions of awards under the Plan.
3.11 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any way to limit or
restrict the Company from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
3.12 Headings
Any section, subsection, paragraph or other subdivision headings
contained herein are for the purpose of convenience only and are not intended to
expand, limit or otherwise define the contents of such subdivisions.
3.13 Effective Date and Term of Plan
(a) Shareholder Approval. The Plan shall be subject to the requisite
approval of the shareholders of the Company in accordance with the requirements
of Rule 4350 of the National Association of Securities Dealers Manual and
Section 162(m) of the Code. In the absence of such approval, any Awards shall be
null and void.
(b) Termination of Plan. Unless sooner terminated by the Board or
pursuant to paragraph (a) above, the provisions of the Plan respecting the grant
of incentive stock options shall terminate on the tenth anniversary of the
adoption of the Plan by the Board, and no incentive stock option awards shall
thereafter be made under the Plan. All such awards made under the Plan prior to
its termination shall remain in effect until such awards have been satisfied or
terminated in accordance with the terms and provisions of the Plan and the
applicable Award Agreements.
3.14 Restriction on Issuance of Stock Pursuant to Awards
The Company shall not permit any shares of Common Stock to be issued
pursuant to Awards granted under the Plan unless such shares of Common Stock are
fully paid and non-assessable under applicable law.
3.15 Governing Law
Except to the extent preempted by any applicable federal law, the Plan
will be construed and administered in accordance with the laws of the State of
New York, without giving effect to principles of conflict of laws.
3.16 Compliance with Section 409A of the Code
Notwithstanding anything to the contrary contained in the Plan or in
any Agreement, to the extent that the Administrator determines that the Plan or
any Award is subject to Section 409A of the Code and fails to comply with the
requirements of Section 409A of the Code, the Administrator reserves the right
to amend or terminate the Plan and/or amend, restructure, terminate or replace
the Award in order to cause the Award to either not be subject to Section 409A
of the Code or to comply with the applicable provisions of such section.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Euroseas Ltd.
---------------------------------
(Registrant)
Date July 17, 2006 By /s/ Aristides J. Pittas
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Aristides J. Pittas