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EXHIBIT 10.23.1
AVESTA TECHNOLOGIES, INC.
1996 STOCK PLAN
amended 1/4/99
1. PURPOSE. The purpose of the Avesta Technologies, Inc. 1996 Stock
Plan (the "Plan") is to encourage employees and directors of and consultants to
Avesta Technologies, Inc. (the "Company") and of any present or future parent or
subsidiary of the Company (collectively, "Related Corporations") and other
individuals who render services to the Company or a Related Corporation, by
providing opportunities to participate in the ownership of the Company and its
future growth through (a) the grant of options which qualify as "incentive stock
options" ("ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"); (b) the grant of options which do not qualify as ISOs
("Non-Qualified Options"); (c) awards of stock in the Company ("Awards"); and
(d) opportunities to make direct purchases of stock in the Company
("Purchases"). Both ISOs and Non-Qualified Options are referred to hereafter
individually as an "Option" and collectively as "Options." Options, Awards and
authorizations to make Purchases are referred to hereafter collectively as
"Stock Rights." As used herein, the terms "parent" and "subsidiary" mean "parent
corporation" and "subsidiary corporation," respectively, as those terms are
defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall
(be administered by the Board of Directors of the Company (the
"Board") or, subject to paragraph 2(D) (relating to compliance
with Section 162(m) of the Code), by a committee appointed by
the Board (the "Committee"). Hereinafter, all references in
this Plan to the "Committee" shall mean the Board if no
Committee has been appointed. Subject to ratification of the
grant or authorization of each Stock Right by the Board (if so
required by applicable state law), and subject to the terms of
the Plan, the Committee shall have the authority to (i)
determine to whom (from among the class of employees eligible
under paragraph 3 to receive ISOs) ISOs shall be granted, and
to whom (from among the class of individuals and entities
eligible under paragraph 3 to receive Non-Qualified Options
and Awards and to make Purchases) Non-Qualified Options,
Awards and authorizations to make Purchases may be granted;
(ii) determine the time or times at which Options or Awards
shall be granted or Purchases made; (iii) determine the
purchase price of shares subject to each Option or Purchase,
which prices shall not be less than the minimum price
specified in paragraph 6; (iv) determine whether each Option
granted shall be an ISO or a Non-Qualified Option; (v)
determine (subject to paragraph 7) the time or times when each
Option shall become exercisable and the duration of the
exercise period; (vi) extend the period during which
outstanding Options may be exercised; (vii) determine whether
restrictions such as repurchase options are to be imposed on
shares subject to Options, Awards and Purchases and the nature
of such restrictions, if any, and (viii) interpret the Plan
and prescribe and rescind rules and regulations relating to
it. If the Committee determines to issue a Non-Qualified
Option, it shall take whatever actions it deems necessary,
under Section 422 of the Code and the regulations promulgated
thereunder, to ensure that such Option is not treated as an
ISO. The interpretation and construction by the Committee of
any provisions of the Plan or of any Stock Right granted under
it shall be final unless otherwise determined by the Board.
The Committee may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem
advisable. No member of the Board or the Committee shall be
liable for any action or determination made in good faith with
respect to the Plan or any Stock Right granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of
its members as its chairman, and shall hold meetings at such
time and places as it may determine. A majority of the
Committee shall constitute a quorum and acts of a majority of
the members of the Committee at a
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meeting at which a quorum is present, or acts reduced to or
approved in writing by all the members of the Committee (if
consistent with applicable state law), shall be the valid acts
of the Committee. From time to time the Board may increase the
size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies however caused, or
remove all members of the Committee and thereafter directly
administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock
Rights may be granted to members of the Board. All grants of
Stock Rights to members of the Board shall in all respects be
made in accordance with the provisions of this Plan applicable
to other eligible persons. Members of the Board who either (i)
are eligible to receive grants of Stock Rights pursuant to the
Plan or (ii) have been granted Stock Rights may vote on any
matters affecting the administration of the Plan or the grant
of any Stock Rights pursuant to the Plan, except that no such
member shall act upon the granting to himself or herself of
Stock Rights, but any such member may be counted in
determining the existence of a quorum at any meeting of the
Board during which action is taken with respect to the
granting to such member of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its
discretion, may take such action as may be necessary to ensure
that Stock Rights granted under the Plan qualify as "qualified
performance-based compensation" within the meaning of Section
162(m) of the Code and applicable regulations promulgated
thereunder ("Performance-Based Compensation"). Such action may
include, in the Board's discretion, some or all of the
following (i) if the Board determines that Stock Rights
granted under the Plan generally shall constitute
Performance-Based Compensation, the Plan shall be
administered, to the extent required for such Stock Rights to
constitute Performance-Based Compensation, by a Committee
consisting solely of two or more "outside directors" (as
defined in applicable regulations promulgated under Section
162(m) of the Code), (ii) if any Non-Qualified Options with an
exercise price less than the fair market value per share of
Common Stock are granted under the Plan and the Board
determines that such Options should constitute
Performance-Based Compensation, such options shall be made
exercisable only upon the attainment of a pre-established,
objective performance goal established by the Committee, and
such grant shall be submitted for, and shall be contingent
upon shareholder approval and (iii) Stock Rights granted under
the Plan may be subject to such other terms and conditions as
are necessary for compensation recognized in connection with
the exercise or disposition of such Stock Right or the
disposition of Common Stock acquired pursuant to such Stock
Right, to constitute Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Stock Rights shall be authorized but
unissued shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 3,700,000, subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the unpurchased shares of
Common Stock subject to such Option shall again be available for grants of Stock
Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 750,000 of shares of Common
Stock under the Plan during any fiscal year of the Company. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full
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or shall cease for any reason to be exercisable in whole or in part or shall be
repurchased by the Company, the shares subject to such Option shall be included
in the determination of the aggregate number of shares of Common Stock deemed to
have been granted to such employee under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time on or after December 16, 1996 and prior to December 16, 2006. The
date of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND
PURCHASES. Subject to paragraph 2(D) (relating to compliance
with Section 162(m) of the Code), the exercise price per share
specified in the agreement relating to each Non-Qualified
Option granted, and the purchase price per share of stock
granted in any Award or authorized as a Purchase, under the
Plan may not be less than the fair market value of the Common
Stock of the Company on the date of grant; provided that, in
no event shall such exercise price or such purchase price be
less than the minimum legal consideration required therefor
under the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
B. PRICE FOR ISOS. The exercise price per share
specified in the agreement relating to each ISO granted under
the Plan shall not be less than the fair market value per
share of Common Stock on the date of such grant. In the case
of an ISO to be granted to an employee owning stock possessing
more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related
Corporation, the price per share specified in the agreement
relating to such ISO shall not be less than one hundred ten
percent (110%) of the fair market value per share of Common
Stock on the date of grant. For purposes of determining stock
ownership under this paragraph, the rules of Section 424(d) of
the Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each
eligible employee may be granted Options treated as ISOs only
to the extent that, in the aggregate under this Plan and all
incentive stock option plans of the Company and any Related
Corporation, ISOs do not become exercisable for the first time
by such employee during any calendar year with respect to
stock having a fair market value (determined at the time the
ISOs were granted) in excess of $100,000. The Company intends
to designate any Options granted in excess of such limitation
as Non-Qualified Options, and the Company shall issue separate
certificates to the optionee with respect to Options that are
Non-Qualified Options and Options that are ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the
time an Option is granted under the Plan, the Company's Common
Stock is publicly traded, "fair market value" shall be
determined as of the date of grant or, if the prices or quotes
discussed in this sentence are unavailable for such date, the
last business day for which such prices or quotes are
available prior to the date of grant and shall mean (i) the
average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then
traded on a national securities exchange; or (ii) the last
reported sale price (on that date) of the Common Stock on the
Nasdaq National Market, if the Common Stock is not then traded
on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by
an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the Nasdaq
National Market. If the Common Stock is not publicly traded at
the time an Option is granted under the Plan, "fair market
value" shall mean the fair value of the Common Stock as
determined by the Committee after taking into consideration
all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock
in private transactions negotiated at arm's length.
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7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully
exercisable on the date of grant or shall become exercisable
thereafter in such installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment
becomes exercisable, it shall remain exercisable until
expiration or termination of the Option, unless otherwise
specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may
be exercised at any time or from time to time, in whole or in
part, for up to the total number of shares with respect to
which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have
the right to accelerate the date that any installment of any
Option becomes exercisable; provided that the Committee shall
not, without the consent of an optionee, accelerate the
permitted exercise date of any installment of any Option
granted to any employee as an ISO (and not previously
converted into a Non-Qualified Option pursuant to paragraph
16) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as
described in paragraph 6(C).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
as defined in paragraph 10, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate on the earlier of (a)
three months after the date of termination of his or her employment, or (b)
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. For purposes of this paragraph 9, employment shall be
considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute or by contract. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. ISOs granted
under the Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Stock Right the right to be retained in
employment or other service by the Company or any Related Corporation for any
period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by
the Company and all Related Corporations by reason of his or
her death, any ISO owned by such optionee may be exercised, to
the extent otherwise exercisable on the date of death, by the
estate, personal representative or beneficiary who has
acquired the ISO by will or by the laws of descent and
distribution, until the earlier of (i) the specified
expiration date of the ISO or (ii) 180 days from
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the date of the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be
employed by the Company and all Related Corporations by reason
of his or her disability, such optionee shall have the right
to exercise any ISO held by him or her on the date of
termination of employment, for the number of shares for which
he or she could have exercised it on that date, until the
earlier of (i) the specified expiration date of the ISO or
(ii) 180 days from the date of the termination of the
optionee's employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code or any successor
statute.
11. ASSIGNABILITY. No ISO shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee. Stock
Rights other than ISOs shall be transferable to the extent set forth in the
agreement relating to such Stock Right.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of
Common Stock shall be subdivided or combined into a greater or
smaller number of shares or if the Company shall issue any
shares of Common Stock as a stock dividend on its outstanding
Common Stock, the number of shares of Common Stock deliverable
upon the exercise of Options shall be appropriately increased
or decreased proportionately, and appropriate adjustments
shall be made in the purchase price per share to reflect such
subdivision, combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger or
other reorganization in which the holders of the outstanding
voting stock of the Company immediately preceding the
consummation of such event, shall, immediately following such
event, hold, as a group, less than a majority of the voting
securities of the surviving or successor entity, or in the
event of a sale of all or substantially all of the Company's
assets (each, an "Acquisition"), the Committee or the board of
directors of any entity assuming the obligations of the
Company hereunder (the "Successor Board"), shall, as to
outstanding Options, either (i) make appropriate provision for
the continuation of such Options by substituting on an
equitable basis for the shares then subject to such Options
either (a) the consideration payable with respect to the
outstanding shares of Common Stock in connection with the
Acquisition, (b) shares of stock of the surviving or successor
corporation or (c) such other securities as the Successor
Board deems appropriate, the fair market value of which shall
not materially exceed the fair market value of the shares of
Common Stock subject to such Options immediately preceding the
Acquisition; or (ii) upon written notice to the optionees,
provide that all Options must be exercised, to the extent then
exercisable or to be exercisable as a result of the
Acquisition, within a specified number of days of the date of
such notice, at the end of which period the Options shall
terminate; or (iii) terminate all Options in exchange for a
cash payment equal to the excess of the fair market value of
the shares subject to such Options (to the
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extent then exercisable or to be exercisable as a result of
the Acquisition) over the exercise price thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event
of a recapitalization or reorganization of the Company (other
than a transaction described in subparagraph B above) pursuant
to which securities of the Company or of another corporation
are issued with respect to the outstanding shares of Common
Stock, an optionee upon exercising an Option shall be entitled
to receive for the purchase price paid upon such exercise the
securities he or she would have received if he or she had
exercised such Option prior to such recapitalization or
reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the
foregoing, any adjustments made pursuant to subparagraphs A, B
or C with respect to ISOs shall be made only after the
Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in
Section 424 of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs
would constitute a modification of such ISOs or would cause
adverse tax consequences to the holders, it may refrain from
making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, each
Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly
provided herein, 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 or price of
shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of
the Company.
G. FRACTIONAL SHARES. No fractional shares shall be
issued under the Plan and the optionee shall receive from the
Company cash in lieu of such fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the
events described in subparagraphs A, B or C above, the class
and aggregate number of shares set forth in paragraph 4 hereof
that are subject to Stock Rights which previously have been or
subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall
determine the specific adjustments to be made under this
paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the grantee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
Federal rate, as defined in Section 1274(d) of the Code, (d) at the discretion
of the Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c),
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(d) or (e) of the preceding sentence, such discretion shall be exercised in
writing at the time of the grant of the ISO in question. The holder of an Option
shall not have the rights of a shareholder with respect to the shares covered by
such Option until the date of issuance of a stock certificate to such holder for
such shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
December 10, 1996, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to December 9, 1997, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on December 15, 2006 (except as to Options outstanding on
that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 13); (b) the provisions of
paragraph 3 regarding eligibility for grants of ISOs may not be modified; (c)
the provisions of paragraph 6(B) regarding the exercise price at which shares
may be offered pursuant to ISOs may not be modified (except by adjustment
pursuant to paragraph 13); and (d) the expiration date of the Plan may not be
extended. Except as otherwise provided in this paragraph 15, in no event may
action of the Board or stockholders alter or impair the rights of a grantee,
without such grantee's consent, under any Stock Right previously granted to such
grantee.
16. MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO NON-QUALIFIED
OPTIONS. Subject to paragraph 13(D), without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such ISO (including
the means of exercising such ISO) if such alteration would constitute a
modification (within the meaning of Section 424(h)(3) of the Code). The
Committee, at the written request or with the written consent of any optionee,
may in its discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments thereof) that
have not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At the time of such conversion, the Committee (with
the consent of the optionee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Committee in its discretion may
determine, provided that such conditions shall not be inconsistent with this
Plan. Nothing in the Plan shall be deemed to give any optionee the right to have
such optionee's ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Committee takes appropriate action.
Upon the taking of such action, the Company shall issue separate certificates to
the optionee with respect to Options that are Non-Qualified Options and Options
that are ISOs.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
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securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the transfer of a Non-Qualified
Stock Option, (iii) the grant of an Award, (iv) the making of a Purchase of
Common Stock for less than its fair market value, or (v) the vesting or
transferability of restricted stock or securities acquired by exercising an
Option, on the grantee's making satisfactory arrangement for such withholding.
Such arrangement may include payment by the grantee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
grantee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.
20. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
21. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Stock Rights shall be governed by the laws of the State
of New York, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
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