As filed with the Securities and Exchange Commission on October 16, 1997.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
APPLE ORTHODONTIX, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 74-2795193
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
APPLE ORTHODONTIX, INC.
2777 ALLEN PARKWAY, SUITE 700
HOUSTON, TEXAS 77019
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
APPLE ORTHODONTIX, INC.
1996 STOCK COMPENSATION PLAN
(FULL TITLE OF THE PLAN)
MICHAEL W. HARLAN
APPLE ORTHODONTIX, INC.
2777 ALLEN PARKWAY, SUITE 700
HOUSTON, TEXAS
(713) 964-6882
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT OF SERVICE)
---------------------------
COPIES TO:
Richard S. Roth
Jackson Walker L.L.P.
1100 Louisiana, Suite 4200
Houston, Texas 77002
APPROXIMATE DATE OF PROPOSED COMMENCEMENT OF SALES
PURSUANT TO THE PLAN:
From time to time after this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered Share(1) Price (1) Registration Fee
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Common Stock,
$.001 par value 980,000 shares $14.75 $14,455,000 $4,381
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h)(1).
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents, which have been filed with the Securities and
Exchange Commission (the "Commission") by Apple Orthodontix, Inc. (the
"Company"), are incorporated herein by reference and made a part hereof: (i)
Prospectus dated May 22, 1997, filed with the Commission pursuant to Rule 424(b)
on May 23, 1997; (ii) the Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31 and June 30, 1997; and (iii) Registration Statement on
Form 8-A (No. 1-12977), effective as of May 14, 1997, and any amendments filed
thereto.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") subsequent
to the date of this Registration Statement and prior to the filing of a
post-effective amendment that indicates that all securities offered have been
sold or that deregisters all securities then remaining unsold, shall be deemed
to be incorporated herein by reference 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 other subsequently filed document which also is or 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.
DELAWARE GENERAL CORPORATION LAW
Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement actually and reasonably
incurred
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by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 145(b) of the DGCL states that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 145(d) of the DGCL states that any indemnification under
subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b). Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the
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corporation as authorized in Section 145. Such expenses (including attorneys'
fees) incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
Section 145(f) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of
Section 145 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office.
Section 145(g) of the DGCL provides that a corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of Section 145.
Section 145(j) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent, and shall inure to the
benefit of the heirs, executors and administrators of such a person.
CERTIFICATE OF INCORPORATION
The Restated Certificate of Incorporation of the Company provides that a
director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. If the DGCL is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Company, in addition to the limitation on
personal liability described above, shall be limited to the fullest extent
permitted by the amended DGCL. Further, any repeal or modification of such
provision of the Restated Certificate of Incorporation by the stockholders of
the Company shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Company existing at
the time of such repeal or modification.
BYLAWS
The Bylaws of the Company provide that the Company will indemnify and hold
harmless any director or officer of the Company to the fullest extent permitted
by applicable law, as in effect as of the date of the adoption of the Bylaws or
to such greater extent as applicable law may thereafter
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permit, from and against all losses, liabilities, claims, damages, judgments,
penalties, fines, amounts paid in settlement and expenses (including attorneys'
fees) whatsoever arising out of any event or occurrence related to the fact that
such person is or was a director or officer of the Company and further provide
that the Company may, but is not required to, indemnify and hold harmless any
employee or agent of the Company or a director, officer, employee or agent of
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise who is or was serving in such capacity at the written
request of the Company; provided, however, that the Company is only required to
indemnify persons serving as directors, officers, employees or agents of the
Company for the expenses incurred in a proceeding if such person is a party to
and is successful, on the merits or otherwise, in such proceeding, or if
unsuccessful in the proceeding, but successful as to a matter in such
proceeding, the expenses attributable to such matter and provided further that
the Company may, but is not required to, indemnify such persons who are serving
as a director, officer, employee or agent of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise at the written
request of the Company for the expenses incurred in a proceeding if such person
is a party to and is successful, on the merits or otherwise, in such proceeding.
The Bylaws further provide that, in the event of any threatened, or pending
action, suit or proceeding in which any of the persons referred to above is a
party or is involved and that may give rise to a right of indemnification under
the Bylaws, following written request by such person, the Company will promptly
pay to such person amounts to cover expenses reasonably incurred by such person
in such proceeding in advance of its final disposition upon the receipt by the
Company of (i) a written undertaking executed by or on behalf of such person
providing that such person will repay the advance if it is ultimately determined
that such person is not entitled to be indemnified by the Company as provided in
the Bylaws and (ii) satisfactory evidence as to the amount of such expenses.
UNDERWRITING AGREEMENT
The Underwriting Agreement relating to the Company's initial public
offering provides for the indemnification of the directors and officers of the
Company in certain circumstances.
TRICAP PARTNERS, L.L.C. AGREEMENT
The financial advisory consulting agreement in which the Company and TriCap
Partners, L.L.C. are parties provides for the indemnification of the directors
and officers of the Company in certain circumstances.
INSURANCE
The Company intends to maintain liability insurance for the benefit of its
directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers or
controlling persons of the Company pursuant to the foregoing provisions, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act, as amended, and is therefore unenforceable.
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ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-8, including those incorporated herein by
reference.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
4.1 Restated Certificate of Incorporation.(1)
4.2 Bylaws.(1)
4.3 Form of certificate evidencing ownership of the Common Stock of
Apple Orthodontix, Inc.(1)
4.4 Form of Registration Rights Agreement.(1)
4.5 Registration Rights Agreement Among Apple Orthodontix, Inc., John G.
Vondrak, D.D.S. and TriCap Funding I, L.L.C.(1)
4.6 Registration Rights Agreement between TriCap Partners, L.L.C. and
Apple Orthodontix, Inc.(1)
5.1 Opinion of H. Steven Walton (2)
23.1 Consent of Arthur Andersen, L.L.P.(2)
23.2 Consent of H. Steven Walton (contained in Exhibit 5.1)
24.1 Power of Attorney. (contained on the signature page of this
Registration Statement)
99.1 Apple Orthodontix, Inc. 1996 Stock Compensation Plan.(2)
(1) Previously filed as an exhibit to the Company's registration statement on
Form S-1 (No. 333- 22785), and incorporated herein by reference.
(2) Filed herewith.
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ITEM 9. UNDERTAKINGS.
(a) The Company 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 Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the 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 the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(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 paragraphs (a)(1)(i) and (a)(1)(ii) do 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 Company pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities 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.
(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 offering.
(b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act), that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities
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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
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company 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
Company 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 Securities Act and will be governed by the final adjudication
of such issue.
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POWER OF ATTORNEY
Each person whose signature appears below authorizes H. Steven Walton and
Michael W. Harlan, and each of them, each of whom may act without joinder of the
other, to execute in the name of each such person who is then an officer or
director of the Registrant, and to file any amendments to this Registration
Statement necessary or advisable to enable the Registrant to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in respect thereof, in connection
with the registration of the securities that are the subject of this
Registration Statement, which amendments may make such changes to such
Registration Statement as such attorney may deem appropriate.
SIGNATURE PAGE
Pursuant to the requirements of the Securities Act of 1933, as amended,
Apple Orthodontix, Inc. 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 Houston, State of Texas, on October ___, 1997.
APPLE ORTHODONTIX, INC.
By: /S/ JOHN G. VONDRAK,D.D.S.
John G. Vondrak, D.D.S.
Chairman of the Board
and Chief Executive Officer
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Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated and on October __, 1997.
SIGNATURES TITLE
/s/ John G. Vondrak, D.D.S. Chairman of the Board and
John G. Vondrak, D.D.S. Chief Executive Officer
(Principal Executive Officer)
/s/ Michael W. Harlan Vice President and Chief
Michael W. Harlan Financial Officer
(Principal Financial and Accounting Officer)
/s/ W. Daniel Cook Director
W. Daniel Cook
/s/ William W. Sherrill Director
William W. Sherrill
/s/ Rod L. Crosby, Jr. Director
Rod L. Crosby, Jr.
/s/ Clyde C. Waddell, Jr. Director
Clyde C. Waddell, Jr.
10
EXHIBIT 5.1
October 16, 1997
Apple Orthodontix, Inc.
2777 Allen Parkway
Suite 700
Houston, Texas 77019
Re: Registration Statement on Form S-8 of Apple Orthodontix, Inc.
Gentlemen:
I am general counsel of Apple Orthodontix, Inc., a Delaware corporation
(the "Company"), and am providing this opinion in connection with the
registration under the Securities Act of 1933, as amended (the "Act"), of the
offering and sale of up to 980,000 shares of the Company's Class A Common Stock,
par value $.001 per share (the "Shares"), which shares are issuable upon the
grant of restricted stock awards ("Restricted Stock Awards") or the exercise of
options ("Options") granted or to be granted from time to time to eligible
persons, pursuant to the provisions of the Apple Orthodontix, Inc. 1996 Stock
Compensation Plan (the "Plan"). A Registration Statement on Form S-8 covering
the offering and sale of the Shares (the "Registration Statement") is expected
to be filed with the Securities and Exchange Commission on or about the date
hereof.
In reaching the conclusions expressed in this opinion I have examined and
relied on such documents, corporate records and other instruments, including
certificates of public officials and certificates of officers of the Company,
and made such further investigation and inquiry as I have deemed necessary to
reach the opinions expressed herein. In making the foregoing examinations, I
have assumed the genuineness of all signatures on original documents, the
authenticity, accuracy and completeness of all documents submitted to us as
originals and the conformity to original documents of all copies submitted to
us.
Based solely upon the foregoing, subject to the comments and exceptions
hereinafter stated, it is my opinion that the Shares, when sold by the Company
in accordance with the terms of the Plan, the Options and the Restricted Stock
Awards for consideration having a value not less than the par value thereof,
will be validly and legally issued, fully paid and nonassessable.
<PAGE>
I express no opinion as to the laws of any jurisdiction other than the
General Corporation Law of the State of Delaware and the federal laws of the
United States of America, in each case as in effect on the date hereof.
I hereby consent to the use of this opinion as an Exhibit to the
Registration Statement. In giving this consent, I do not admit that I come
within the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ H. Steven Walton
EXHIBIT TO COME
EXHIBIT 99.1
APPLE ORTHODONTIX, INC. 1996 STOCK COMPENSATION PLAN
AMENDED AND RESTATED AS OF JUNE 11, 1997
ARTICLE I
THE PLAN
1.1 NAME. This Plan shall be known as the "Apple Orthodontix, Inc. 1996
Stock Compensation Plan." Capitalized terms used herein are defined in ARTICLE
VII hereof.
1.2 PURPOSE. The purpose of the Plan is to promote the growth and general
prosperity of the Company by permitting the Company to grant to Employees,
Nonemployee Directors, Advisors, and Orthodontists Common Stock of the Company
and Options to purchase Common Stock of the Company. The Plan is designed to
help the Company and its Subsidiaries attract and retain superior personnel for
positions of substantial responsibility and to provide Employees, Nonemployee
Directors, Advisors, and Orthodontists with an additional incentive to
contribute to the success of the Company. The Company intends that Incentive
Stock Options granted pursuant to ARTICLE III shall qualify as "incentive stock
options" within the meaning of Section 422 of the Code.
1.3 EFFECTIVE DATE. The Plan shall become effective upon the Effective
Date.
1.4 ELIGIBILITY TO PARTICIPATE. Any Employee, Nonemployee Director,
Advisor, or Orthodontist shall be eligible to participate in the Plan. Subject
to the following provisions, including without limitation SECTION 4.5, the
Committee may grant Options or Restricted Stock in accordance with such
determinations as the Committee from time to time in its sole discretion shall
make; provided, however, that Incentive Stock Options may be granted only to
persons who are Employees.
1.5 SHARES SUBJECT TO THE PLAN. The shares of Common Stock to be issued
pursuant to the Plan shall be either authorized and unissued shares of Common
Stock or shares of Common Stock issued and thereafter acquired by the Company.
1.6 MAXIMUM NUMBER OF PLAN SHARES. Subject to adjustment pursuant to the
provisions of SECTION 6.2, and subject to any additional restrictions elsewhere
in the Plan, the maximum aggregate number of shares of Common Stock that may be
issued and sold hereunder shall not exceed the greater of (a) 1,000,000 shares
or (b) 12 percent of the number of shares of Common Stock issued and outstanding
on the last day of each calendar quarter. No more than 500,000 shares of Common
Stock shall be available for Incentive Stock Options. Subject to adjustment
pursuant to the provisions of SECTION 6.2, and subject to any additional
restrictions elsewhere in the Plan, the maximum aggregate number of shares of
Common Stock with respect to which Options may be granted to any Optionee during
the term of the Plan shall not exceed 500,000 shares.
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1.7 OPTIONS AND STOCK GRANTED UNDER PLAN. Plan Shares with respect to
which an Option shall have been exercised or a Restricted Stock Award shall have
vested shall not again be available for grant hereunder. If Options terminate
for any reason without being wholly exercised or Restricted Stock is forfeited,
new Options or Restricted Stock may be granted hereunder covering the number of
Plan Shares to which such Option termination or forfeiture relates.
1.8 CONDITIONS PRECEDENT. The Company shall not issue any certificate for
Plan Shares pursuant to the Plan prior to fulfillment of all of the following
conditions:
(a) The admission of the Plan Shares to listing on all stock
exchanges on which the Common Stock is then listed, unless the Committee
determines in its sole discretion that such listing is neither necessary
nor advisable;
(b) The completion of any registration or other qualification of the
offer or sale of the Plan Shares under any federal or state law or under
the rulings or regulations of the Securities and Exchange Commission or
any other governmental regulatory body that the Committee shall in its
sole discretion deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any
federal or state governmental agency that the Committee shall in its sole
discretion determine to be necessary or advisable.
1.9 RESERVATION OF SHARES OF COMMON STOCK. During the term of the Plan,
the Company shall at all times reserve and keep available such number of shares
of Common Stock as shall be necessary to satisfy the requirements of the Plan as
to the number of Plan Shares. In addition, the Company shall from time to time,
as is necessary to accomplish the purposes of the Plan, seek or obtain from any
regulatory agency having jurisdiction any requisite authority that is necessary
to issue Plan Shares hereunder. The inability of the Company to obtain from any
regulatory agency having jurisdiction the authority deemed by the Company's
counsel to be necessary to the lawful issuance of any Plan Shares shall relieve
the Company of any liability in respect of the nonissuance of Plan Shares as to
which the requisite authority shall not have been obtained.
1.10 TAX WITHHOLDING.
(a) CONDITION PRECEDENT. The issuance of Plan Shares is subject to
the condition that if at any time the Committee shall determine, in its
discretion, that the satisfaction of withholding tax or other withholding
liabilities under any federal, state or local law is necessary or
desirable as a condition of, or in connection with, such issuances, then
the issuances shall not be effective unless the withholding shall have
been effected or obtained in a manner acceptable to the Committee.
(b) MANNER OF SATISFYING WITHHOLDING OBLIGATION. When a Participant
is required by the Committee to pay to the Company an amount required to
be withheld under
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applicable income tax laws in connection with the exercise of an Option or
the receipt or vesting of Restricted Stock, such payment may be made (i)
in cash, (ii) by check, (iii) if permitted by the Committee, by delivery
to the Company of shares of Common Stock already owned by the Participant
having a Fair Market Value on the Tax Date equal to the amount required to
be withheld, (iv) through the withholding by the Company ("Company
Withholding") of a portion of the Plan Shares acquired upon the exercise
of the Options (if applicable) having a Fair Market Value on the Tax Date
equal to the amount required to be withheld or (v) in any other form of
valid consideration, as permitted by the Committee in its discretion.
(c) NOTICE OF DISPOSITION OF STOCK ACQUIRED PURSUANT TO INCENTIVE
STOCK OPTIONS. The Company may require as a condition to the issuance of
Plan Shares covered by any Incentive Stock Option that the party
exercising such Option give a written representation to the Company, which
is satisfactory in form and substance to its counsel and upon which the
Company may reasonably rely, that he shall report to the Company any
disposition of such shares prior to the expiration of the holding periods
specified by Section 422(a)(1) of the Code. If and to the extent that the
realization of income in such a disposition imposes upon the Company
federal, state or local withholding tax requirements, or any such
withholding is required to secure for the Company an otherwise available
tax deduction, the Company shall have the right to require that the
recipient remit to the Company an amount sufficient to satisfy those
requirements; and the Company may require as a condition to the issuance
of Plan Shares covered by an Incentive Stock Option that the party
exercising such Option give a satisfactory written representation
promising to make such a remittance.
1.11 EXERCISE OF OPTIONS.
(a) METHOD OF EXERCISE. Each Option shall be exercisable in
accordance with the terms of the Option Agreement pursuant to which the
Option was granted. No Option may be exercised for a fraction of a Plan
Share.
(b) PAYMENT OF PURCHASE PRICE. The purchase price of any Plan Shares
purchased shall be paid at the time of exercise of the Option either (i)
in cash, (ii) by certified or cashier's check, (iii) if permitted by the
Committee, by shares of Common Stock, (iv) if permitted by the Committee,
by cash or certified or cashier's check for the par value of the Plan
Shares plus a promissory note for the balance of the purchase price, which
note shall provide for full personal liability of the maker and shall
contain such terms and provisions as the Committee may determine,
including without limitation the right to repay the note partially or
wholly with Common Stock, (v) by delivery of a copy of irrevocable
instructions from the Optionee to a broker or dealer, reasonably
acceptable to the Company, to sell certain of the Plan Shares purchased
upon exercise of the Option or to pledge them as collateral for a loan and
promptly deliver to the Company the amount of sale or loan proceeds
necessary to pay such purchase price or (vi) in any other form of valid
consideration, as permitted by the Committee in its discretion. If any
portion of the purchase
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price or a note given at the time of exercise is paid in shares of Common
Stock, those shares shall be valued at the then Fair Market Value.
1.12 ACCELERATION IN CERTAIN EVENTS. The Committee may accelerate the
exercisability of any Option in whole or in part at any time. Notwithstanding
the provisions of any Option Agreement, the following provisions shall apply:
(a) MERGERS, CONSOLIDATION, ETC. In the event that the Company
shall, pursuant to action by the Board, at any time enter into an
agreement whereby the Company will merge into, consolidate with, or sell
or otherwise transfer all or substantially all of its assets to another
corporation and provision is not made pursuant to the terms of such
transaction for the assumption by the surviving, resulting, or acquiring
corporation of outstanding Options, or for the substitution of new Options
with substantially equivalent benefit therefor, each outstanding Option
shall become fully (100%) vested. The Committee shall advise each
Optionee, in writing, of the manner and terms under which such fully
vested Options shall be exercised.
(b) CHANGE IN CONTROL. Anything contained herein to the contrary
notwithstanding, (1) an Optionee shall become fully (100%) vested in each
of his or her Options upon the occurrence of a change in control (as
defined below) or a threatened change in control (as determined by the
Committee in its sole discretion); and (2) no Option held by an Optionee
at the time a change in control or threatened change in control occurs or
at any time thereafter shall terminate for any reason before the end of
the Option's express term. For purposes of this section, "change in
control" means one or more of the following events:
(i) Any person within the meaning of Section 13(d) and 14(d) of the
Exchange Act, other than the Company (including its subsidiaries and
affiliates), has become the beneficial owner, within the meaning of Rule
13d-3 under the Exchange Act, of 33% or more of the combined voting power
of the Company's then outstanding Common Stock or equivalent in voting
power of any class or classes of the Company's outstanding securities
ordinarily entitled to vote in elections of directors ("voting
securities"); or
(ii) Shares representing 33% or more of the combined voting power of
the Company's voting securities are purchased pursuant to a tender offer
or exchange offer (other than an offer by the Company or its subsidiaries
or affiliates); or
(iii) As a result of, or in connection with, any tender offer or
exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions (a
"Transaction"), the persons who were Directors of the Company before the
Transaction shall cease to constitute a majority of the Board of the
Company or of any successor to the Company; or
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(iv) Following the Effective Date, the Company is merged or
consolidated with another corporation and as a result of such merger or
consolidation less than 40% of the outstanding voting securities of the
surviving or resulting corporation shall then be owned in the aggregate by
the former shareholders of the Company, other than (A) any party to such
merger or consolidation, or (B) any affiliates of any such party; or
(v) The Company transfers more than 50% of its assets, or the last
of a series of transfers results in the transfer of more than 50% of the
assets of the Company, to another entity that is not wholly-owned by the
Company. For purposes of this subsection (v), the determination of what
constitutes 50% of the assets of the Company shall be made by the
Committee, as constituted immediately prior to the events that would
constitute a change of control if 50% of the Company's assets were
transferred in connection with such events, in its sole discretion.
1.13 WRITTEN NOTICE REQUIRED. Any Option shall be deemed to be exercised
for purposes of the Plan when written notice of exercise has been received by
the Company at its principal office from the person entitled to exercise the
Option and payment for the Plan Shares with respect to which the Option is
exercised has been received by the Company in accordance with SECTION 1.11.
1.14 COMPLIANCE WITH SECURITIES LAWS. Plan Shares shall not be issued with
respect to any Option or any Restricted Stock Award unless the issuance and
delivery of the Plan Shares (and the exercise of an Option, if applicable) shall
comply with all relevant provisions of state and federal law (including without
limitation (i) the Securities Act and the rules and regulations promulgated
thereunder, and (ii) the requirements of any stock exchange upon which the Plan
Shares may then be listed) and shall be further subject to the approval of
counsel for the Company with respect to such compliance. The Committee may also
require a Participant to furnish evidence satisfactory to the Company, including
without limitation a written and signed representation letter and consent to be
bound by any transfer restrictions imposed by law, legend, condition, or
otherwise, that the Plan Shares are being acquired only for investment and
without any present intention to sell or distribute the shares in violation of
any state or federal law, rule, or regulation. Further, each Participant shall
consent to the imposition of a legend on the certificate representing the Plan
Shares issued pursuant to the exercise of an Option or a Restricted Stock Award
restricting their transfer as required by law or this section.
1.15 EMPLOYMENT OR SERVICE OF OPTIONEE. Nothing in the Plan or in any
Award granted hereunder shall confer upon any Employee any right to continued
employment by the Company or any of its Subsidiaries or limit in any way the
right of the Company or any Subsidiary at any time to terminate or alter the
terms of that employment. Nothing in the Plan or in any Award granted hereunder
shall confer upon any Nonemployee Director or Advisor any right to continued
service as a Nonemployee Director or Advisor of the Company or any of its
Subsidiaries or limit in any way the right of the Company or any Subsidiary at
any time to terminate or alter the terms of that service.
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1.16 RIGHTS OF OPTIONEES UPON TERMINATION OF EMPLOYMENT OR SERVICE. In the
event an Optionee ceases to be an Employee, Nonemployee Director, Advisor, or
Orthodontist for any reason other than death, Retirement, Permanent Disability,
for Cause or upon providing certain required notice of termination prior to an
annual anniversary of an Employee's employment agreement with the Company, (i)
the Committee shall have the ability to accelerate the vesting of the Optionee's
Option, in its sole discretion, and (ii) such Optionee's Option shall be
exercisable (to the extent exercisable on the date of termination of employment
or rendition of services, or, if the vesting of such Option has been
accelerated, to the extent exercisable following such acceleration) at any time
within three months after the date of termination of employment or rendition of
services, unless by its terms the Option expires earlier or unless, with respect
to a Nonqualified Stock Option, the Committee agrees, in its sole discretion, to
further extend the term of such Nonqualified Stock Option. In the event an
Optionee ceases to serve as an Employee, Nonemployee Director, Advisor, or
Orthodontist due to death, Permanent Disability, Retirement, for Cause or upon
providing certain required notice of termination prior to an annual anniversary
of an Employee's employment agreement with the Company, an Optionee's Options
may be exercised as follows:
(a) DEATH. Except as otherwise limited by the Committee at the of
the grant of an Option, if an Optionee dies while serving as an Employee,
Nonemployee Director, Advisor, or Orthodontist or within three months
after ceasing to be an Employee, Nonemployee Director, Advisor, or
Orthodontist his Option shall become fully exercisable on the date of his
death and shall expire 12 months thereafter, unless by its terms it
expires sooner or unless, with respect to a Nonqualified Stock Option, the
Committee agrees, in its sole discretion, to further extend the term of
such Nonqualified Stock Option. During such period, the Option may be
fully exercised, to the extent that it remains unexercised on the date of
death, by the Optionee's personal representative or by the distributees to
whom the Optionee's rights under the Option shall pass by will or by the
laws of descent and distribution.
(b) RETIREMENT. If an Optionee ceases to serve as an Employee or
Nonemployee Director as a result of Retirement, (i) the Committee shall
have the ability to accelerate the vesting of the Optionee's Option, in
its sole discretion, and (ii) such Optionee's Option shall be exercisable
(to the extent exercisable on the effective date of such Retirement or, if
the vesting of such Option has been accelerated, to the extent exercisable
following such acceleration) at any time within three months after the
effective date of such Retirement, unless by its terms the Option expires
earlier or unless, with respect to a Nonqualified Stock Option (other than
an Option granted pursuant to SECTION 4.5), the Committee agrees, in its
sole discretion, to further extend the term of such Nonqualified Stock
Option.
(c) DISABILITY. If an Optionee ceases to serve as an Employee,
Nonemployee Director, Advisor, or Orthodontist as a result of Permanent
Disability, the Optionee's Option shall become fully exercisable and shall
expire 12 months thereafter, unless by its terms it expires sooner or,
unless, with respect to a Nonqualified Stock Option (other than an Option
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granted pursuant to SECTION 4.5), the Committee agrees, in its sole
discretion, to extend the term of such Nonqualified Stock Option.
(d) CAUSE. If an Optionee ceases to be employed by the Company or a
Subsidiary or ceases to serve as a Nonemployee Director, Advisor, or
Orthodontist because the Optionee's relationship with the Company or a
Subsidiary is terminated for Cause, the Optionee's Options shall
automatically expire on the date of such termination. If any facts that
would constitute Cause for termination or removal of an Optionee are
discovered after the Optionee's relationship with the Company has ended,
any Options then held by the Optionee may be immediately terminated by the
Committee. Notwithstanding the foregoing, if an Optionee is an Employee
employed pursuant to a written employment agreement with the Company or a
Subsidiary, the Optionee's relationship with the Company or a Subsidiary
shall be deemed terminated for Cause for purposes of the Plan only if the
Optionee is considered under the circumstances to have been terminated
"for cause" for purposes of such written agreement or the Optionee
voluntarily ceases to be an Employee in breach of such Optionee's
employment agreement with the Company or a Subsidiary.
(e) NOTICE. If an Optionee's employment agreement with the Company
or a Subsidiary is terminated by either the Company, a Subsidiary, or the
Optionee by providing certain required notices of termination prior to an
annual anniversary of such Optionee's employment agreement, the Options
that are vested as of the date of termination shall remain exercisable for
a period of twelve months (three months if Incentive Stock Options) after
the date of termination and shall expire at the end of such twelve-month
period (three-month period if Incentive Stock Options).
1.17 TRANSFERABILITY OF OPTIONS. Except as may be agreed upon by the
Committee in accordance with the following paragraph, Options shall not be
transferable other than by will or the laws of descent and distribution or, with
respect to Nonqualified Stock Options, pursuant to the terms of a qualified
domestic relations order as defined by the Code or Title I of ERISA, or the
rules thereunder, and, with respect to Incentive Stock Options, may be exercised
during the lifetime of an Optionee only by that Optionee or by his legally
authorized representative. The designation by an Optionee of a beneficiary shall
not constitute a transfer of the Option. The Committee may, in its discretion,
provide in an Option Agreement that Nonqualified Stock Options granted hereunder
may be transferred by the Optionee to members of his immediate family, trusts
for the benefit of such immediate family members and partnerships in which such
immediate family members are the only partners.
1.18 INFORMATION TO PARTICIPANTS. The Company shall furnish to each
Participant a copy of the annual report, proxy statements and all other reports
sent to the Company's shareholders. Upon written request, the Company shall
furnish to each Participant a copy of its most recent Form 10-K Annual Report
and each quarterly report to shareholders issued since the end of the Company's
most recent fiscal year.
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ARTICLE II
ADMINISTRATION
2.1 COMMITTEE. Subject to SECTION 2.2, the Plan shall be administered by a
Committee of not fewer than two members of the Board. Each member of the
Committee shall be a "Non-Employee Director" within the meaning of Rule 16b-3
under the Exchange Act. Moreover, in the event any Awards granted hereunder are
intended to qualify as performance-based compensation under Section 162(m) of
the Code, all members of the Committee shall be "outside directors" within the
meaning of Section 162(m) of the Code and the regulations thereunder. Subject to
the provisions of the Plan, the Committee shall have the sole discretion and
authority to determine from time to time the Employees, Non-Employee Directors,
Advisors, and Orthodontists to whom Awards shall be granted and the number of
Plan Shares subject to each Award, to interpret the Plan, to prescribe, amend
and rescind any rules and regulations necessary or appropriate for the
administration of the Plan, to determine and interpret the details and
provisions of each Award Agreement, to modify or amend any Award Agreement or
waive any conditions or restrictions applicable to any Awards (or the exercise
thereof), and to make all other determinations necessary or advisable for the
administration of the Plan.
2.2 APPOINTMENT OF COMMITTEE. The Committee shall be appointed by the
Board; provided that the Board may remove any Committee member, with or without
cause.
2.3 MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. A majority of the members of
the Committee shall constitute a quorum, and any action taken by a majority
present at a meeting at which a quorum is present or any action taken without a
meeting evidenced by a writing executed by all members of the Committee shall
constitute the action of the Committee. Meetings of the Committee may take place
by telephone conference call.
2.4 COMPANY ASSISTANCE. The Company shall supply full and timely
information to the Committee on all matters relating to Employees, Nonemployee
Directors, Advisors, and Orthodontists, their employment, death, Retirement,
Permanent Disability, or other termination of employment or other relationship
with the Company, and such other pertinent facts as the Committee may require.
The Company shall furnish the Committee with such clerical and other assistance
as is necessary in the performance of its duties.
2.5 EXCULPATION OF COMMITTEE. No member of the Committee shall be
personally liable for, and the Company shall indemnify all members of the
Committee and hold them harmless against, any claims resulting directly or
indirectly from any action or inaction by the Committee pursuant to the Plan,
including without limitation any determination by the Committee regarding
whether a "change in control" (within the meaning of SECTION 1.12) is threatened
or any failure by the Committee to consider such a determination.
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ARTICLE III
INCENTIVE STOCK OPTIONS
3.1 TERMS AND CONDITIONS. The terms and conditions of Options granted
under this Article may differ from one another as the Committee shall, in its
discretion, determine, as long as all Options granted under this Article satisfy
the requirements of this Article.
3.2 DURATION OF OPTIONS. Each Option granted pursuant to this Article and
all rights thereunder shall expire on the date determined by the Committee, but
in no event shall any Option granted under this Article expire earlier than one
year or later than 10 years after the date on which the Option is granted. In
addition, each Option shall be subject to early termination as provided
elsewhere in the Plan.
3.3 PURCHASE PRICE. The purchase price for Plan Shares acquired pursuant
to the exercise, in whole or in part, of any Option granted under this Article
shall not be less than the Fair Market Value of the Plan Shares at the time of
the grant of the Option; provided, however, in the event of the grant of any
Option to an individual who, at the time the Option is granted, owns shares of
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any Subsidiary or affiliate thereof within the
meaning of Section 422 of the Code, the purchase price for the Plan Shares
subject to that Option must be at least 110% of the Fair Market Value of those
Plan Shares at the time the Option is granted and the Option must not be
exercisable after the expiration of five years from the date of its grant.
3.4 MAXIMUM AMOUNT OF OPTIONS FIRST EXERCISABLE IN ANY CALENDAR YEAR. The
aggregate Fair Market Value of Plan Shares (determined at the time the Option is
granted) with respect to which Options issued under this Article are exercisable
for the first time by any Employee during any calendar year under all incentive
stock option plans of the Company and its Subsidiaries and affiliates shall not
exceed $100,000. Any portion of an Option granted under the Plan in excess of
the foregoing limit shall be considered granted pursuant to ARTICLE IV.
3.5 INDIVIDUAL OPTION AGREEMENTS. Each Employee receiving Options pursuant
to this Article shall be required to enter into a written Option Agreement with
the Company. In such Option Agreement, the Employee shall agree to be bound by
the terms and conditions of the Plan, the Options made pursuant hereto, and such
other matters as the Committee deems appropriate.
ARTICLE IV
NONQUALIFIED STOCK OPTIONS
4.1 OPTION TERMS AND CONDITIONS. Subject to SECTION 4.5, the terms and
conditions of Options granted under this Article may differ from one another as
the Committee shall, in its discretion, determine as long as all Options granted
under this Article satisfy the requirements of this Article.
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4.2 DURATION OF OPTIONS. Each Option granted pursuant to this Article and
all rights thereunder shall expire on the date determined by the Committee. In
addition, each Option shall be subject to early termination as provided
elsewhere in the Plan.
4.3 PURCHASE PRICE. The purchase price for the Plan Shares acquired
pursuant to the exercise, in whole or in part, of any Option granted under this
Article shall not be less than the Fair Market Value of the Plan Shares at the
time of the grant of the Option.
4.4 INDIVIDUAL OPTION AGREEMENTS. Each Optionee receiving Options pursuant
to this Article shall be required to enter into a written Option Agreement with
the Company. In such Option Agreement, the Optionee shall agree to be bound by
the terms and conditions of the Plan, the Options made pursuant hereto, and such
other matters as the Committee deems appropriate.
4.5 AUTOMATIC GRANTS TO NONEMPLOYEE DIRECTORS. Each Nonemployee Director
shall automatically be granted a Nonqualified Stock Option to purchase 10,000
shares of Common Stock either (i) upon initial election or appointment to the
Board or (ii) if the Nonemployee Director is serving on the Board on the date
the Plan is approved by the Company's stockholders, on the date the Plan is so
approved. Each Nonemployee Director will receive a Nonqualified Stock Option to
purchase 5,000 shares of Common Stock on the date of each annual meeting of
stockholders of the Company subsequent to his initial election as a director.
The purchase price for Plan Shares acquired pursuant to the exercise, in whole
or in part, of any Option received by Nonemployee Directors shall be the Fair
Market Value of the Plan Shares on the date of grant of such Option. One half of
each Option shall become exercisable on the first anniversary of the date of
grant of such Option and the remaining one half of each Option shall become
exercisable on the second anniversary of the date of grant. Each Option shall
expire on the day prior to the tenth anniversary of the date of grant of such
Option, unless otherwise specified herein. Nonemployee Directors shall not be
eligible to receive any other benefits or grants under the Plan other than as
provided in this Section.
ARTICLE V
RESTRICTED STOCK
5.1 GRANT OF RESTRICTED STOCK AWARDS. The Committee may, in its sole
discretion, grant Restricted Stock Awards in accordance with the terms and
conditions set forth in the Plan. Each Restricted Stock Agreement may contain
such additional terms and conditions, not inconsistent with the terms of the
Plan, as are determined by the Committee in its sole discretion.
5.2. TERMS AND CONDITIONS. Each Restricted Stock Award confers upon the
recipient thereof the right to receive a specified number of shares of Common
Stock in accordance with the terms and conditions of each Participant's
Restricted Stock Agreement. The general terms and conditions of a Restricted
Stock Award will be as follows:
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(a) Any shares of Common Stock awarded hereunder to a Participant
will be restricted for a period of time to be determined by the Committee
for each Participant at the time of the Award, which period shall be not
more than ten years. The restrictions will prohibit the sale, assignment,
transfer, pledge or other encumbrance of such shares, and will provide for
possible reversion thereof to the Company in accordance with subparagraph
(b) during the period of restriction.
(b) All Restricted Stock awarded under the Plan to a Participant
will be forfeited and returned to the Company in the event the
Participant's employment or service with the Company or a subsidiary
thereof is terminated prior to the expiration of the period of
restriction, unless the Participant's termination of employment or service
is due to his death, Permanent Disability or Retirement or unless the
Committee, in its sole discretion, waives the restrictions established in
accordance with subparagraph (a) with respect to any or all of the shares
of Restricted Stock.
(c) In the event of a Participant's death or Permanent Disability,
the restrictions established in accordance with subparagraph (a) will
lapse with respect to all Restricted Stock awarded to the Participant
prior to any such event, and the shares of Common Stock involved will
cease to be Restricted Stock and will no longer be subject to forfeiture
to the Company pursuant to subparagraph (b).
(d) In the event of a Participant's Retirement, the restrictions
established in accordance with subparagraph (a) will continue to apply
unless the Committee in its sole discretion shortens the restriction
period.
(e) Stock certificates issued with respect to Restricted Stock
Awards will be registered in the name of the Participant, but will be
delivered by him to the Company together with a stock power endorsed in
blank. Each such certificate will bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
FORFEITURE, RESTRICTIONS ON TRANSFER AND CERTAIN OTHER TERMS AND
CONDITIONS SET FORTH IN THE APPLE ORTHODONTIX, INC. 1996 STOCK
COMPENSATION PLAN AND THE AGREEMENT BETWEEN THE REGISTERED OWNER OF
THE SHARES REPRESENTED BY THIS CERTIFICATE AND APPLE ORTHODONTIX,
INC. ENTERED INTO PURSUANT TO SUCH PLAN."
From the time of grant of the Restricted Stock Award, the
Participant will be entitled to exercise all rights (including dividend
and voting rights) with respect to the shares represented by such
certificate, subject to forfeiture of such voting rights and the Common
Stock as provided in subparagraph (b).
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(f) Upon the lapse of a restriction period as determined pursuant to
subparagraph (a), the Company will return the stock certificates
representing the shares with respect to which the restriction has lapsed
to the Participant or his legal representative, and pursuant to the
instruction of the Participant or his legal representative will issue a
certificate for such shares that does not bear the legend set forth in
subparagraph (e).
(g) Any other securities or assets (other than ordinary cash
dividends) that are received by a Participant with respect to Restricted
Stock awarded to him, which is still subject to restrictions established
in accordance with subparagraph (a), will be subject to the same
restrictions and will be delivered by the Participant to the Company as
provided in subparagraph (e).
5.3. NOTICE TO COMPANY OF SECTION 83(B) ELECTION. Any Participant who
exercises an election under Section 83(b) of the Code to have his receipt of
shares of Restricted Stock taxed currently, without regard to restrictions, must
give notice to the Company of such election immediately upon making such
election. Such an election must be made within 30 days after the effective date
of issuance and cannot be revoked except with the consent of the Internal
Revenue Service.
ARTICLE VI
TERMINATION, AMENDMENT, AND ADJUSTMENT
6.1 TERMINATION AND AMENDMENT. The Plan shall terminate on December 15,
2006. No Award shall be granted under the Plan after that date of termination.
Subject to the limitations contained in this Section, the Committee may at any
time amend or revise the terms of the Plan, including the form and substance of
the Award Agreements to be used in connection herewith; provided that no
amendment or revision may be made without the approval of the shareholders of
the Company if such approval is required under the Code, Rule 16b-3, or any
other applicable law or rule. No amendment, suspension, or termination of the
Plan shall, without the consent of the individual who has received an Award
hereunder, alter or impair any of that individual's rights or obligations under
any Award granted under the Plan prior to that amendment, suspension, or
termination.
6.2 ADJUSTMENTS. If the outstanding Common Stock is increased, decreased,
changed into, or exchanged for a different number or kind of shares or
securities through merger, consolidation, combination, exchange of shares, other
reorganization, recapitalization, reclassification, stock dividend, stock split,
or reverse stock split, an appropriate and proportionate adjustment shall be
made in the maximum number and kind of Plan Shares as to which Awards may be
granted under the Plan. A corresponding adjustment changing the number or kind
of shares allocated to unexercised Options or portions thereof and outstanding
Restricted Stock Awards, which shall have been granted prior to any such change,
shall likewise be made. Any such adjustment in
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outstanding Options shall be made without change in the aggregate purchase price
applicable to the unexercised portion of the Options, but with a corresponding
adjustment in the price for each share covered by the Options. The foregoing
adjustments and the manner of application of the foregoing provisions shall be
determined solely by the Committee, and any such adjustment may provide for the
elimination of fractional share interests.
ARTICLE VII
MISCELLANEOUS
7.1 OTHER COMPENSATION PLANS. The adoption of the Plan shall not affect
any other stock option or incentive or other compensation plans in effect for
the Company or any Subsidiary or affiliate of the Company, nor shall the Plan
preclude the Company or any Subsidiary or affiliate thereof from establishing
any other forms of incentive or other compensation plans.
7.2 PLAN BINDING ON SUCCESSORS. The Plan shall be binding upon the
successors and assigns of the Company and any Subsidiary or affiliate of the
Company that adopts the Plan.
7.3 NUMBER AND GENDER. Whenever used herein, nouns in the singular shall
include the plural where appropriate, and the masculine pronoun shall include
the feminine gender.
7.4 HEADINGS. Headings of articles and sections hereof are inserted for
convenience of reference and constitute no part of the Plan.
ARTICLE VIII
DEFINITIONS
As used herein with initial capital letters, the following terms have the
meanings hereinafter set forth unless the context clearly indicates to the
contrary:
8.1 "ADVISOR" means any individual performing substantial BONA FIDE
services for the Company or any Subsidiary of the Company that has adopted the
Plan who is not an Employee or a Director.
8.2 "AWARD" means a grant of Options under Article III or IV of the Plan
or a Restricted Stock Award under Article V of the Plan.
8.3 "AWARD AGREEMENT" means an Option Agreement or a Restricted Stock
Agreement.
8.4 "BOARD" means the Board of Directors of the Company.
8.5 "CAUSE" means conviction of a crime involving moral turpitude or a
crime providing for a term of imprisonment in a federal or state penitentiary;
failure or refusal to follow reasonable
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instructions of the Board; failure or refusal to comply with the reasonable
policies, standards and regulations of the Company, which from time to time may
be established; failure or refusal to faithfully and diligently perform the
usual customary duties of his employment or service; acting in an
unprofessional, unethical, immoral or fraudulent manner; acting in a manner
which discredits or is detrimental to the reputation, character and standing of
Company or a Subsidiary; or the commission of any other act that causes or
reasonably may be expected to cause substantial injury to the Company.
8.6 "CODE" means the Internal Revenue Code of 1986, as amended.
8.7 "COMMITTEE" means the Committee appointed in accordance with SECTION
2.2.
8.8 "COMMON STOCK" means the Class A Common Stock, par value $0.001 per
share, of the Company or, in the event that the outstanding shares of such
Common Stock are hereafter changed into or exchanged for shares of a different
stock or security of the Company or some other corporation, such other stock or
security.
8.9 "COMPANY" means Apple Orthodontix, Inc., a Delaware corporation.
8.10 "DIRECTOR" means a member of the Board.
8.11 "EFFECTIVE DATE" means December 15, 1996.
8.12 "EMPLOYEE" means an employee (as defined in Section 3401(c) of the
Code and the regulations thereunder) of the Company or of any Subsidiary of the
Company that adopts the Plan, including Officers.
8.13 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
8.14 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
8.15 "FAIR MARKET VALUE" means such value as determined by the Committee
on the basis of such factors as it deems appropriate; provided that if the
Common Stock is traded on a national securities exchange or transactions in the
Common Stock are quoted on the Nasdaq National Market System, such value as
shall be determined by the Committee on the basis of the reported sales prices
for the Common Stock on the date for which such determination is relevant, as
reported on the national securities exchange or the Nasdaq National Market
System, as the case may be. If the Common Stock is not listed and traded upon a
recognized securities exchange or on the Nasdaq National Market System, the
Committee shall make a determination of Fair Market Value on a reasonable basis,
which may include the mean between the closing bid and asked quotations for such
stock on the date for which such determination is relevant (as reported by a
recognized stock quotation service) or, in the event that there shall be no bid
or asked quotations on the date for which such determination is relevant, then
on the basis of the mean between the closing bid and asked
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quotations on the date nearest preceding the date for which such determination
is relevant for which such bid and asked quotations were available.
8.16 "INCENTIVE STOCK OPTION" means an Option granted pursuant to ARTICLE
III.
8.17 "NONEMPLOYEE DIRECTOR" means a member of the Board who is not an
Officer or Employee; provided that, as used in SECTION 2.1, the term
"Non-Employee Director" shall have the meaning provided in that section.
8.18 "NONQUALIFIED STOCK OPTION" means an Option granted pursuant to
ARTICLE IV.
8.19 "OFFICER" means an officer of the Company or any Subsidiary of the
Company.
8.20 "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option.
8.21 "OPTIONEE" means an Employee, Nonemployee Director, Advisor, or
Orthodontist to whom an Option has been granted hereunder.
8.22 "OPTION AGREEMENT" means an agreement between the Company and an
Optionee with respect to one or more Options.
8.23 "ORTHODONTIST" means an orthodontist who has a practice management
contract with the Company or a Subsidiary, or who is a member of or otherwise
associated with an orthodontic practice that has a practice management contract
with the Company or a Subsidiary.
8.24 "PARTICIPANT" means a person to whom an Award has been granted.
8.25 "PERMANENT DISABILITY" has the same meaning as that provided in
Section 22(e)(3) of the Code.
8.26 "PLAN" means the Apple Orthodontix, Inc. 1996 Stock Compensation
Plan, as amended from time to time.
8.27 "PLAN SHARES" means shares of Common Stock issuable pursuant to the
Plan.
8.28 "RESTRICTED STOCK" or "RESTRICTED STOCK AWARD" means an award of
Common Stock granted under Article V.
8.29 "RESTRICTED STOCK AGREEMENT" means a written agreement between the
Company and a Participant with respect to a Restricted Stock Award.
8.30 "RETIREMENT" occurs when an Employee or Director terminates his
relationship with the Company or a Subsidiary on or after the date he (a) turns
65 years old or (b) turns 55 years old
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and has completed 10 years of service with the Company or a Subsidiary as
otherwise determined by the Board.
8.31 "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor rule.
8.32 "SECURITIES ACT" means the Securities Act of 1933, as amended.
8.33 "SUBSIDIARY" means a subsidiary corporation of the Company, as
defined in Section 424(f) of the Code.
8.34 "TAX DATE" means the date on which the amount of tax to be withheld
is determined.
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