As filed with the Securities and Exchange Commission on November 1, 1996
Registration No. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------------
Willis Lease Finance Corporation
(Exact name of registrant as specified in its charter)
California 68-0070656
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
180 Harbor Drive, Suite 200
Sausalito, California 94965
(Address of principal executive offices) (Zip Code)
--------------------
1996 Stock Option/Stock Issuance Plan
Employee Stock Purchase Plan
(Full title of the Plans)
--------------------
Charles F. Willis, IV
Chief Executive Officer
Willis Lease Finance Corporation
180 Harbor Drive, Suite 200
Sausalito, California 94965
(Name and address, including zip code of agent for service)
(415) 331-5281
(Telephone number, including area code, of agent for service)
<TABLE>
CALCULATION OF REGISTRATION FEE
================================================================================
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
---------- ------------- ------------ --------- ------------
1996 Stock Option/Stock Issuance Plan
<S> <C> <C> <C> <C>
Options to Purchase 525,000 N/A N/A N/A
Common Stock
Common Stock,
no par value 525,000 shares $10 $5,250,000 $1,811
Employee Stock Purchase Plan
Common Stock, 75,000 shares $10.56 $750,000 $259
no par value
Aggregate Filing Fee $2,070
================================================================================
<FN>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1996 Stock Option/Stock
Issuance Plan and/or the Employee Stock Purchase Plan by reason of any
stock dividend, stock split, recapitalization or other similar
transaction effected without the receipt of consideration which results
in an increase in the number of the outstanding shares of Common Stock
of Willis Lease Finance Corporation.
(2) Calculated solely for purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as amended, on the basis of the average of
the high and low selling prices per share of Common Stock of Willis
Lease Finance Corporation on October 23, 1996, as reported by the
Nasdaq National Market.
</FN>
</TABLE>
<PAGE>
PART II
Information Required in the Registration Statement
Item 3. Incorporation of Documents by Reference
Willis Lease Finance Corporation (the "Registrant") hereby incorporates
by reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "SEC"):
(a) The Registrant's prospectus filed with the SEC pursuant to
Rule 424(a) of the Securities Act of 1933, as amended (the
"1933 Act"), in connection with the Registration Statement
Number 333-5126-LA on Form SB-2 filed with the SEC on June 21,
1996, together with amendments thereto, in which there is set
forth audited financial statements for the Registrant's fiscal
year(s) ended December 31, 1995; and
(b) The Registrant's Registration Statement No. 000-28774 on Form
8-A filed with the SEC on September 5, 1996, in which there is
described the terms, rights and provisions applicable to the
Registrant's outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
Item 4. Description of Securities
Not Applicable.
Item 5. Interests of Named Experts and Counsel
Not Applicable.
Item 6. Indemnification of Directors and Officers
Section 317 of the California General Corporation Law (the
"California Law") and Article III of the Company's Articles of Incorporation
(the "Articles"), provide for the indemnification of directors, officers, and
"agents" (as defined in Section 317 of the California Law) under certain
circumstances. The Articles grant the Company the power to indemnify its
directors, officers, and agents under certain circumstances to the extent
permitted by California Law against certain expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding arising by reason of his or her position as a director,
officer, employee or agent.
Section 317 of the California Law provides that a corporation
has the power to purchase and maintain insurance on behalf of any agent of the
corporation against any liabilities asserted against or incurred by the agent in
such capacity. The Company plans to procure a directors' and officers' liability
insurance policy insuring the Company's directors and officers against certain
liabilities and expenses incurred by them in their capacities as such, and
insuring the Company under certain circumstances, in the event that
indemnification payments are made by the Company to such directors and officers.
<PAGE>
Section 204(a)(11) of the California Law provides for the
indemnification, subject to certain limitations, of directors, officers and
agents for breach of their duty to a corporation and its shareholders in excess
of that expressly permitted by Section 317 of the California Law.
The Company has entered into indemnification agreements with
its directors and officers. These agreements provide substantially broader
indemnity rights than those provided under the California Law and the Company's
Bylaws. The indemnification agreements are not intended to deny or otherwise
limit third-party or derivative suits against the Company or its directors or
officers, but if a director or officer were entitled to indemnity or
contribution under the indemnification agreement, the financial burden of a
third-party suit would be borne by the Company, and the Company would not
benefit from derivative recoveries against the director or officer. Such
recoveries would accrue to the benefit of the Company, but would be offset by
the Company's obligations to the director or officer under the indemnification
agreement.
Item 7. Exemption from Registration Claimed
Not Applicable.
<TABLE>
Item 8. Exhibits
<CAPTION>
Number Exhibit
- ------ -------
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made to Registrant's Registration
Statement No. 00-28774 on Form 8-A, which is incorporated herein by reference pursuant
to Item 3(b).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of KPMG Peat Marwick LLP, independent accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this Registration Statement.
99.1 1996 Stock Option/Stock Issuance Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Addendum to Stock Option Agreement - Involuntary Termination Following Corporate
Transaction.
99.5 Addendum to Stock Option Agreement - Limited Stock Appreciation Rights.
99.6 Addendum to Stock Option Agreement - Involuntary Termination Following Change in
Control.
99.7 Notice of Grant of Non-Associate Director Automatic Stock Option - Initial.
99.8 Notice of Grant of Non-Associate Director Automatic Stock Option - Annual.
99.9 Automatic Stock Option Agreement.
99.10 Form of Stock Issuance Agreement.
99.11 Addendum to Stock Issuance Agreement - Involuntary Termination Following Corporate
Transaction.
99.12 Addendum to Stock Issuance Agreement - Involuntary Termination Following Change in
Control.
99.13 Employee Stock Purchase Plan.
99.14 Form of Stock Purchase Agreement.
99.15 Form of Enrollment/Change Form.
</TABLE>
II-2.
<PAGE>
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement (i) to include any prospectus required by Section
10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the 1933 Act each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and (3) to remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the Registrant's 1996
Stock Option/Stock Issuance Plan and/or the Employee Stock Purchase Plan.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers, or controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that, in the opinion of the SEC, such indemnification is against public
policy as expressed in the 1933 Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
II-3.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Sausalito, State of California, on
this 21st day of October, 1996.
WILLIS LEASE FINANCE CORPORATION
By: /s/ Charles F. Willis
----------------------------
Charles F. Willis, IV
President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Willis Lease
Finance Corporation, a California Corporation, do hereby constitute and appoint
Charles F. Willis and Elliot M. Fischer, and each of them, the lawful
attorneys-in-fact and agents with full power and authority to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, and any one of them, determine may be necessary or advisable or required
to enable said corporation to comply with the Securities Act of 1933, as
amended, and any rules or regulations or requirements of the Securities and
Exchange Commission in connection with this Registration Statement. Without
limiting the generality of the foregoing power and authority, the powers granted
include the power and authority to sign the names of the undersigned officers
and directors in the capacities indicated below to this Registration Statement,
to any and all amendments, both pre-effective and post-effective, and
supplements to this Registration Statement, and to any and all instruments or
documents filed as part of or in conjunction with this Registration Statement or
amendments or supplements thereof, and each of the undersigned hereby ratifies
and confirms all that said attorneys and agents, or any one of them, shall do or
cause to be done by virtue hereof. This Power of Attorney may be signed in
several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this
Power of Attorney as of the date indicated.
Pursuant to the requirements of the 1933 Act, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Charles F. Willis President and Director October 21, 1996
- ------------------------- (Principal Executive Officer)
Charles F. Willis, IV
II-4.
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Elliot M. Fischer Chief Financial Officer October 21, 1996
- ------------------------- and Controller
Elliot M. Fischer (Principal Financial Officer and
Principal Accounting Officer)
/s/ William L. McElfresh Executive Vice President October 21, 1996
- ------------------------- and Director
William L. McElfresh
/s/ Ross K. Anderson Director October 21, 1996
- -------------------------
Ross K. Anderson
/s/ William M. LeRoy Director October 21, 1996
- -------------------------
William M. LeRoy
/s/ Willard H. Smith, Jr. Director October 21, 1996
- -------------------------
Willard H. Smith, Jr.
II-5.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
WILLIS LEASE FINANCE CORPORATION
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
Number Exhibit
- ------ -------
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made to Registrant's Registration
Statement No. 00-28774 on Form 8-A, which is incorporated herein by reference pursuant
to Item 3(b).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of KPMG Peat Marwick LLP, independent accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this Registration Statement.
99.1 1996 Stock Option/Stock Issuance Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Addendum to Stock Option Agreement - Involuntary Termination Following Corporate
Transaction.
99.5 Addendum to Stock Option Agreement - Limited Stock Appreciation Rights.
99.6 Addendum to Stock Option Agreement - Involuntary Termination Following Change in
Control.
99.7 Notice of Grant of Non-Associate Director Automatic Stock Option - Initial.
99.8 Notice of Grant of Non-Associate Director Automatic Stock Option - Annual.
99.9 Automatic Stock Option Agreement.
99.10 Form of Stock Issuance Agreement.
99.11 Addendum to Stock Issuance Agreement - Involuntary Termination Following Corporate
Transaction.
99.12 Addendum to Stock Issuance Agreement - Involuntary Termination Following Change in
Control.
99.13 Employee Stock Purchase Plan.
99.14 Form of Stock Purchase Agreement.
99.15 Form of Enrollment/Change Form.
</TABLE>
EXHIBIT 5
Opinion and consent of Brobeck, Phleger & Harrison LLP
October 25, 1996
Willis Lease Finance Corporation
180 Harbor Drive, Suite 200
Sausalito, California 94965
Re: Registration Statement for Offering of an aggregate of
600,000 Shares of Common Stock
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of (i) 525,000 shares
and (ii) 75,000 shares of the Common Stock of Willis Lease Finance Corporation
(the "Company") under the Company's 1996 Stock Option/Stock Issuance Plan and
Employee Stock Purchase Plan, respectively. We advise you that, in our opinion,
when such shares have been issued and sold pursuant to the applicable provisions
of the 1996 Stock Option/Stock Issuance Plan and Employee Stock Purchase Plan,
and in accordance with the Registration Statement, such shares will be duly
authorized, validly issued, fully paid and non-assessable shares of the
Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Willis Lease Finance Corporation:
We consent to the use of our report dated April 19, 1996 incorporated herein by
reference.
/s/ KPMG PeatMarwick LLP
San Francisco, California
October 28, 1996
WILLIS LEASE FINANCE CORPORATION
1996 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan is intended to
promote the interests of Willis Lease Finance Corporation, a California
corporation, by providing eligible persons with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the service of the
Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity
programs:
- the Discretionary Option Grant Program under which
eligible persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock,
- the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued shares of
Common Stock directly, either through the immediate purchase of such shares or
as a bonus for services rendered the Corporation (or any Parent or Subsidiary),
and
- the Automatic Option Grant Program under which
eligible non- employee Board members shall automatically receive option grants
at periodic intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Five shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.
III. ADMINISTRATION OF THE PLAN
A. Prior to the Section 12 Registration Date, the
Discretionary Option Grant and Stock Issuance Programs shall be administered by
the Board. Beginning with the
<PAGE>
Section 12 Registration Date, the Primary Committee shall have sole and
exclusive authority to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to Section 16 Insiders. No non-employee Board
member shall be eligible to serve on the Primary Committee if such individual
has, during the twelve (12)-month period immediately preceding the date of his
or her appointment to the Committee or (if shorter) the period commencing with
the Section 12(g) Registration Date and ending with the date of his or her
appointment to the Primary Committee, received an option grant or direct stock
issuance under the Plan or any other stock option, stock appreciation, stock
bonus or other stock plan of the Corporation (or any Parent or Subsidiary),
other than pursuant to the Automatic Option Grant Program.
B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. The members of the
Secondary Committee may be Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
2.
<PAGE>
F. Administration of the Automatic Option Grant Program shall
be self- executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under those programs.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board
(other than those serving as members of the Primary Committee) or the
board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent
advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
C. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with the Discretionary Option Grant
Program or to effect stock issuances in accordance with the Stock Issuance
Program.
D. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals serving
as non-employee Board members on the Underwriting Date, (ii) those individuals
who first become non-employee Board members after the Underwriting Date, whether
through appointment by the Board or election by the Corporation's stockholders,
and (iii) those individuals who continue to serve as non-employee Board members
at one or more Annual Stockholders Meetings held after the Underwriting Date. A
non-employee Board member who has previously been in the employ of the
Corporation (or any Parent or Subsidiary) shall not be
3.
<PAGE>
eligible to receive an option grant under the Automatic Option Grant Program at
the time he or she first becomes a non-employee Board member, but shall be
eligible to receive periodic option grants under the Automatic Option Grant
Program while he or she continues to serve as a non-employee Board member.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock initially reserved for issuance over the term of the Plan shall not exceed
525,000 shares. Such authorized share reserve is subject to stockholder approval
prior to the Section 12 Registration Date.
B. No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 250,000 shares of Common Stock in the aggregate per
calendar year, beginning with the 1996 calendar year.
C. Shares of Common Stock subject to outstanding options shall
be available for subsequent issuance under the Plan to the extent those options
expire or terminate for any reason prior to exercise in full. Unvested shares
issued under the Plan and subsequently cancelled or repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.
D. If any change is made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the number and/or class of securities for which any one
person may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances under this Plan per calendar year, (iii) the
number and/or class of securities for which grants are subsequently to be made
under the Automatic Option Grant Program to new and continuing non-employee
Board members, (iv) the number and/or class of securities and the exercise price
per share in effect under each outstanding option under the Plan. Such
adjustments to the outstanding options are
4.
<PAGE>
to be effected in a manner which shall preclude the enlargement or dilution of
rights and benefits under such options. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
5.
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the
Plan Administrator but shall not be less than one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section I of
Article Five and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the
Corporation,
(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or
(iii) to the extent the option is exercised
for vested shares, through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide irrevocable
written instructions to (a) a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable Federal, state and local income
and employment taxes required to be withheld by the Corporation by
reason of such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
6.
<PAGE>
B. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the exercise
of any options held by the Optionee at the time of cessation of Service or
death:
(i) Any option outstanding at the time of
the Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing the
option, but no such option shall be exercisable after the expiration of
the option term.
(ii) Any option exercisable in whole or in
part by the Optionee at the time of death may be subsequently exercised
by the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution.
(iii) Should the Optionee's Service be
terminated for Misconduct, then all outstanding options held by the
Optionee shall terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service. Upon
the expiration of the applicable exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and cease
to be outstanding for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding
to the extent the option is not otherwise at that time exercisable for
vested shares.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:
(i) extend the period of time for which the
option is to remain exercisable following the Optionee's cessation of
Service from the limited exercise period otherwise in effect for that
option to such greater
7.
<PAGE>
period of time as the Plan Administrator shall deem appropriate, but in
no event beyond the expiration of the option term, and/or
(ii) permit the option to be exercised,
during the applicable post-Service exercise period, not only with
respect to the number of vested shares of Common Stock for which such
option is exercisable at the time of the Optionee's cessation of
Service but also with respect to one or more additional installments in
which the Optionee would have vested had the Optionee continued in
Service.
D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. During the lifetime of
the Optionee, Incentive Options shall be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the Optionee's death. However, a
Non-Statutory Option may, in connection with the Optionee's estate plan, be
assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established exclusively
for one or more such family members. The assigned portion may only be exercised
by the person or persons who acquire a proprietary interest in the option
pursuant to the assignment. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Qualified Options when
issued under the Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to
Employees.
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B. Dollar Limitation. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
C. 10% Stockholder. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share shall
not be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, an outstanding option
shall not so accelerate if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof), (ii) such option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
option shares at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
such option or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
The determination of option comparability under clause (i) above shall be made
by the Plan Administrator, and its determination shall be final, binding and
conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
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C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year.
E. The Plan Administrator shall have full power and authority
to grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within twelve (12) months
following the effective date of any Corporate Transaction in which those options
are assumed or replaced and do not otherwise accelerate. Any options so
accelerated shall remain exercisable for fully-vested shares until the earlier
of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Involuntary Termination.
In addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
F. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to (i) provide for the automatic acceleration of one
or more outstanding options (and the automatic termination of one or more
outstanding repurchase rights with the immediate vesting of the shares of Common
Stock subject to those rights) upon the occurrence of a Change in Control or
(ii) condition any such option acceleration (and the termination of any
outstanding repurchase rights) upon the subsequent Involuntary Termination of
the Optionee's Service within a specified period following the effective date of
such Change in Control. Any options accelerated in connection with a Change in
Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
G. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar limitation is not exceeded.
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To the extent such dollar limitation is exceeded, the accelerated portion of
such option shall be exercisable as a Non-Qualified Option under the Federal tax
laws.
H. The outstanding options shall in no way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Discretionary
Option Grant Program (including outstanding options incorporated from the
Predecessor Plan) and to grant in substitution new options covering the same or
different number of shares of Common Stock but with an exercise price per share
based on the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority
to grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of
tandem stock appreciation rights:
(i) One or more Optionees may be granted the
right, exercisable upon such terms as the Plan Administrator may
establish, to elect between the exercise of the underlying option for
shares of Common Stock and the surrender of that option in exchange for
a distribution from the Corporation in an amount equal to the excess of
(a) the Fair Market Value (on the option surrender date) of the number
of shares in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over (b) the
aggregate exercise price payable for such shares.
(ii) No such option surrender shall be
effective unless it is approved by the Plan Administrator. If the
surrender is so approved, then the distribution to which the Optionee
shall be entitled may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares
and partly in cash, as the Plan Administrator shall in its sole
discretion deem appropriate.
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(iii) If the surrender of an option is
rejected by the Plan Administrator, then the Optionee shall retain
whatever rights the Optionee had under the surrendered option (or
surrendered portion thereof) on the option surrender date and may
exercise such rights at any time prior to the later of (a) five (5)
business days after the receipt of the rejection notice or (b) the last
day on which the option is otherwise exercisable in accordance with the
terms of the documents evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the option grant
date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be
granted limited stock appreciation rights with respect to their
outstanding options.
(ii) Upon the occurrence of a Hostile
Take-Over, each individual holding one or more options with such a
limited stock appreciation right in effect for at least six (6) months
shall have the unconditional right (exercisable for a thirty (30)-day
period following such Hostile Take-Over) to surrender each such option
to the Corporation, to the extent the option is at the time exercisable
for vested shares of Common Stock. In return for the surrendered
option, the Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (A) the Take-Over Price
of the shares of Common Stock which are at the time vested under each
surrendered option (or surrendered portion thereof) over (B) the
aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the option
surrender date.
(iii) Neither the approval of the Plan
Administrator nor the consent of the Board shall be required in
connection with such option surrender and cash distribution.
(iv) The balance of the option (if any)
shall continue in full force and effect in accordance with the
documents evidencing such option.
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ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. Purchase Price.
1. The purchase price per share shall be fixed by the
Plan Administrator, but shall not be less than one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article
Five, shares of Common Stock may be issued under the Stock Issuance Program for
any of the following items of consideration which the Plan Administrator may
deem appropriate in each individual instance:
(i) cash or check made payable to the
Corporation, or
(ii) past services rendered to the
Corporation (or any Parent or Subsidiary).
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by
the Participant or the performance objectives to be attained,
(ii) the number of installments in which the
shares are to vest,
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(iii) the interval or intervals (if any)
which are to lapse between installments, and
(iv) the effect which death, Permanent
Disability or other event designated by the Plan Administrator is to
have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or
other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The Participant shall have full stockholder rights
with respect to any shares of Common Stock issued to the Participant under the
Stock Issuance Program, whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall have the right to vote such
shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service
while holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the
cessation of the Participant's Service or the non-attainment of the performance
objectives applicable to those shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at any time,
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whether before or after the Participant's cessation of Service or the attainment
or non-attainment of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding
repurchase/cancellation rights under the Stock Issuance Program shall terminate
automatically, and all the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent (i) those repurchase/cancellation rights are
to be assigned to the successor corporation (or parent thereof) in connection
with such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed in the Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary
authority, exercisable either at the time the unvested shares are issued or any
time while the Corporation's repurchase/cancellation rights remain outstanding
under the Stock Issuance Program, to provide that those rights shall
automatically terminate in whole or in part, and the shares of Common Stock
subject to those terminated rights shall immediately vest, in the event the
Participant's Service should subsequently terminate by reason of an Involuntary
Termination within twelve (12) months following the effective date of any
Corporate Transaction in which those repurchase/cancellation rights are assigned
to the successor corporation (or parent thereof).
C. The Plan Administrator shall have the discretion,
exercisable either at the time the unvested shares are issued or at any time
while the Corporation's repurchase rights remain outstanding, to (i) provide for
the automatic termination of one or more outstanding repurchase/cancellation
rights and the immediate vesting of the shares of Common Stock subject to those
rights upon the occurrence of a Change in Control or (ii) condition any such
accelerated vesting upon the subsequent Involuntary Termination of the
Participant's Service within a specified period following the effective date of
such Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
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ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates
specified below:
1. Each individual serving as a non-employee Board
member on the Underwriting Date shall automatically be granted at that time a
Non-Statutory Option to purchase 5,000 shares of Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary and has not previously received a stock option grant from
the Corporation.
2. Each individual who is first elected or appointed
as a non- employee Board member at any time after the Underwriting Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase 5,000 shares of Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.
3. On the date of each Annual Stockholders Meeting
held after the Underwriting Date, each individual who is to continue to serve as
an Eligible Director, whether or not that individual is standing for re-election
to the Board at that particular Annual Meeting, shall automatically be granted a
Non-Statutory Option to purchase 1,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. There shall be no limit on the number of such 1,000 share option grants
any one Eligible Director may receive over his or her period of Board service,
and non-employee Board members who have previously been in the employ of the
Corporation (or any Parent or Subsidiary) or who have otherwise received a stock
option grant from the Corporation prior to the Underwriting Date shall be
eligible to receive one or more such annual option grants over their period of
continued Board service.
B. Exercise Price.
1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall be payable in one or more
of the alternative forms authorized under the Discretionary Option Grant
Program. Except to the extent the sale and remittance procedure specified
thereunder is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.
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C. Option Term. Each option shall have a term of ten (10)
years measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall be
immediately exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. Each initial 5,000-share grant shall
vest, and the Corporation's repurchase right shall lapse, in a series of four
(4) successive equal annual installments over the Optionee's period of continued
service as a Board member, with the first such installment to vest upon the
Optionee's completion of one (1) year of Board service measured from the option
grant date. Each annual 1,000-share grant shall vest, and the Corporation's
repurchase right shall lapse, upon the Optionee's completion of one (1) year of
Board service measured from the option grant date.
E. Termination of Board Service. The following provisions
shall govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of
Optionee's death, the personal representative of the Optionee's estate
or the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following the date
of such cessation of Board service in which to exercise each such
option.
(ii) During the twelve (12)-month exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares of Common Stock for which the option is
exercisable at the time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as
a Board member by reason of death or Permanent Disability, then all
shares at the time subject to the option shall immediately vest so that
such option may, during the twelve (12)-month exercise period following
such cessation of Board service, be exercised for all or any portion of
those shares as fully- vested shares of Common Stock.
(iv) In no event shall the option remain
exercisable after the expiration of the option term. Upon the
expiration of the twelve (12)-month exercise period or (if earlier)
upon the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Board service for any
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reason other than death or Permanent Disability, terminate and cease to
be outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-
OVER
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Change in Control, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Each such option shall remain exercisable
for such fully-vested option shares until the expiration or sooner termination
of the option term or the surrender of the option in connection with a Hostile
Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each automatic option held by him or her for a period of at least six (6)
months. The Optionee shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
shares of Common Stock at the time subject to the surrendered option (whether or
not the Optionee is otherwise at the time vested in those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board or any Plan Administrator shall
be required in connection with such option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
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E. The grant of options under the Automatic Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
III. AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM
The provisions of this Automatic Option Grant Program,
together with the option grants outstanding thereunder, may not be amended at
intervals more frequently than once every six (6) months, other than to the
extent necessary to comply with applicable Federal income tax laws and
regulations.
IV. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
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ARTICLE FIVE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant
to pay the option exercise price under the Discretionary Option Grant Program or
the purchase price of shares issued under the Stock Issuance Program by
delivering a full-recourse, interest bearing promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective with respect to the
Discretionary Option Grant and the Stock Issuance Programs immediately upon the
Plan Effective Date. The Automatic Option Grant Program shall become effective
on the Underwriting Date. Options may be granted under the Discretionary Option
Grant Program at any time on or after the Plan Effective Date, and the initial
options under the Automatic Option Grant Program shall be made on the
Underwriting Date to each Eligible Director at that time. However, no options
granted under the Plan may be exercised, and no shares shall be issued under the
Plan, until the Plan is approved by the Corporation's stockholders. If such
stockholder approval is not obtained within twelve (12) months after the Plan
Effective Date, then all options previously granted under this Plan shall
terminate and cease to be outstanding, and no further options shall be granted
and no shares shall be issued under the Plan.
B. The Plan shall terminate upon the earliest of (i) June 19,
2006, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such plan
termination, all outstanding option grants and
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unvested stock issuances shall thereafter continue to have force and effect in
accordance with the provisions of the documents evidencing such grants or
issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, (i) no
such amendment or modification shall adversely affect the rights and obligations
with respect to stock options or unvested stock issuances at the time
outstanding under the Plan unless the Optionee or the Participant consents to
such amendment or modification and (ii) any amendment made to the Automatic
Option Grant Program (or any stock option or stock issuances outstanding
thereunder) shall be in compliance with the applicable limitations of those
programs. In addition, the Board shall not, without the approval of the
Corporation's stockholders, (i) materially increase the maximum number of shares
issuable under the Plan or the maximum number of shares for which any one person
may be granted stock options, separately exercisable stock appreciation rights
and direct stock issuances in the aggregate under this Plan during any one
calendar year, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) materially modify the
eligibility requirements for participation or (iii) materially increase the
benefits accruing to participants.
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program and shares of Common Stock may be
issued under the Stock Issuance Program that are in each instance in excess of
the number of shares then available for issuance under the Plan, provided any
excess shares actually issued under those programs shall be held in escrow until
there is obtained stockholder approval of an amendment sufficiently increasing
the number of shares of Common Stock available for issuance under the Plan. If
such stockholder approval is not obtained within twelve (12) months after the
date the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common Stock (i) upon
the exercise of any
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granted option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the stock options granted under
it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued
or delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws, including
the filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
22.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option grant
program in effect under the Plan.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
A-1.
<PAGE>
(ii) the sale, transfer or other disposition of all
or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
G. Corporation shall mean Willis Lease Finance Corporation, a
California corporation, and any corporate successor to all or substantially all
of the assets or voting stock of Willis Lease Finance Corporation which shall by
appropriate action adopt the Plan.
H. Discretionary Option Grant Program shall mean the discretionary
option grant program in effect under the Plan.
I. Domestic Relations Order shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
J. Eligible Director shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
K. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
L. Exercise Date shall mean the date on which the Corporation shall
have received written notice of the option exercise.
M. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the average
of the high and low selling prices per share of Common Stock on the
date in question, as such prices are reported by the National
Association of Securities Dealers on the Nasdaq National Market or any
successor system. If there are no high or low selling prices for the
Common Stock on the date in question, then the Fair Market Value shall
be the average of the high and low selling prices on the last preceding
date for which such quotations exist.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the average of the
high and low selling prices per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such prices are
officially quoted in the
A-2.
<PAGE>
composite tape of transactions on such exchange. If there are no high
and low selling prices for the Common Stock on the date in question,
then the Fair Market Value shall be the average of the high and low
selling prices on the last preceding date for which such quotations
exist.
(iii) For purposes of any option grants made on the
Underwriting Date, the Fair Market Value shall be deemed to be equal to
the price per share at which the Common Stock is to be sold in the
initial public offering pursuant to the Underwriting Agreement.
(iv) For purposes of any option grants made prior to
the Underwriting Date, the Fair Market Value shall be determined by the
Plan Administrator, after taking into account such factors as it deems
appropriate.
N. Hostile Take-Over shall mean a change in ownership of the
Corporation effected through the following transaction:
(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, and
(ii) more than fifty percent (50%) of the securities
so acquired are accepted from persons other than Section 16 Insiders.
O. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
P. Involuntary Termination shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Corporation
which materially reduces his or her level of responsibility, (B) a
reduction in his or her level of compensation (including base salary,
fringe benefits and participation in any corporate-performance based
bonus or incentive programs) by more than
A-3.
<PAGE>
fifteen percent (15%) or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected by the Corporation without
the individual's consent.
Q. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
R. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
S. Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.
T. Optionee shall mean any person to whom an option is granted under
the Discretionary Option Grant or Automatic Option Grant Program.
U. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. Participant shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
W. Permanent Disability or Permanently Disabled shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
Program, Permanent Disability or Permanently Disabled shall mean the inability
of the non-employee Board member to perform his or her usual duties as a Board
member by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12)
months or more.
X. Plan shall mean the Corporation's 1996 Stock Option/Stock Issuance
Plan, as set forth in this document.
A-4.
<PAGE>
Y. Plan Administrator shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Z. Plan Effective Date shall mean June 20, 1996, the date on which the
Plan was adopted by the Board.
AA. Primary Committee shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.
AB. Qualified Domestic Relations Order shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
AC. Secondary Committee shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
AD. Section 12 Registration Date shall mean the date on which the
Common Stock is first registered under Section 12(g) of Section 16 of the 1934
Act.
AE. Section 16 Insider shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
AF. Service shall mean the performance of services for the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
AG. Stock Exchange shall mean either the American Stock Exchange or the
New York Stock Exchange.
AH. Stock Issuance Agreement shall mean the agreement entered into by
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
AI. Stock Issuance Program shall mean the stock issuance program in
effect under the Plan.
A-5.
<PAGE>
AJ. Subsidiary shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
AK. Take-Over Price shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
AL. Taxes shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
AM. 10% Stockholder shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
AN. Underwriting Agreement shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
AO. Underwriting Date shall mean the date on which the Underwriting
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.
A-6.
WILLIS LEASE FINANCE CORPORATION
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of Willis Lease Finance
Corporation (the "Corporation"):
Optionee: 1~
Grant Date:
Vesting Commencement Date:
Exercise Price:
Number of Option Shares:
Expiration Date:
Type of Option: Incentive Stock Option
Exercise Schedule: The Option shall become exercisable in four
(4) equal successive annual installments measured from the
Vesting Commencement Date. In no event shall the Option become
exercisable for any additional Option Shares after Optionee's
cessation of Service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the Willis Lease Finance
Corporation 1996 Stock Option/Stock Issuance Plan (the "Plan"). Optionee further
agrees to be bound by the terms of the Plan and the terms of the Option as set
forth in the Stock Option Agreement attached hereto as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the official
prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the
Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.
No Employment or Service Contract. Nothing in this Notice or
in the attached Stock Option Agreement or in the Plan shall confer upon Optionee
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining
<PAGE>
Optionee) or of Optionee, which rights are hereby expressly reserved by each, to
terminate Optionee's Service at any time for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have
the meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
, 199
- ------------------------------ --
Date
WILLIS LEASE FINANCE CORPORATION
By:
-------------------------------
Title:
-------------------------------
--------------------------------------
1~, OPTIONEE
Address:
-------------------------------
--------------------------------------
ATTACHMENTS
Exhibit A - Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
2.
WILLIS LEASE FINANCE CORPORATION
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee,
as of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. Option Term. This option shall have a term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. Limited Transferability. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may, in connection
with the Optionee's estate plan, be assigned in whole or in part during
Optionee's lifetime to one or more members of the Optionee's immediate family or
to a trust established for the exclusive benefit of one or more such family
members. The assigned portion shall be exercisable only by the person or persons
who acquire a proprietary interest in the option pursuant to such assignment.
The terms applicable to the assigned portion shall be the same as those in
effect for this option immediately prior to such assignment and shall be set
forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
<PAGE>
4. Dates of Exercise. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant Notice.
As the option becomes exercisable for such installments, those installments
shall accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. Cessation of Service. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:
(i) Should Optionee cease to remain in
Service for any reason (other than death, Permanent Disability or
Misconduct) while this option is outstanding, then Optionee shall have
a period of three (3) months (commencing with the date of such
cessation of Service) during which to exercise this option, but in no
event shall this option be exercisable at any time after the Expiration
Date.
(ii) Should Optionee die while this option
is outstanding, then the personal representative of Optionee's estate
or the person or persons to whom the option is transferred pursuant to
Optionee's will or in accordance with the laws of descent and
distribution shall have the right to exercise this option. Such right
shall lapse, and this option shall cease to be outstanding, upon the
earlier of (A) the expiration of the twelve (12)-month period measured
from the date of Optionee's death or (B) the Expiration Date.
(iii) Should Optionee cease Service by
reason of Permanent Disability while this option is outstanding, then
Optionee shall have a period of twelve (12) months (commencing with the
date of such cessation of Service) during which to exercise this
option. In no event shall this option be exercisable at any time after
the Expiration Date.
(iv) During the limited period of
post-Service exercisability, this option may not be exercised in the
aggregate for more than the number of vested Option Shares for which
the option is exercisable at the time of Optionee's cessation of
Service. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding for any vested Option Shares for which the
option has not been exercised. However, this option shall, immediately
upon Optionee's cessation of Service for any reason, terminate and
cease to be outstanding with respect to Option Shares in which Optionee
is not otherwise at that time vested or for which this option is not
otherwise at that time exercisable.
2.
<PAGE>
(v) Should Optionee's Service be terminated
for Misconduct, then this option shall terminate immediately and cease
to remain outstanding.
6. Special Acceleration of Option.
(a) This option, to the extent outstanding at the
time of a Corporate Transaction but not otherwise fully exercisable, shall
automatically accelerate so that this option shall, immediately prior to the
effective date of the Corporate Transaction, become exercisable for all of the
Option Shares at the time subject to this option and may be exercised for any or
all of those Option Shares as fully-vested shares of Common Stock. No such
acceleration of this option, however, shall occur if and to the extent: (i) this
option is, in connection with the Corporate Transaction, either to be assumed by
the successor corporation (or parent thereof) or to be replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof) or (ii) this option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing on the Option Shares at the time of the Corporate Transaction (the
excess of the Fair Market Value of those Option Shares over the aggregate
Exercise Price payable for such shares) and provides for subsequent pay-out in
accordance with the option exercise schedule set forth in the Grant Notice. The
determination of option comparability under clause (i) shall be made by the Plan
Administrator, and such determination shall be final, binding and conclusive.
(b) Immediately following the Corporate Transaction,
this option shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof) in connection with the
Corporate Transaction.
(c) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such
Corporate Transaction, and appropriate adjustments shall also be made to the
Exercise Price, provided the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
7. Adjustment in Option Shares. Should any change be made to
the Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be
3.
<PAGE>
made to (i) the total number and/or class of securities subject to this option
and (ii) the Exercise Price in order to reflect such change and thereby preclude
a dilution or enlargement of benefits hereunder.
8. Stockholder Rights. The holder of this option shall not
have any stockholder rights with respect to the Option Shares until such person
shall have exercised the option, paid the Exercise Price and become a holder of
record of the purchased shares.
9. Manner of Exercising Option.
(a) In order to exercise this option with respect to
all or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons exercising the option)
must take the following actions:
(i) Execute and deliver to the Corporation a
Notice of Exercise for the Option Shares for which the option is
exercised.
(ii) Pay the aggregate Exercise Price for
the purchased shares in one or more of the following forms:
(A) cash or check made payable to
the Corporation;
(B) a promissory note payable to
the Corporation, but only to the extent authorized by the Plan
Administrator in accordance with Paragraph 13;
(C) shares of Common Stock held by
Optionee (or any other person or persons exercising the
option) for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date; or
(D) to the extent the option is
exercised for vested Option Shares, through a special sale and
remittance procedure pursuant to which Optionee (or any other
person or persons exercising the option) shall concurrently
provide irrevocable written instructions (I) to a
Corporation-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all applicable Federal, state
and local income and employment taxes required to be withheld
by the Corporation by reason of such exercise and (II) to the
Corporation to deliver the certificates for the purchased
4.
<PAGE>
shares directly to such brokerage firm in order to complete
the sale transaction.
Except to the extent the sale and remittance
procedure is utilized in connection with the option exercise,
payment of the Exercise Price must accompany the Notice of
Exercise delivered to the Corporation in connection with the
option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if
other than Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining Optionee)
for the satisfaction of all Federal, state and local income and
employment tax withholding requirements applicable to the option
exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any
fractional shares.
10. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of
the Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation to
be necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
11. Successors and Assigns. Except to the extent otherwise
provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns and the legal representatives, heirs
and legatees of Optionee's estate.
5.
<PAGE>
12. Notices. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation at its principal corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below Optionee's signature line on the
Grant Notice. All notices shall be deemed effective upon personal delivery or
upon deposit in the U.S. mail, postage prepaid and properly addressed to the
party to be notified.
13. Financing. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a promissory note
payable to the Corporation. The terms of any such promissory note (including the
interest rate, the requirements for collateral and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion.
14. Construction. This Agreement and the option evidenced
hereby are made and granted pursuant to the Plan and are in all respects limited
by and subject to the terms of the Plan. All decisions of the Plan Administrator
with respect to any question or issue arising under the Plan or this Agreement
shall be conclusive and binding on all persons having an interest in this
option.
15. Governing Law. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
16. Excess Shares. If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may without stockholder approval be issued under the Plan, then this
option shall be void with respect to those excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.
17. Additional Terms Applicable to an Incentive Option. In the
event this option is designated an Incentive Option in the Grant Notice, the
following terms and conditions shall also apply to the grant:
(i) This option shall cease to qualify for
favorable tax treatment as an Incentive Option if (and to the extent)
this option is exercised for one or more Option Shares: (A) more than
three (3) months after the date Optionee ceases to be an Employee for
any reason other than death or Permanent Disability or (B) more than
twelve (12) months after the date Optionee ceases to be an Employee by
reason of Permanent Disability.
6.
<PAGE>
(ii) No installment under this option shall
qualify for favorable tax treatment as an Incentive Option if (and to
the extent) the aggregate Fair Market Value (determined at the Grant
Date) of the Common Stock for which such installment first becomes
exercisable hereunder would, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common
Stock or other securities for which this option or any other Incentive
Options granted to Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any Parent or
Subsidiary) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should
such One Hundred Thousand Dollar ($100,000) limitation be exceeded in
any calendar year, this option shall nevertheless become exercisable
for the excess shares in such calendar year as a Non-Statutory Option.
(iii) Should the exercisability of this
option be accelerated upon a Corporate Transaction, then this option
shall qualify for favorable tax treatment as an Incentive Option only
to the extent the aggregate Fair Market Value (determined at the Grant
Date) of the Common Stock for which this option first becomes
exercisable in the calendar year in which the Corporate Transaction
occurs does not, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other
securities for which this option or one or more other Incentive Options
granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate. Should the
applicable One Hundred Thousand Dollar ($100,000) limitation be
exceeded in the calendar year of such Corporate Transaction, the option
may nevertheless be exercised for the excess shares in such calendar
year as a Non-Statutory Option.
(iv) Should Optionee hold, in addition to
this option, one or more other options to purchase Common Stock which
become exercisable for the first time in the same calendar year as this
option, then the foregoing limitations on the exercisability of such
options as Incentive Options shall be applied on the basis of the order
in which such options are granted.
18. Leave of Absence. The following provisions shall apply
upon the Optionee's commencement of an authorized leave of absence:
(a) The exercise schedule in effect under the Grant
Notice shall be frozen as of the first day of the authorized leave, and
this option shall not become exercisable for any additional
installments of the Option Shares during the period Optionee remains on
such leave.
7.
<PAGE>
(b) Should Optionee resume active Employee status
within sixty (60) days after the start date of the authorized leave,
Optionee shall, for purposes of the exercise schedule set forth in the
Grant Notice, receive Service credit for the entire period of such
leave. If Optionee does not resume active Employee status within such
sixty (60)-day period, then no Service credit shall be given for the
entire period of such leave.
(c) If the option is designated as an Incentive
Option in the Grant Notice, then the following additional provision
shall apply:
- If the leave of absence continues for more
than ninety (90) days, then this option shall automatically
convert to a Non- Statutory Option under the Federal tax laws
on the ninety-first (91st) day of such leave, unless the
Optionee's reemployment rights are guaranteed by statute or by
written agreement. Following any such conversion of the
option, all subsequent exercises of such option, whether
effected before or after Optionee's return to active Employee
status, shall result in an immediate taxable event, and the
Corporation shall be required to collect from Optionee the
Federal, state and local income and employment withholding
taxes applicable to such exercise.
(d) In no event shall this option become exercisable
for any additional Option Shares or otherwise remain outstanding if
Optionee does not resume Employee status prior to the Expiration Date
of the option term.
8.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Willis Lease Finance Corporation (the
"Corporation") that I elect to purchase ____________ shares of the Corporation's
Common Stock (the "Purchased Shares") at the option exercise price of
$____________ per share (the "Exercise Price") pursuant to that certain option
(the "Option") granted to me under the Corporation's 1996 Stock Incentive Plan
on __________________ , 199__.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
, 199
- --------------------------- --
Date
-----------------------------------------
Optionee
Address:
--------------------------------
-----------------------------------------
Print name in exact manner
it is to appear on the
stock certificate:
-----------------------------------------
Address to which certificate
is to be sent, if different
from address above:
-----------------------------------------
-----------------------------------------
Social Security Number:
-----------------------------------------
Employee Number:
-----------------------------------------
<PAGE>
APPENDIX
The following definitions shall be in effect under the
Agreement:
A. Agreement shall mean this Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Code shall mean the Internal Revenue Code of 1986, as amended.
D. Common Stock shall mean the Corporation's common stock.
E. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. Corporation shall mean Willis Lease Finance Corporation, a
California corporation.
G. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. Exercise Date shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. Exercise Price shall mean the exercise price per share as specified
in the Grant Notice.
J. Expiration Date shall mean the date on which the option expires as
specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
A-1.
<PAGE>
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as the
price is reported by the National Association of Securities Dealers on
the Nasdaq National Market or any successor system. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
L. Grant Date shall mean the date of grant of the option as specified
in the Grant Notice.
M. Grant Notice shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
O. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).
P. Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.
Q. Notice of Exercise shall mean the notice of exercise in the form
attached hereto as Exhibit I.
A-2.
<PAGE>
R. Option Shares shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
S. Optionee shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. Permanent Disability shall mean the inability of Optionee to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
V. Plan shall mean the Corporation's 1996 Stock Incentive Plan.
W. Plan Administrator shall mean either the Board or a committee of the
Board acting in its administrative capacity under the Plan.
X. Service shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.
Y. Stock Exchange shall mean the American Stock Exchange or the New
York Stock Exchange.
Z. Subsidiary shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3.
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement dated 2~ (the "Option
Agreement") by and between Willis Lease Finance Corporation (the "Corporation")
and 1~ ("Optionee") evidencing the stock option (the "Option") granted on such
date to Optionee under the terms of the Corporation's 1996 Stock Option/Stock
Issuance Plan, and such provisions shall be effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meanings assigned to them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed or replaced with a comparable option in accordance
with Paragraph 6 of the Option Agreement, the Option shall not accelerate upon
the occurrence of that Corporate Transaction, and the Option shall accordingly
continue, over Optionee's period of Service after the Corporate Transaction, to
become exercisable for the Option Shares in one or more installments in
accordance with the provisions of the Option Agreement. However, immediately
upon an Involuntary Termination of Optionee's Service within twelve (12) months
following such Corporate Transaction, the Option (or any replacement grant), to
the extent outstanding at the time but not otherwise fully exercisable, shall
automatically accelerate so that the Option shall become immediately exercisable
for all the Option Shares at the time subject to the Option and may be exercised
for any or all of those Option Shares as fully vested shares. The Option shall
remain so exercisable until the earlier of (i) the Expiration Date or (ii) the
expiration of the one (1)-year period measured from the date of the Involuntary
Termination.
2. For purposes of this Addendum, an Involuntary Termination
shall mean the termination of Optionee's Service by reason of:
(i) Optionee's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) Optionee's voluntary resignation following (A) a
change in Optionee's position with the Corporation (or Parent or
Subsidiary employing Optionee) which materially reduces Optionee's
level of responsibility, (B) a reduction in Optionee's level of
compensation (including base salary, fringe benefits and participation
in any corporate-performance
<PAGE>
based bonus or incentive programs) by more than fifteen percent (15%)
or (C) a relocation of Optionee's place of employment by more than
fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without Optionee's consent.
3. The provisions of Paragraph 1 of this Addendum shall govern
the period for which the Option is to remain exercisable following the
Involuntary Termination of Optionee's Service within eighteen (18) months after
the Corporate Transaction and shall supersede any provisions to the contrary in
Paragraph 5 of the Option Agreement.
IN WITNESS WHEREOF, Willis Lease Finance Corporation has
caused this Addendum to be executed by its duly-authorized officer, and Optionee
has executed this Addendum, all as of the Effective Date specified below.
WILLIS LEASE FINANCE CORPORATION
By:
---------------------------------------
Title:
------------------------------------
------------------------------------------
1~, OPTIONEE
EFFECTIVE DATE: , 199
------------------- --
2.
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement dated 2~ (the "Option
Agreement") by and between Willis Lease Finance Corporation (the "Corporation")
and 1~ ("Optionee") evidencing the stock option (the "Option") granted on such
date to Optionee under the terms of the Corporation's 1996 Stock Option/Stock
Issuance Plan, and such provisions shall be effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meanings assigned to them in the Option Agreement.
LIMITED STOCK APPRECIATION RIGHT
1. Optionee is hereby granted a limited stock appreciation
right in tandem with the Option, exercisable upon the terms set forth below:
(i) Should a Hostile Take-Over occur at any time
after the Option has been outstanding for a period of at least six (6)
months measured from the Effective Date of this Addendum indicated
below, then Optionee shall have the unconditional right (exercisable
during the thirty (30)-day period following such Hostile Take-Over) to
surrender the Option to the Corporation, to the extent the Option is at
the time exercisable for vested shares of Common Stock. In return for
the surrendered Option, Optionee shall receive a cash distribution from
the Corporation in an amount equal to the excess of (A) the Take-Over
Price of the shares of Common Stock which are at the time vested under
the surrendered Option (or surrendered portion) over (B) the aggregate
Exercise Price payable for such shares.
(ii) To exercise this limited stock appreciation
right, Optionee must, during the applicable thirty (30)-day exercise
period, provide the Corporation with written notice of the option
surrender in which there is specified the number of Option Shares as to
which the Option is being surrendered. Such notice must be accompanied
by the return of Optionee's copy of the Option Agreement, together with
any written amendments to such Agreement. The cash distribution shall
be paid to Optionee within five (5) days following such delivery date,
and neither the approval of the Plan Administrator nor the consent of
the Board shall be required in connection with such option surrender
and cash distribution. Upon receipt of such cash distribution, the
Option shall be cancelled with respect to the Option Shares for which
the Option has been surrendered, and Optionee shall cease to have any
further right to acquire those Option Shares under the Option
Agreement. The Option shall, however, remain outstanding and
exercisable for the
<PAGE>
balance of the Option Shares (if any) in accordance with the terms of
the Option Agreement, and the Corporation shall issue a new stock
option agreement (substantially in the same form of the surrendered
Option Agreement) for those remaining Option Shares.
(iii) In no event may this limited stock appreciation
right be exercised when there is not a positive spread between the Fair
Market Value of the Option Shares and the aggregate Exercise Price
payable for such shares. This limited stock appreciation right shall in
all events terminate upon the expiration or sooner termination of the
option term and may not be assigned or transferred by Optionee.
2. For purposes of this Addendum, the following definitions
shall be in effect:
(i) A Hostile Take-Over shall be deemed to occur in the
event (A) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such
stockholders to accept, and (B) more than fifty percent (50%) of the
securities so acquired in such tender or exchange offer are accepted
from holders other than the officers and directors of the Corporation
subject to the short-swing profit restrictions of Section 16 of the
Securities Exchange Act of 1934, as amended.
(ii) The Take-Over Price per share shall be deemed to be
equal to the greater of (A) the Fair Market Value per Option Share on
the option surrender date or (B) the highest reported price per share
of Common Stock paid by the tender offeror in effecting the Hostile
Take-Over. However, if the surrendered Option is designated as an
Incentive Option in the Grant Notice, then the Take-Over Price shall
not exceed the clause (A) price per share.
2.
<PAGE>
IN WITNESS WHEREOF, Willis Lease Finance Corporation has
caused this Addendum to be executed by its duly-authorized officer, and Optionee
has executed this Addendum, all as of the Effective Date specified below.
WILLIS LEASE FINANCE CORPORATION
By:
---------------------------------------
Title:
------------------------------------
------------------------------------------
1~, OPTIONEE
EFFECTIVE DATE: , 199
--------------------- --
3.
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement dated 2~ (the "Option
Agreement") by and between Willis Lease Finance Corporation (the "Corporation")
and 1~ ("Optionee") evidencing the stock option (the "Option") granted on such
date to Optionee under the terms of the Corporation's 1996 Stock Option/Stock
Issuance Plan, and such provisions shall be effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meanings assigned to them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CHANGE IN CONTROL
1. The Option shall not accelerate upon the occurrence of a
Change in Control, and the Option shall, over Optionee's period of Service
following such Change in Control, continue to become exercisable for the Option
Shares in one or more installments in accordance with the provisions of the
Option Agreement. However, immediately upon an Involuntary Termination of
Optionee's Service within twelve (12) months following the Change in Control,
the Option, to the extent outstanding at the time but not otherwise fully
exercisable, shall automatically accelerate so that the Option shall become
immediately exercisable for all the Option Shares at the time subject to the
Option and may be exercised for any or all of those Option Shares as fully
vested shares. The Option shall remain so exercisable until the earlier of (i)
the Expiration Date or (ii) the expiration of the one (1)-year period measured
from the date of the Involuntary Termination.
2. For purposes of this Addendum, a Change in Control shall be
deemed to occur in the event of a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept, or
(ii) a change in the composition of the
Board over a period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more contested
elections for Board membership, to be
<PAGE>
comprised of individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time such
election or nomination was approved by the Board.
3. For purposes of this Addendum, an Involuntary Termination
shall mean the termination of Optionee's Service by reason of:
(i) Optionee's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) Optionee's voluntary resignation
following (A) a change in Optionee's position with the Corporation (or Parent or
Subsidiary employing Optionee) which materially reduces Optionee's level of
responsibility, (B) a reduction in Optionee's level of compensation (including
base salary, fringe benefits and participation in any corporate-performance
based bonus or incentive programs) by more than fifteen percent (15%) or (C) a
relocation of Optionee's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected by the
Corporation without Optionee's consent.
4. The provisions of Paragraph 1 of this Addendum shall govern
the period for which the Option is to remain exercisable following the
Involuntary Termination of Optionee's Service within eighteen (18) months after
the Change in Control and shall supersede any provisions to the contrary in
Paragraph 5 of the Option Agreement.
IN WITNESS WHEREOF, Willis Lease Finance Corporation has
caused this Addendum to be executed by its duly-authorized officer, and Optionee
has executed this Addendum, all as of the Effective Date specified below.
WILLIS LEASE FINANCE CORPORATION
By:
----------------------------------------
Title:
-------------------------------------
-------------------------------------------
1~, OPTIONEE
EFFECTIVE DATE: , 199
----------------------------- --
2.
INITIAL GRANT
WILLIS LEASE FINANCE CORPORATION
NOTICE OF GRANT OF NON-ASSOCIATE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of Willis Lease Finance
Corporation (the "Corporation"):
Optionee:
Grant Date:
Exercise Price: $ per share
Number of Option Shares: 5,000 shares
Expiration Date:
Type of Option: Non-Statutory Stock Option
Date Exercisable: Immediately Exercisable
Vesting Schedule: Each option shall be immediately exercisable
for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by
the Corporation, at the exercise price paid per share, upon
the Optionee's cessation of Board service prior to vesting in
those shares. Each initial 5,000-share grant shall vest, and
the Corporation's repurchase right shall lapse, in a series of
four (4) successive equal annual installments over the
Optionee's period of continued service as a Board member, with
the first such installment to vest upon the Optionee's
completion of one (1) year of Board service measured from the
option grant date. In no event shall any additional Option
Shares vest after Optionee's cessation of Board Service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the automatic option grant
program under the Willis Lease Finance Corporation 1996 Stock Incentive Plan
(the "Plan"). Optionee further agrees to be bound by the terms of the Plan and
the terms of the Option as set forth in the Automatic Stock Option Agreement
attached hereto as Exhibit A. Optionee hereby acknowledges receipt of a copy of
the official prospectus for the Plan in the form attached hereto as Exhibit B. A
copy of the Plan is available upon request made to the Corporate Secretary at
the Corporation's principal offices.
<PAGE>
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE TRANSFERABLE
AND SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION, AT THE EXERCISE PRICE
PAID PER SHARE, UPON OPTIONEE'S TERMINATION OF SERVICES AS A MEMBER OF THE
CORPORATION'S BOARD OF DIRECTORS. THE TERMS AND CONDITIONS OF SUCH REPURCHASE
RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION
EXERCISE.
No Impairment of Rights. Nothing in this Notice or the
attached Automatic Stock Option Agreement or in the Plan shall interfere with or
otherwise restrict in any way the rights of the Corporation or the Corporation's
stockholders to remove Optionee from the Board at any time in accordance with
the provisions of applicable law.
Definitions. All capitalized terms in this Notice shall have
the meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.
_________________________ , 199_
Date
WILLIS LEASE
FINANCE CORPORATION
By:
----------------------------
Title:
----------------------------
-----------------------------------
OPTIONEE
Address:
---------------------------
-----------------------------------
ATTACHMENTS
Exhibit A - Automatic Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
2.
<PAGE>
EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT
<PAGE>
EXHIBIT B
PLAN SUMMARY AND PROSPECTUS
ANNUAL GRANT
WILLIS LEASE FINANCE CORPORATION
NOTICE OF GRANT OF NON-ASSOCIATE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of Willis Lease Finance
Corporation (the "Corporation"):
Optionee:
Grant Date:
Exercise Price: $ per share
Number of Option Shares: 1,000 shares
Expiration Date:
Type of Option: Non-Statutory Stock Option
Date Exercisable: Immediately Exercisable
Vesting Schedule: The Option Shares shall initially be
unvested and subject to repurchase by the Corporation at the
Exercise Price paid per share. Optionee shall acquire a vested
interest in, and the Corporation's repurchase right will
accordingly lapse with respect to the Option Shares, upon
Optionee's completion of one (1) year of service as a member
of the Corporation's Board of Directors (the "Board") measured
from the Grant Date. In no event shall any additional Option
Shares vest after Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the automatic option grant
program under the Willis Lease Finance Corporation 1996 Stock Incentive Plan
(the "Plan"). Optionee further agrees to be bound by the terms of the Plan and
the terms of the Option as set forth in the Automatic Stock Option Agreement
attached hereto as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the official
prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the
Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.
<PAGE>
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE TRANSFERABLE
AND SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION, AT THE EXERCISE PRICE
PAID PER SHARE, UPON OPTIONEE'S TERMINATION OF SERVICES AS A MEMBER OF THE
CORPORATION'S BOARD OF DIRECTORS. THE TERMS AND CONDITIONS OF SUCH REPURCHASE
RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION
EXERCISE.
No Impairment of Rights. Nothing in this Notice or the
attached Automatic Stock Option Agreement or in the Plan shall interfere with or
otherwise restrict in any way the rights of the Corporation or the Corporation's
stockholders to remove Optionee from the Board at any time in accordance with
the provisions of applicable law.
Definitions. All capitalized terms in this Notice shall have
the meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.
_________________________ , 199_
Date
WILLIS LEASE
FINANCE CORPORATION
By:
----------------------------
Title:
----------------------------
-----------------------------------
OPTIONEE
Address:
---------------------------
-----------------------------------
ATTACHMENTS
Exhibit A - Automatic Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
2.
<PAGE>
EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT
<PAGE>
EXHIBIT B
PLAN SUMMARY AND PROSPECTUS
WILLIS LEASE FINANCE CORPORATION
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has implemented an automatic option grant
program under the Corporation's 1996 Stock Incentive Plan (the "Plan") pursuant
to which eligible non-associate members of the Corporation's Board of Directors
(the "Board") will automatically receive special option grants at periodic
intervals over their period of Board service in order to provide such
individuals with a meaningful incentive to continue to serve as a member of the
Board.
B. Optionee is an eligible non-associate Board member, and
this Agreement is executed pursuant to, and is intended to carry out the
purposes of, the Plan in connection with the automatic grant of a stock option
to purchase shares of the Corporation's common stock ("Common Stock") under the
Plan.
C. The granted option is intended to be a non-statutory option
which does not meet the requirements of Section 422 of the Internal Revenue
Code.
D. All capitalized terms in this Agreement, to the extent not
otherwise defined in the Agreement, shall have the meaning assigned to them in
the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee,
as of the Grant Date, a Non-Statutory Option to purchase up to the number of
Option Shares specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term specified in Paragraph 2 at
the Exercise Price.
2. Option Term. This option shall have a maximum term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the Expiration Date, unless sooner terminated in accordance
with Paragraph 5, 6 or 7.
3. Limited Transferability. This option may, in connection
with the Optionee's estate plan, be assigned in whole or in part during
Optionee's lifetime to one or more members of the Optionee's immediate family or
to a trust established for the exclusive benefit of one or more such family
members. The assigned portion shall be exercisable only by the person or persons
who acquire a proprietary interest in the option pursuant to such
<PAGE>
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for this option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Corporation may
deem appropriate. Should the Optionee die while holding this option, then this
option shall be transferred in accordance with Optionee's will or the laws of
descent and distribution.
4. Exercisability/Vesting.
A. This option shall be immediately exercisable for any or all
of the Option Shares, whether or not the Option Shares are vested in accordance
with the Vesting Schedule set forth in the Grant Notice, and shall remain so
exercisable until the Expiration Date or the sooner termination of the option
term under Paragraph 5,6 or 7.
B. Optionee shall, in accordance with the Vesting Schedule set
forth in the Grant Notice, vest in the Option Shares in one or more installments
over his or her period of Board service. Vesting in the Option Shares may be
accelerated pursuant to the provisions of Paragraph 5, 6 or 7. In no event,
however, shall any additional Option Shares vest following Optionee's cessation
of service as a Board member.
5. Cessation of Board Service. Should Optionee's service as a
Board member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:
- Should Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability) while holding this
option, then the period for exercising this option shall be reduced to
a twelve (12)-month period commencing with the date of such cessation
of Board service, but in no event shall this option be exercisable at
any time after the Expiration Date. During such limited period of
exercisability, this option may not be exercised in the aggregate for
more than the number of Option Shares (if any) in which the Optionee is
vested on the date Optionee ceases service as a Board member. Upon the
earlier of (i) the expiration of such twelve (12)-month period or (ii)
the specified Expiration Date, the option shall terminate and cease to
be exercisable with respect to any vested Option Shares for which the
option has not been exercised.
- Should Optionee die during the twelve (12)-month period
following his or her cessation of Board service, then the personal
representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance
with the laws of descent and distribution shall have the right to
exercise this option for any or all of the Option Shares in which the
Optionee is vested at the time of Optionee's cessation of Board service
(less any Option Shares purchased
2.
<PAGE>
by Optionee after such cessation of Board service but prior to death).
Such right of exercise shall terminate, and this option shall
accordingly cease to be exercisable for such vested Option Shares, upon
the earlier of (A) the expiration of the twelve (12)-month period
measured from the date of Optionee's cessation of Board service or (B)
the specified Expiration Date of the option term.
- Should Optionee cease service as a Board member by reason of
death or Permanent Disability, then all Option Shares at the time
subject to this option but not otherwise vested shall immediately vest
in full so that the Optionee (or the personal representative of the
Optionee's estate or the person or persons to whom the option is
transferred upon the Optionee's death) shall have the right to exercise
this option for any or all of the Option Shares as fully-vested shares
of Common Stock at any time prior to the earlier of (A) the expiration
of the twelve (12)-month period measured from the date of the
Optionee's cessation of Board service or (B) the specified Expiration
Date.
- Upon Optionee's cessation of Board service for any reason
other than death or Permanent Disability, this option shall immediately
terminate and cease to be outstanding with respect to any and all
Option Shares in which the Optionee is not otherwise at that time
vested in accordance with the normal Vesting Schedule set forth in the
Grant Notice or the special vesting acceleration provisions of
Paragraph 6 or 7 below.
6. Corporate Transaction.
A. In the event of a Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each option shall, immediately
prior to the specified effective date for the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all of any portion of those shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, this option shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation or its
parent company.
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to Optionee in consummation of such Corporate Transaction had the
option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the Exercise Price payable per
share under each outstanding option, provided the aggregate Exercise Price for
such securities shall remain the same.
3.
<PAGE>
7. Change in Control/Hostile Take-Over.
A. All Option Shares subject to this option at the time of a
Change in Control but not otherwise vested shall automatically vest so that this
option shall, immediately prior to the effective date of such Change in Control,
become exercisable for any or all of those Option Shares as fully-vested shares
of Common Stock. This option shall remain exercisable for such fully-vested
Option Shares until the earliest to occur of (i) the specified Expiration Date,
(ii) the sooner termination of this option in accordance with Paragraph 5 or 6
or (iii) the surrender of this option under Paragraph 7.B.
B. Provided this option has been outstanding for at least six
(6) months prior to the occurrence of a Hostile Take-Over, Optionee shall have
an unconditional right (exercisable during the thirty (30)-day period
immediately following the consummation of such Hostile Take-Over) to surrender
this option to the Corporation in exchange for a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
Option Shares at the time subject to the surrendered option (whether or not
those Option Shares are otherwise at the time vested) over (ii) the aggregate
Exercise Price payable for such shares. This Paragraph 7.B limited stock
appreciation right shall in all events terminate upon the expiration or sooner
termination of the option term and may not be assigned or transferred by
Optionee.
C. To exercise the Paragraph 7.B limited stock appreciation
right, Optionee must, during the applicable thirty (30)-day exercise period,
provide the Corporation with written notice of the option surrender in which
there is specified the number of Option Shares as to which the Option is being
surrendered. Such notice must be accompanied by the return of Optionee's copy of
this Agreement, together with any written amendments to such Agreement. The
exercise of such limited right in accordance with the provisions of this
Paragraph 7 is hereby pre-approved by the Plan Administrator. The cash
distribution shall be paid to Optionee within five (5) days following such
delivery date, and neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option surrender
and cash distribution. Upon receipt of such cash distribution, this option shall
be cancelled with respect to the shares subject to the surrendered option (or
the surrendered portion), and Optionee shall cease to have any further right to
acquire those Option Shares under this Agreement. The option shall, however,
remain outstanding for the balance of the Option Shares (if any) in accordance
with the terms and provisions of this Agreement, and the Corporation shall
accordingly issue a new stock option agreement (substantially in the same form
as this Agreement) for those remaining Option Shares.
8. Adjustment in Option Shares. Should any change be made to
the Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the
4.
<PAGE>
Exercise Price in order to reflect such change and thereby preclude a dilution
or enlargement of benefits hereunder; provided, however, that the aggregate
Exercise Price shall remain the same.
9. Stockholder Rights. The holder of this option shall not
have any stockholder rights with respect to the Option Shares until such person
shall have exercised the option, paid the Exercise Price and become a holder of
record of the purchased shares.
10. Manner of Exercising Option.
A. In order to exercise this option for all or any part of the
Option Shares for which the option is at the time exercisable, Optionee (or in
the case of exercise after Optionee's death, Optionee's executor, administrator,
heir or legatee, as the case may be) must take the following actions:
(i) To the extent the option is exercised for vested
Option Shares, the Secretary of the Corporation shall be provided with
written notice of the option exercise (the "Exercise Notice"), in
substantially the form of Exhibit I attached hereto, in which there is
specified the number of vested Option Shares to be purchased under the
exercised option. To the extent the option is exercised for one or more
unvested Option Shares, the Optionee (or other person exercising the
option) shall deliver to the Secretary of the Corporation a Purchase
Agreement for those unvested Option Shares.
(ii) The aggregate Exercise Price for the purchased
shares shall be paid in one or more of the following alternative forms:
- full payment in cash or check made payable to the
Corporation's order; or
- full payment in shares of Common Stock held by
Optionee (or any other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date; or
- to the extent the option is exercised for vested
Option Shares, full payment effected through a broker-dealer sale and
remittance procedure pursuant to which Optionee shall provide
irrevocable written instructions (A) to a Corporation-designated
brokerage firm to effect the immediate sale of the vested shares
purchased under the option and remit to the Corporation, out of the
sale proceeds available on the settlement date, sufficient funds to
cover the aggregate Exercise Price payable for those shares plus the
applicable Federal, State and local income taxes required to be
withheld by the Corporation by reason of such exercise
5.
<PAGE>
and (B) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale.
(iii) Appropriate documentation evidencing the right to
exercise this option shall be furnished the Corporation if the person
or persons exercising the option is other than the Optionee.
(iv) Appropriate arrangement must be made with the
Corporation for the satisfaction of all Federal, State and local income
tax withholding requirements applicable to the option exercise.
B. Except to the extent the sale and remittance procedure
specified above is utilized in connection with the exercise of the option for
vested shares, payment of the Exercise Price for the purchased shares must
accompany the Exercise Notice or Purchase Agreement delivered to the Corporation
in connection with the option exercise.
C. As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate or certificates representing the
purchased Option Shares. To the extent any such Option Shares are unvested, the
certificates for those Option Shares shall be endorsed with an appropriate
legend evidencing the Corporation's repurchase rights and may be held in escrow
with the Corporation until such shares vest.
D. In no event may this option be exercised for any fractional
shares.
11. No Impairment of Rights. This Agreement shall not in any
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
12. Compliance with Laws and Regulations.
A. The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
B. The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any
6.
<PAGE>
liability with respect to the non-issuance or sale of the Common Stock as to
which such approval shall not have been obtained. However, the Corporation shall
use its best efforts to obtain all such applicable approvals.
13. Successors and Assigns. Except to the extent otherwise
provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns and the legal representatives, heirs
and legatees of Optionee's estate.
14. Construction/Governing Law. This Agreement and the option
evidenced hereby are made and granted pursuant to the Automatic Option Grant
Program in effect under the Plan and are in all respects limited by and subject
to the express terms and provisions of that Program. The interpretation,
performance, and enforcement of this Agreement shall be governed by the laws of
the State of California without resort to that State's conflict-of-laws rules.
15. Notices. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation at its principal corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below Optionee's signature line on the
Grant Notice. All notices shall be deemed effective upon personal delivery or
upon deposit in the U.S. mail, postage prepaid and properly addressed to the
party to be notified.
7.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Willis Lease Finance Corporation (the
"Corporation") that I elect to purchase ________ shares of the Corporation's
Common Stock (the "Purchased Shares") at the option exercise price of $_________
per share (the "Exercise Price") pursuant to that certain option (the "Option")
granted to me under the Corporation's 1996 Stock Incentive Plan on _________,
199__.
Concurrently with the delivery of this Exercise Notice to the
Secretary of the Corporation, I shall hereby pay to the Corporation the Exercise
Price for the Purchased Shares in accordance with the provisions of my agreement
with the Corporation evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special broker/dealer sale and remittance
procedure specified in my agreement to effect payment of the Exercise Price for
any Purchased Shares in which I am vested at the time of exercise.
- -------------------------- ----------------------------------
Date Optionee
Address: ----------------------------------
----------------------------------
Print name in exact manner
it is to appear on the
stock certificate: ----------------------------------
Address to which certificate
is to be sent, if different
from address above: ----------------------------------
----------------------------------
Social Security Number: ----------------------------------
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Automatic Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:
- the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept, or
- a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time the Board approved such
election or nomination.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
- a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
A-1
<PAGE>
- the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
G. Corporation shall mean Willis Lease Finance Corporation, a
California corporation.
H. Exercise Date shall mean the date on which the option shall
have been exercised in accordance with Paragraph 10 of the Agreement.
I. Exercise Price shall mean the exercise price payable per share
as specified in the Grant Notice.
J. Expiration Date shall mean the date on which the option term
expires as specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as the
price is reported by the National Association of Securities Dealers on
the Nasdaq National Market or any successor system. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
L. Grant Date shall mean the date of grant of the option as
specified in the Grant Notice.
M. Grant Notice shall mean the Notice of Grant of Automatic Stock
Option accompanying the Agreement, pursuant to which Optionee has been informed
of the basic terms of the option evidenced hereby.
A-2
<PAGE>
N. Hostile Take-Over shall mean a change in ownership of the
Corporation effected through the following transaction:
- the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept, and
- more than fifty percent (50%) of the acquired securities are
accepted from holders other than the officers and directors of the
Corporation subject to the short-swing profit restrictions of Section
16 of the 1934 Act.
O. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
P. Non-Statutory Option shall mean an option not intended to
satisfy the requirements of Code Section 422.
Q. Option Shares shall mean the number of shares of Common Stock
subject to the option.
R. Optionee shall mean the person to whom the option is granted
as specified in the Grant Notice.
S. Permanent Disability shall mean the inability of Optionee to
perform his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.
T. Plan shall mean the Corporation's 1996 Stock Option Stock
Issuance Plan.
U. Purchase Agreement shall mean the stock purchase agreement (in
form and substance satisfactory to the Corporation) which must be executed at
the time the option is exercised for any unvested Option Shares and which will
accordingly (i) grant the Corporation the right to repurchase, at the Exercise
Price, any and all of those Option Shares in which the Optionee is not otherwise
vested at the time of his or her cessation of service as a Board member and (ii)
preclude the sale, transfer or other disposition of any of the Option Shares
purchased under such agreement while those Option Shares remain subject to the
repurchase right.
A-3
<PAGE>
V. Stock Exchange shall mean the American Stock Exchange or the
New York Stock Exchange.
W. Take-Over Price shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting the
Hostile Take-Over.
X. Vesting Schedule shall mean the vesting schedule specified in
the Grant Notice, pursuant to which Optionee will vest in the Option Shares in
one or more annual installments over his or her period of Board service, subject
to acceleration in accordance with the provisions of the Agreement.
A-4
WILLIS LEASE FINANCE CORPORATION
STOCK ISSUANCE AGREEMENT
AGREEMENT made as of this _____ day of 19___, by and among
Willis Lease Finance Corporation, a California corporation, and
_______________________, a Participant in the Corporation's 1996 Stock
Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. PURCHASE OF SHARES
1. Purchase. Participant hereby purchases __________ shares of
Common Stock (the "Purchased Shares") pursuant to the provisions of the Stock
Issuance Program at the purchase price of $______ per share (the "Purchase
Price").
2. Payment. Concurrently with the delivery of this Agreement
to the Corporation, Participant shall pay the Purchase Price for the Purchased
Shares in cash or check payable to the Corporation and shall deliver a
duly-executed blank Assignment Separate from Certificate (in the form attached
hereto as Exhibit I) with respect to the Purchased Shares.
3. Delivery of Certificates. The certificates representing the
Purchased Shares shall be held in escrow in accordance with the provisions of
this Agreement.
4. Stockholder Rights. Until such time as the Corporation
exercises the Repurchase Right, Participant (or any successor in interest) shall
have all the rights of a stockholder (including voting and dividend) with
respect to the Purchased Shares, subject, however, to the transfer restrictions
of this Agreement.
5. Compliance with Law. Under no circumstances shall shares of
Common Stock or other assets be issued or delivered to Participant pursuant to
the provisions of this Agreement unless, in the opinion of counsel for the
Corporation or its successors, there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is at the time listed for trading and all
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.
<PAGE>
B. TRANSFER RESTRICTIONS
1. Restriction on Transfer. Except for any Permitted Transfer,
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right.
2. Restrictive Legend. The stock certificate for the Purchased
Shares shall be endorsed with the following restrictive legend:
"The shares represented by this certificate
are subject to certain repurchase rights granted to the Corporation and
accordingly may not be sold, assigned, transferred, encumbered, or in
any manner disposed of except in conformity with the terms of a written
agreement dated ________, 199__ between the Corporation and the
registered holder of the shares (or the predecessor in interest to the
shares). A copy of such agreement is maintained at the Corporation's
principal corporate offices."
3. Transferee Obligations. Each person (other than the
Corporation) to whom the Purchased Shares are transferred by means of a
Permitted Transfer must, as a condition precedent to the validity of such
transfer, acknowledge in writing to the Corporation that such person is bound by
the provisions of this Agreement and that the transferred shares are subject to
the Repurchase Right to the same extent such shares would be so subject if
retained by Participant.
C. REPURCHASE RIGHT
1. Grant. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the ninety (90)-day period
following the date Participant ceases for any reason to remain in Service, to
repurchase at the Purchase Price all or any portion of the Purchased Shares in
which Participant is not, at the time of his or her cessation of Service, vested
in accordance with the Vesting Schedule (such shares to be hereinafter referred
to as the "Unvested Shares").
2. Exercise of the Repurchase Right. The Repurchase Right
shall be exercisable by written notice delivered to each Owner of the Unvested
Shares prior to the expiration of the ninety (90)-day exercise period. The
notice shall indicate the number of Unvested Shares to be repurchased and the
date on which the repurchase is to be effected, such date to be not more than
thirty (30) days after the date of such notice. The certificates representing
the Unvested Shares to be repurchased shall be delivered to the Corporation
prior to the close of business on the date specified for the repurchase.
Concurrently with the receipt of such stock certificates, the Corporation shall
pay to Owner, in cash or cash equivalent (including the cancellation of any
purchase-money indebtedness), an amount equal to the Purchase Price previously
paid for the Unvested Shares to be repurchased from Owner.
2.
<PAGE>
3. Termination of the Repurchase Right. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2. In addition, the Repurchase Right shall terminate
and cease to be exercisable with respect to any and all Purchased Shares in
which Participant vests in accordance with the following Vesting Schedule:
(i) Upon Participant's completion of one (1) year of
Service measured from ______________, 199__, Participant shall acquire
a vested interest in, and the Repurchase Right shall lapse with respect
to, twenty-five percent (25%) of the Purchased Shares.
(ii) Participant shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the remaining
Purchased Shares in thirty-six (36) successive equal monthly
installments upon Participant's completion of each additional month of
Service over the thirty-six (36)-month period measured from the initial
vesting date under subparagraph (i) above.
4. Recapitalization. Any new, substituted or additional
securities or other property (including cash paid other than as a regular cash
dividend) which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the Repurchase Right, but
only to the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Purchased Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Corporation's capital
structure; provided, however, that the aggregate purchase price shall remain the
same.
5. Corporate Transaction.
(a) Immediately prior to the consummation of any
Corporate Transaction, the Repurchase Right shall automatically lapse in its
entirety, except to the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.
(b) To the extent the Repurchase Right remains in
effect following a Corporate Transaction, such right shall apply to the new
capital stock or other property (including any cash payments) received in
exchange for the Purchased Shares in consummation of the Corporate Transaction,
but only to the extent the Purchased Shares are at the time covered by such
right. Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Corporation's capital structure; provided, however, that
the aggregate purchase price shall remain the same.
3.
<PAGE>
D. ESCROW
1. Deposit. Upon issuance, the certificates for the Purchased
Shares shall be deposited in escrow with the Corporation to be held in
accordance with the provisions of this Article D. Each deposited certificate
shall be accompanied by a duly-executed Assignment Separate from Certificate in
the form of Exhibit I. The deposited certificates, together with any other
assets or securities from time to time deposited with the Corporation pursuant
to the requirements of this Agreement, shall remain in escrow until such time or
times as the certificates (or other assets and securities) are to be released or
otherwise surrendered for cancellation in accordance with Paragraph D.3. Upon
delivery of the certificates (or other assets and securities) to the
Corporation, Owner shall be issued a receipt acknowledging the number of
Purchased Shares (or other assets and securities) delivered in escrow.
2. Recapitalization/Reorganization. Any new, substituted or
additional securities or other property which is by reason of any
Recapitalization or Reorganization distributed with respect to the Purchased
Shares shall be immediately delivered to the Corporation to be held in escrow
under this Article D, but only to the extent the Purchased Shares are at the
time subject to the escrow requirements hereunder. However, all regular cash
dividends on the Purchased Shares (or other securities at the time held in
escrow) shall be paid directly to Owner and shall not be held in escrow.
3. Release/Surrender. The Purchased Shares, together with any
other assets or securities held in escrow hereunder, shall be subject to the
following terms relating to their release from escrow or their surrender to the
Corporation for repurchase and cancellation:
(i) Should the Corporation elect to exercise the
Repurchase Right with respect to any Unvested Shares, then the escrowed
certificates for those Unvested Shares (together with any other assets
or securities attributable thereto) shall be surrendered to the
Corporation concurrently with the payment to Owner of an amount equal
to the aggregate Purchase Price for such Unvested Shares, and Owner
shall cease to have any further rights or claims with respect to such
Unvested Shares (or other assets or securities attributable thereto).
(ii) Should the Corporation elect not to exercise the
Repurchase Right with respect to any Unvested Shares held at the time
in escrow hereunder, then the escrowed certificates for those shares
(together with any other assets or securities attributable thereto)
shall be released to Owner.
(iii) As the Purchased Shares (or any other assets or
securities attributable thereto) vest in accordance with the Vesting
Schedule, the
4.
<PAGE>
certificates for those vested shares (as well as all other vested
assets and securities) shall be released from escrow upon Owner's
request.
(iv) All Purchased Shares in which the Participant is
vested (and any other vested assets and securities attributable
thereto) shall be released from escrow within thirty (30) days after
the Participant's cessation of Service.
(v) Should the Repurchase Right terminate in connection
with a Corporate Transaction, then any Purchased Shares (or other
assets or securities) at the time held in escrow hereunder shall
promptly be released to Owner.
E. SPECIAL TAX ELECTION
1. Section 83(b) Election . Under Code Section 83, the excess
of the fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right.
Participant may elect under Code Section 83(b) to be taxed at the time the
Purchased Shares are acquired, rather than when and as such Purchased Shares
cease to be subject to such forfeiture restrictions. Such election must be filed
with the Internal Revenue Service within thirty (30) days after the date of this
Agreement. Even if the fair market value of the Purchased Shares on the date of
this Agreement equals the Purchase Price paid (and thus no tax is payable), the
election must be made to avoid adverse tax consequences in the future. THE FORM
FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO. PARTICIPANT
UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY
(30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE
FORFEITURE RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
F. GENERAL PROVISIONS
1. Assignment. The Corporation may assign the Repurchase Right
to any person or entity selected by the Board, including (without limitation)
one or more stockholders of the Corporation.
5.
<PAGE>
2. No Employment or Service Contract. Nothing in this
Agreement or in the Plan shall confer upon Participant any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Participant) or of Participant, which rights are hereby
expressly reserved by each, to terminate Participant's Service at any time for
any reason, with or without cause.
3. Notices. Any notice required to be given under this
Agreement shall be in writing and shall be deemed effective upon personal
delivery or upon deposit in the U.S. mail, registered or certified, postage
prepaid and properly addressed to the party entitled to such notice at the
address indicated below such party's signature line on this Agreement or at such
other address as such party may designate by ten (10) days advance written
notice under this paragraph to all other parties to this Agreement.
4. No Waiver. The failure of the Corporation in any instance
to exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Participant. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
5. Cancellation of Shares. If the Corporation shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
G. MISCELLANEOUS PROVISIONS
1. Participant Undertaking. Participant hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either Participant or the
Purchased Shares pursuant to the provisions of this Agreement.
2. Agreement is Entire Contract. This Agreement constitutes
the entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
6.
<PAGE>
3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
4. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5. Successors and Assigns. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's estate.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first indicated above.
WILLIS LEASE FINANCE CORPORATION
By:
----------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
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PARTICIPANT
Address:
-----------------------------------
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7.
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED __________________ hereby sell(s),
assign(s) and transfer(s) unto Willis Lease Finance Corporation (the
"Corporation"), _____________________ (__________) shares of the Common Stock
of the Corporation standing in his or her name on the books of the Corporation
represented by Certificate No. ______________ herewith and do(es) hereby
irrevocably constitute and appoint ________________ Attorney to transfer the
said stock on the books of the Corporation with full power of substitution in
the premises.
Dated: ______________
Signature ________________________________
Instruction: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
<PAGE>
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is ____________ being
made is ____________ shares of the common stock of Willis Lease Finance
Corporation
(3) The property was issued on _____________, 199_.
(4) The taxable year in which the election is being made is the calendar
year 199_.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of annual
and monthly installments over a four (4)-year period ending on
__________, 199__.
(6) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms
will never lapse) is $__________ per share.
(7) The amount paid for such property is $_____________ per share.
(8) A copy of this statement was furnished to Willis Lease Finance
Corporation for whom taxpayer rendered the services underlying the
transfer of property.
(9) This statement is executed on ________________________, 199_.
__________________________________ _______________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Issuance Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Participant must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Issuance Agreement.
B. Associate shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
C. Board shall mean the Corporation's Board of Directors.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
G. Corporation shall mean Willis Lease Finance Corporation, a
California corporation.
H. Owner shall mean Participant and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.
I. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
J. Participant shall mean the person to whom shares are issued under
the Stock Issuance Program.
A-1.
<PAGE>
K. Permitted Transfer shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Participant obtains the Corporation's
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or the laws of
intestate succession following Participant's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness incurred
by Participant in connection with the acquisition of the Purchased Shares.
L. Plan shall mean the Corporation's 1996 Stock Option Stock Issuance
Plan.
M. Plan Administrator shall mean either the Board or a committee of
Board members, to the extent the committee is at the time responsible for the
administration of the Plan.
N. Purchase Price shall have the meaning assigned to such term in
Paragraph A.1.
O. Purchased Shares shall have the meaning assigned to such term in
Paragraph A.1.
P. Recapitalization shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
Q. Reorganization shall mean any of the following transactions:
(i) a merger or consolidation in which the Corporation is not
the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to a person or persons
different from the persons holding those securities immediately prior
to the merger, or
(iv) any transaction effected primarily to change the state in
which the Corporation is incorporated or to create a holding company
structure.
R. Repurchase Right shall mean the right granted to the Corporation in
accordance with Article C.
S. Service shall mean the Participant's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an associate,
subject to the
A-2.
<PAGE>
control and direction of the employer entity as to both the work to be performed
and the manner and method of performance, a non-associate member of the board of
directors or a consultant.
T. Stock Issuance Program shall mean the Stock Issuance Program under
the Plan.
U. Subsidiary shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
V. Vesting Schedule shall mean the vesting schedule specified in
Paragraph C.3, subject to the acceleration provisions of Paragraph C.5.
W. Unvested Shares shall have the meaning assigned to such term in
Paragraph C.1.
A-3.
ADDENDUM
TO
STOCK ISSUANCE AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Issuance Agreement dated 2~ (the
"Issuance Agreement") by and between Willis Lease Finance Corporation (the
"Corporation") and 1~ ("Participant") evidencing the stock issuance on such date
to Participant under the terms of the Corporation's 1996 Stock Option/Stock
Issuance Plan, and such provisions shall be effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meanings assigned to such terms in the Issuance Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Repurchase Right is assigned to the
successor corporation (or parent thereof) in connection with a Corporate
Transaction, no accelerated vesting of the Purchased Shares shall occur upon
such Corporate Transaction, and the Repurchase Right shall continue to remain in
full force and effect in accordance with the provisions of the Issuance
Agreement. The Participant shall, over Participant's period of Service following
the Corporate Transaction, continue to vest in the Purchased Shares in one or
more installments in accordance with the provisions of the Issuance Agreement.
However, immediately upon an Involuntary Termination of Participant's Service
within twelve (12) months following the Corporate Transaction, the Repurchase
Right shall terminate automatically and all the Purchased Shares shall vest in
full.
2. For purposes of this Addendum, the following definitions
shall be in effect:
An Involuntary Termination shall mean the termination
of Participant's Service by reason of:
(i) Participant's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) Participant's voluntary resignation
following (A) a change in Participant's position with the Corporation
(or Parent or Subsidiary employing Participant) which materially
reduces Participant's level of responsibility, (B) a reduction in
Participant's level of compensation (including base salary, fringe
benefits and participation in any corporate-
<PAGE>
performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of Participant's place of employment
by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without
Participant's consent.
Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Participant, any unauthorized use or
disclosure by the Participant of confidential information or trade secrets of
the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by the Participant adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation (or any Parent or Subsidiary) may consider as grounds for
the dismissal or discharge of the Participant or other person in the Service of
the Corporation (or any Parent or Subsidiary).
IN WITNESS WHEREOF, Willis Lease Finance Corporation has
caused this Addendum to be executed by its duly-authorized officer, and
Participant has executed this Addendum, all as of the Effective Date specified
below.
WILLIS LEASE FINANCE CORPORATION
By:
--------------------------------------
Title:
-----------------------------------
-----------------------------------------
1~, PARTICIPANT
EFFECTIVE DATE: , 199
------------------- --
2.
ADDENDUM
TO
STOCK ISSUANCE AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Issuance Agreement dated 2~ (the
"Issuance Agreement") by and between Willis Lease Finance Corporation (the
"Corporation") and 1~ ("Participant") evidencing the stock issuance on such date
to Participant under the terms of the Corporation's 1996 Stock Option/Stock
Issuance Plan, and such provisions shall be effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meanings assigned to such terms in the Issuance Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CHANGE IN CONTROL
1. No accelerated vesting of the Purchased Shares shall occur
upon a Change in Control, and the Repurchase Right shall continue to remain in
full force and effect in accordance with the provisions of the Issuance
Agreement. The Participant shall, over Participant's period of Service following
the Change in Control, continue to vest in the Purchased Shares in one or more
installments in accordance with the provisions of the Issuance Agreement.
However, immediately upon an Involuntary Termination of Participant's Service
within twelve (12) months following the Change in Control, the Repurchase Right
shall terminate automatically and all the Purchased Shares shall vest in full.
2. For purposes of this Addendum, the following definitions
shall be in effect:
A Change in Control shall be deemed to occur in the
event of a change in ownership or control of the Corporation effected through
either of the following transactions:
(i) the direct or indirect acquisition by
any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934, as amended) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept, or
<PAGE>
(ii) a change in the composition of the
Board over a period of thirty-six (36) months or less such that a
majority of the Board members ceases by reason of one or more contested
elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the beginning of
such period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time such
election or nomination was approved by the Board.
An Involuntary Termination shall mean the termination
of Participant's Service by reason of:
(i) Participant's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) Participant's voluntary resignation
following (A) a change in Participant's position with the Corporation
(or Parent or Subsidiary employing Participant) which materially
reduces Participant's level of responsibility, (B) a reduction in
Participant's level of compensation (including base salary, fringe
benefits and participation in any corporate- performance based bonus or
incentive programs) by more than fifteen percent (15%) or (C) a
relocation of Participant's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is
effected by the Corporation without Participant's consent.
Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Participant, any unauthorized use or
disclosure by the Participant of confidential information or trade secrets of
the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by the Participant adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation (or any Parent or Subsidiary) may consider as grounds for
the dismissal or discharge of the Participant or other person in the Service of
the Corporation (or any Parent or Subsidiary).
2.
<PAGE>
IN WITNESS WHEREOF, Willis Lease Finance Corporation has
caused this Addendum to be executed by its duly-authorized officer, and
Participant has executed this Addendum, all as of the Effective Date specified
below.
WILLIS LEASE FINANCE CORPORATION
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
1~, PARTICIPANT
EFFECTIVE DATE: , 199
------------------- --
3.
WILLIS LEASE FINANCE CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the
interests of Willis Lease Finance Corporation by providing eligible employees
with the opportunity to acquire a proprietary interest in the Corporation
through participation in a payroll-deduction based employee stock purchase plan
designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to
such terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret
and construe any provision of the Plan and to adopt such rules and regulations
for administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed 75,000 shares.
B. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and class of securities
issuable under the Plan, (ii) the maximum number and class of securities
purchasable per Participant on any one Purchase Date and (iii) the number and
class of securities and the price per share in effect under each outstanding
purchase right in order to prevent the dilution or enlargement of benefits
thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under
the Plan through a series of successive offering periods until such time as (i)
the maximum number of shares of Common Stock available for issuance under the
Plan shall have been purchased or (ii) the Plan shall have been sooner
terminated.
<PAGE>
B. Each offering period shall be of such duration (not to
exceed twenty-four (24) months) as determined by the Plan Administrator prior to
the start date. The initial offering period shall commence at the Effective Time
and terminate on the last business day in July 1998. The next offering period
shall commence on the first business day in August 1998, and subsequent offering
periods shall commence as designated by the Plan Administrator.
C. Each offering period shall be comprised of a series of one
or more successive Purchase Intervals. Purchase Intervals shall run from the
first business day in February each year to the last business day in July of the
same year and from the first business day in August each year to the last
business day in January of the following year. However, the first Purchase
Interval in effect under the initial offering period shall commence at the
Effective Time and terminate on the last business day in January 1997.
D. Should the Fair Market Value per share of Common Stock on
any Purchase Date within an offering period be less than the Fair Market Value
per share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new offering
period shall have a duration of twenty four (24) months, unless a shorter
duration is established by the Plan Administrator within five (5) business days
following the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start
date of any offering period under the Plan may enter that offering period on
such start date or on any subsequent Semi-Annual Entry Date within that offering
period, provided he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee
after the start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.
C. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.
D. To participate in the Plan for a particular offering
period, the Eligible Employee must complete the enrollment forms prescribed by
the Plan Administrator (including a stock purchase agreement and a payroll
deduction authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.
2.
<PAGE>
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock during an offering period may be
any multiple of one percent (1%) of the Base Salary paid to the Participant
during each Purchase Interval within that offering period, up to a maximum of
ten percent (10%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:
(i) The Participant may, at any time during
the offering period, reduce his or her rate of payroll deduction to
become effective as soon as possible after filing the appropriate form
with the Plan Administrator. The Participant may not, however, effect
more than one (1) such reduction per Purchase Interval.
(ii) The Participant may, prior to the
commencement of any new Purchase Interval within the offering period,
increase the rate of his or her payroll deduction by filing the
appropriate form with the Plan Administrator. The new rate (which may
not exceed the ten percent (10%) maximum) shall become effective on the
start date of the first Purchase Interval following the filing of such
form.
B. Payroll deductions shall begin on the first pay day
following the Participant's Entry Date into the offering period and shall
(unless sooner terminated by the Participant) continue through the pay day
ending with or immediately prior to the last day of that offering period. The
amounts so collected shall be credited to the Participant's book account under
the Plan, but no interest shall be paid on the balance from time to time
outstanding in such account. The amounts collected from the Participant shall
not be held in any segregated account or trust fund and may be commingled with
the general assets of the Corporation and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the
termination of the Participant's purchase right in accordance with the
provisions of the Plan.
D. The Participant's acquisition of Common Stock under the
Plan on any Purchase Date shall neither limit nor require the Participant's
acquisition of Common Stock on any subsequent Purchase Date, whether within the
same or a different offering period.
VII. PURCHASE RIGHTS
A. Grant of Purchase Right. A Participant shall be granted a
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive
3.
<PAGE>
installments over the remainder of such offering period, upon the terms set
forth below. The Participant shall execute a stock purchase agreement embodying
such terms and such other provisions (not inconsistent with the Plan) as the
Plan Administrator may deem advisable.
Under no circumstances shall purchase rights be granted under
the Plan to any Eligible Employee if such individual would, immediately after
the grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Corporation or any Corporate Affiliate.
B. Exercise of the Purchase Right. Each purchase right shall
be automatically exercised in installments on each successive Purchase Date
within the offering period, and shares of Common Stock shall accordingly be
purchased on behalf of each Participant (other than Participants whose payroll
deductions have previously been refunded pursuant to the Termination of Purchase
Right provisions below) on each such Purchase Date. The purchase shall be
effected by applying the Participant's payroll deductions for the Purchase
Interval ending on such Purchase Date to the purchase of whole shares of Common
Stock at the purchase price in effect for the Participant for that Purchase
Date.
C. Purchase Price. The purchase price per share at which
Common Stock will be purchased on the Participant's behalf on each Purchase Date
within the offering period shall not be less than eighty-five percent (85%) of
the lower of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into that offering period or (ii) the Fair Market Value
per share of Common Stock on that Purchase Date. However, for each Participant
whose Entry Date is other than the start date of the offering period, the clause
(i) amount shall in no event be less than the Fair Market Value per share of
Common Stock on the start date of that offering period.
D. Number of Purchasable Shares. The number of shares of
Common Stock purchasable by a Participant on each Purchase Date during the
offering period shall be the number of whole shares obtained by dividing the
amount collected from the Participant through payroll deductions during the
Purchase Interval ending with that Purchase Date by the purchase price in effect
for the Participant for that Purchase Date. However, the maximum number of
shares of Common Stock purchasable per Participant on any one Purchase Date
shall not exceed five hundred (500) shares, subject to periodic adjustments in
the event of certain changes in the Corporation's capitalization.
E. Excess Payroll Deductions. Any payroll deductions not
applied to the purchase of shares of Common Stock on any Purchase Date because
they are not sufficient to purchase a whole share of Common Stock shall be held
for the purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable by the Participant on the
Purchase Date shall be promptly refunded.
4.
<PAGE>
F. Termination of Purchase Right. The following provisions
shall govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to
the next scheduled Purchase Date in the offering period, terminate his
or her outstanding purchase right by filing the appropriate form with
the Plan Administrator (or its designate), and no further payroll
deductions shall be collected from the Participant with respect to the
terminated purchase right. Any payroll deductions collected during the
Purchase Interval in which such termination occurs shall be immediately
refunded to the Participant.
(ii) The termination of such purchase right
shall be irrevocable, and the Participant may not subsequently rejoin
the offering period for which the terminated purchase right was
granted. In order to resume participation in any subsequent offering
period, such individual must re-enroll in the Plan (by making a timely
filing of the prescribed enrollment forms) on or before his or her
scheduled Entry Date into that offering period.
(iii) Should the Participant cease to remain
an Eligible Employee for any reason (including death, disability or
change in status) while his or her purchase right remains outstanding,
then that purchase right shall immediately terminate, and all of the
Participant's payroll deductions for the Purchase Interval in which the
purchase right so terminates shall be immediately refunded. However,
should the Participant cease to remain in active service by reason of
an approved unpaid leave of absence, then the Participant shall have
the right, exercisable up until the last business day of the Purchase
Interval in which such leave commences, to (a) withdraw all the payroll
deductions collected to date on his or her behalf for that Purchase
Interval or (b) have such funds held for the purchase of shares on his
or her behalf on the next scheduled Purchase Date. In no event,
however, shall any further payroll deductions be collected on the
Participant's behalf during such leave. Upon the Participant's return
to active service, his or her payroll deductions under the Plan shall
automatically resume at the rate in effect at the time the leave began,
unless the Participant withdraws from the Plan prior to his or her
return.
G. Corporate Transaction. Each outstanding purchase right
shall automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the Purchase Interval in which such Corporate Transaction occurs to the
purchase of whole shares of Common Stock at a purchase price per share not less
than eighty-five percent (85%) of the lower of (i) the Fair Market Value per
share of Common Stock on the Participant's Entry Date into the offering period
in which such Corporate Transaction occurs or (ii) the Fair Market
5.
<PAGE>
Value per share of Common Stock immediately prior to the effective date of such
Corporate Transaction. However, the applicable limitation on the number of
shares of Common Stock purchasable per Participant shall continue to apply to
any such purchase, and the clause (i) amount above shall not, for any
Participant whose Entry Date for the offering period is other than the start
date of that offering period, be less than the Fair Market Value per share of
Common Stock on that start date.
The Corporation shall use its best efforts to provide at least
ten (10)-days prior written notice of the occurrence of any Corporate
Transaction, and Participants shall, following the receipt of such notice, have
the right to terminate their outstanding purchase rights prior to the effective
date of the Corporate Transaction and receive a refund of their accumulated
payroll deductions.
H. Proration of Purchase Rights. Should the total number of
shares of Common Stock to be purchased pursuant to outstanding purchase rights
on any particular date exceed the number of shares then available for issuance
under the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. Assignability. The purchase right shall be exercisable only
by the Participant and shall not be assignable or transferable by the
Participant.
J. Stockholder Rights. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to
acquire Common Stock pursuant to any purchase right outstanding under this Plan
if and to the extent such accrual, when aggregated with (i) rights to purchase
Common Stock accrued under any other purchase right granted under this Plan and
(ii) similar rights accrued under other employee stock purchase plans (within
the meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty- Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations to the
purchase rights granted under the Plan, the following provisions shall be in
effect:
6.
<PAGE>
(i) The right to acquire Common Stock under
each outstanding purchase right shall accrue in a series of
installments on each successive Purchase Date during the offering
period on which such right remains outstanding.
(ii) No right to acquire Common Stock under
any outstanding purchase right shall accrue to the extent the
Participant has already accrued in the same calendar year the right to
acquire Common Stock under one (1) or more other purchase rights at a
rate equal to Twenty-Five Thousand Dollars ($25,000) worth of Common
Stock (determined on the basis of the Fair Market Value per share on
the date or dates of grant) for each calendar year such rights were at
any time outstanding.
C. If by reason of such accrual limitations, any purchase
right of a Participant does not accrue for a particular Purchase Interval, then
the payroll deductions which the Participant made during that Purchase Interval
with respect to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions
of this Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on June 20, 1996 and
shall become effective at the Effective Time, provided no purchase rights
granted under the Plan shall be exercised, and no shares of Common Stock shall
be issued hereunder, until (i) the Plan shall have been approved by the
stockholders of the Corporation and (ii) the Corporation shall have complied
with all applicable requirements of the 1933 Act (including the registration of
the shares of Common Stock issuable under the Plan on a Form S-8 registration
statement filed with the Securities and Exchange Commission), all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation. In the event such
stockholder approval is not obtained, or such compliance is not effected, within
twelve (12) months after the date on which the Plan is adopted by the Board, the
Plan shall terminate and have no further force or effect, and all sums collected
from Participants during the initial offering period hereunder shall be
refunded.
B. Unless sooner terminated by the Board, the Plan shall
terminate upon the earliest of (i) the last business day in July 2006, (ii) the
date on which all shares available for issuance under the Plan shall have been
sold pursuant to purchase rights exercised under the Plan or (iii) the date on
which all purchase rights are exercised in connection with a Corporate
Transaction. No further purchase rights shall be granted or
7.
<PAGE>
exercised, and no further payroll deductions shall be collected, under the Plan
following such termination.
X. AMENDMENT OF THE PLAN
The Board may alter, amend, suspend or discontinue the Plan at
any time to become effective immediately following the close of any Purchase
Interval. However, the Board may not, without the approval of the Corporation's
stockholders, (i) materially increase the number of shares of Common Stock
issuable under the Plan or the maximum number of shares purchasable per
Participant on any one Purchase Date, except for permissible adjustments in the
event of certain changes in the Corporation's capitalization, (ii) alter the
purchase price formula so as to reduce the purchase price payable for the shares
of Common Stock purchasable under the Plan or (iii) materially increase the
benefits accruing to Participants under the Plan or materially modify the
requirements for eligibility to participate in the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of
the Plan shall be paid by the Corporation.
B. Nothing in the Plan shall confer upon the Participant any
right to continue in the employ of the Corporation or any Corporate Affiliate
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any Corporate Affiliate employing such
person) or of the Participant, which rights are hereby expressly reserved by
each, to terminate such person's employment at any time for any reason, with or
without cause.
C. The provisions of the Plan shall be governed by the laws of
the State of California without resort to that State's conflict-of-laws rules.
8.
<PAGE>
Schedule A
Corporations Participating in
Employee Stock Purchase Plan
As of the Effective Time
Willis Lease Finance Corporation
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. Base Salary shall mean the (i) regular base salary paid to
a Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
any pre-tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. The
following items of compensation shall not be included in Base Salary: (i) all
overtime payments, bonuses, commissions (other than those functioning as base
salary equivalents), profit-sharing distributions and other incentive-type
payments and (ii) any and all contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf by the
Corporation or any Corporate Affiliate under any employee benefit or welfare
plan now or hereafter established.
B. Board shall mean the Corporation's Board of Directors.
C. Code shall mean the Internal Revenue Code of 1986, as
amended.
D. Common Stock shall mean the Corporation's common stock.
E. Corporate Affiliate shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
F. Corporate Transaction shall mean either of the following
stockholder- approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation.
G. Corporation shall mean Willis Lease Finance Corporation, a
California corporation, and any corporate successor to all or substantially all
of the assets or voting stock of Willis Lease Finance Corporation which shall by
appropriate action adopt the Plan.
A-1.
<PAGE>
H. Effective Time shall mean the time at which the
Underwriting Agreement is executed and finally priced. Any Corporate Affiliate
which becomes a Participating Corporation after such Effective Time shall
designate a subsequent Effective Time with respect to its Participants.
I. Eligible Employee shall mean any person who is employed by
a Participating Corporation on a basis under which he or she is regularly
expected to render more than twenty (20) hours of service per week for more than
five (5) months per calendar year for earnings considered wages under Code
Section 3401(a).
J. Entry Date shall mean the date an Eligible Employee first
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.
K. Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(iii) For purposes of the initial offering period which
begins at the Effective Time, the Fair Market Value shall be deemed to
be equal to the price per share at which the Common Stock is sold in
the initial public offering pursuant to the Underwriting Agreement.
L. 1933 Act shall mean the Securities Act of 1933, as amended.
A-2.
<PAGE>
M. Participant shall mean any Eligible Employee of a
Participating Corporation who is actively participating in the Plan.
N. Participating Corporation shall mean the Corporation and
such Corporate Affiliate or Affiliates as may be authorized from time to time by
the Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan as of the Effective Time are listed in
attached Schedule A.
O. Plan shall mean the Corporation's Employee Stock Purchase
Plan, as set forth in this document.
P. Plan Administrator shall mean the committee of two (2) or
more Board members appointed by the Board to administer the Plan.
Q. Purchase Date shall mean the last business day of each
Purchase Interval. The initial Purchase Date shall be January 31, 1997.
R. Purchase Interval shall mean each successive six (6)-month
period within the offering period at the end of which there shall be purchased
shares of Common Stock on behalf of each Participant.
S. Semi-Annual Entry Date shall mean the first business day in
February and August each year on which an Eligible Employee may first enter an
offering period.
T. Stock Exchange shall mean either the American Stock
Exchange or the New York Stock Exchange.
U. Underwriting Agreement shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-3.
WILLIS LEASE FINANCE CORPORATION
STOCK PURCHASE AGREEMENT
------------------------
I hereby elect to participate in the Employee Stock Purchase Plan (the
"ESPP") effective with the Entry Date specified below, and I hereby subscribe to
purchase shares of Common Stock of Willis Lease Finance Corporation (the
"Corporation") in accordance with the provisions of this Agreement and the ESPP.
I hereby authorize payroll deductions from each of my paychecks following my
entry into the ESPP in the 1% multiple of my earnings (not to exceed a maximum
of 10%) specified in my attached Enrollment Form.
Each offering period is divided into a series of successive purchase
intervals. The initial purchase interval is to begin at the time of the initial
public offering and end on January 31, 1997. Subsequent purchase intervals will
each be of six (6) months duration and will begin on the first business day of
February and August each year during the offering period. My participation will
automatically remain in effect from one offering period to the next in
accordance with this Agreement and my payroll deduction authorization, unless I
withdraw from the ESPP or change the rate of my payroll deduction or unless my
employment status changes. I may reduce the rate of my payroll deductions on one
occasion per purchase interval, and I may increase my rate of payroll deduction
to become effective at the beginning of any subsequent purchase interval within
the offering period.
My payroll deductions will be accumulated for the purchase of shares of
the Corporation's Common Stock on the last business day of each purchase
interval within the offering period. The purchase price per share will not be
less than 85% of the lower of (i) the fair market value per share of Common
Stock on my entry date into the offering period or (ii) the fair market value
per share on the semi-annual purchase date. However, the clause (i) amount will
in no event be less than the fair market value per share of Common Stock on the
start date of the offering period. I will also be subject to ESPP restrictions
(i) limiting the maximum number of shares which I may purchase on any one
purchase date to 500 shares and (ii) prohibiting me from purchasing more than
$25,000 worth of Common Stock for each calendar year my purchase right remains
outstanding.
I may withdraw from the ESPP at any time prior to the last business day
of a purchase interval and the Corporation will automatically refund all my
payroll deductions for that purchase interval. I may not rejoin that particular
offering period at any later date. Upon the termination of my employment for any
reason, including death or disability, or my loss of eligible employee status,
my participation in the ESPP will immediately cease and all my payroll
deductions for the purchase interval in which my employment terminates or my
loss of eligibility occurs will automatically be refunded.
If I take an unpaid leave of absence, my payroll deductions will
immediately cease, and any payroll deductions for the purchase interval in which
my leave begins will, at my election, either be refunded or applied to the
purchase of shares of Common Stock at the end of that purchase interval. Upon my
return to active service, my payroll deductions will automatically resume at the
rate in effect when my leave began.
A stock certificate for the shares purchased on my behalf at the end of
each purchase interval will automatically be deposited into a brokerage account
which the Corporation will open on my behalf. I will notify the Corporation of
any sale or disposition of my ESPP shares, and I will satisfy all applicable
income and employment tax withholding requirements at the time of such sale or
disposition.
The Corporation has the right, exercisable in its sole discretion, to
amend or terminate the ESPP at any time, with such amendment or termination to
become effective immediately following the exercise of outstanding purchase
rights at the end of any current purchase interval. Should the Corporation elect
to terminate the ESPP, I will have no further rights to purchase shares of
Common Stock pursuant to this Agreement.
I have received a copy of the official Plan Prospectus summarizing the
major features of the ESPP. I have read this Agreement and the Prospectus and
hereby agree to be bound by the terms of both this Agreement and the ESPP. The
effectiveness of this Agreement is dependent upon my eligibility to participate
in the ESPP.
Date: , 199
------------------------------- -- ------------------------------
Signature of Employee
- ----------
Printed Name:
------------------------
Entry Date: , 199
------------------------- --
WILLIS LEASE FINANCE CORPORATION
EMPLOYEE STOCK PURCHASE PLAN ("ESPP")
ENROLLMENT/CHANGE FORM
Action Complete Sections:
------ ------------------
SECTION 1: / / New Enrollment 2, 3, 7 and sign attached
ACTION Stock Purchase
Agreement
/ / Change Payroll Deductions 2, 4, 7
/ / Terminate Payroll Deductions 2, 5, 7
/ / Leave of Absence 2, 6, 7
================================================================================
SECTION 2:
PERSONNEL Name
DATA -----------------------------------------------------------
Last First MI Dept.
Home Address
---------------------------------------------------
Street
-------------------------------------------------------
City State Zip Code
Social Security #: / / / /-/ / /-/ / / / /
================================================================================
SECTION 3:
NEW Effective with the Purchase
ENROLLMENT Interval Beginning: Payroll Deduction Amount:
/ / February 1, 199__ _____% of base salary*
/ / August 1, 199__ * Must be a multiple of 1% up
to a maximum of 10% of
base salary
/ / Initial Offering Period -- ___, 1996
================================================================================
SECTION 4:
CHANGE Effective with I authorize the following new
PAYROLL the Pay Period level of payroll deductions:
DEDUCTIONS Beginning: ___________________ % of base salary*
Month, Day and Year -------
* Must be a multiple of 1%
up to a maximum of 10%
of base salary
NOTE: You may reduce your rate of payroll deductions once per
purchase interval to become effective as soon as
possible following the filing of the change form. You
may also increase your rate of payroll deductions to
become effective as of the start date of the next
purchase interval.
================================================================================
SECTION 5:
TERMINATE Effective with Your election to terminate your
PAYROLL the Pay Period payroll deductions for the
DEDUCTIONS Beginning: ___________________ balance of the offering period
Month, Day and Year cannot be changed, and you may
not rejoin the offering period
at a later date. You will not
be able to resume participation
in the ESPP until a new
offering period begins.
Your ESPP payroll deductions collected to date for the purchase
interval in which you file this termination notice will be
refunded to you.
NOTE: If your employment terminates for any reason or your
eligibility status changes (less than 20 hrs/wk or less than 5
months/yr), you will immediately cease to participate in the
ESPP, and your ESPP payroll deductions collected in that
purchase interval will automatically be refunded to you.
================================================================================
SECTION 6
LEAVE OF In connection with my unpaid leave of absence, I elect the
ABSENCE following action regarding my ESPP payroll deductions to date
in the current purchase interval:
/ / Purchase shares of Willis Lease Finance Corporation at end
of the interval
OR
/ / Refund ESPP payroll deductions collected
NOTE If you take an unpaid leave of absence, your payroll deductions
will immediately cease. Upon your return to active service,
your payroll deductions will automatically resume at the rate
in effect for you at the time you went on leave.
================================================================================
SECTION 7
AUTHORIZATION
I hereby authorize the specific action or actions indicated above.
- ---------------------- ----------------------------------------
Date Signature of Employee
