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EXHIBIT 99.1
ALLOY ONLINE, INC.
RESTATED 1997 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN
1. DEFINITIONS. Unless otherwise specified or unless the context
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otherwise requires, the following terms, as used in this Alloy Online, Inc.
Restated 1997 Employee, Director and Consultant Stock Option Plan, have the
following meanings:
Administrator means the Board of Directors, unless it has delegated power
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to act on its behalf to the Committee, in which case the Administrator means the
Committee.
Affiliate means a corporation which, for purposes of Section 424 of the
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Code, is a parent or subsidiary of the Company, direct or indirect.
Board of Directors means the Board of Directors of the Company.
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Code means the United States Internal Revenue Code of 1986, as amended.
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Committee means the committee of the Board of Directors to which the
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Board of Directors has delegated power to act under or pursuant to the
provisions of the Plan.
Common Stock means shares of the Company's common stock, par value $.01
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per share.
Company means Alloy Online, Inc., a Delaware corporation.
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Disability or Disabled means permanent and total disability as defined in
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Section 22(e)(3) of the Code.
Fair Market Value of a Share of Common Stock means:
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(1) If the Common Stock is listed on a national securities
exchange or traded in the over-the-counter market and sales prices are
regularly reported for the Common Stock, the closing or last price of the
Common Stock on the Composite Tape or other comparable reporting system
for the trading day immediately preceding the applicable date;
(2) If the Common Stock is not traded on a national securities
exchange but is traded on the over-the-counter market, if sales prices
are not regularly reported for the Common Stock for the trading day
referred to in clause (1), and if bid and asked prices for the Common
Stock are regularly reported, the mean between the bid and the asked
price for the Common Stock at the close of trading in the over-the-
counter market for the trading day on which Common Stock was traded
immediately preceding the applicable date; and
(3) If the Common Stock is neither listed on a national
securities exchange nor traded in the over-the-counter market, such value
as the Administrator, in good faith, shall determine.
ISO means an option meant to qualify as an incentive stock option under
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Section 422 of the Code.
Key Employee means an employee of the Company or of an Affiliate
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(including, without limitation, an employee who is also serving as an officer or
director of the Company or of an Affiliate), designated by the Administrator to
be eligible to be granted one or more Options under the Plan.
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Non-Qualified Option means an option which is not intended to qualify
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as an ISO.
Option means an ISO or Non-Qualified Option granted under the Plan.
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Option Agreement means an agreement between the Company and a
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Participant delivered pursuant to the Plan, in such form as the Administrator
shall approve.
Participant means a Key Employee, director or consultant to whom one or
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more Options are granted under the Plan. As used herein, "Participant" shall
include "Participant's Survivors" where the context requires.
Plan means this Alloy Online, Inc. Restated 1997 Employee, Director
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and Consultant Stock Option Plan.
Shares means shares of the Common Stock as to which Options have been
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or may be granted under the Plan or any shares of capital stock into which the
Shares are changed or for which they are exchanged within the provisions of
Paragraph 3 of the Plan. The Shares issued upon exercise of Options granted
under the Plan may be authorized and unissued shares or shares held by the
Company in its treasury, or both.
Survivors means a deceased Participant's legal representatives and/or
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any person or persons who acquired the Participant's rights to an Option by will
or by the laws of descent and distribution.
2. PURPOSES OF THE PLAN. The Plan is intended to encourage ownership of
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Shares by Key Employees and directors of and certain consultants to the Company
in order to attract such people, to induce them to work for the benefit of the
Company or of an Affiliate and to provide additional incentive for them to
promote the success of the Company or of an Affiliate. The Plan provides for the
granting of ISOs and Non-Qualified Options.
3. SHARES SUBJECT TO THE PLAN. The number of Shares which may be issued
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from time to time pursuant to this Plan shall be 8,000,000 or the equivalent of
such number of Shares after the Administrator, in its sole discretion, has
interpreted the effect of any stock split, stock dividend, combination,
recapitalization or similar transaction in accordance with Paragraph 16 of the
Plan. If an Option ceases to be "outstanding", in whole or in part, the Shares
which were subject to such Option shall be available for the granting of other
Options under the Plan. Any Option shall be treated as "outstanding" until such
Option is exercised in full, or terminates or expires under the provisions of
the Plan, or by agreement of the parties to the pertinent Option Agreement.
4. ADMINISTRATION OF THE PLAN. The Administrator of the Plan will be
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the Board of Directors, except to the extent the Board of Directors delegates
its authority to the Committee, in which case the Committee shall be the
Administrator. Subject to the provisions of the Plan, the Administrator is
authorized to:
a. Interpret the provisions of the Plan or of any Option or Option
Agreement and to make all rules and determinations which it deems
necessary or advisable for the administration of the Plan;
b. Determine which employees of the Company or of an Affiliate
shall be designated as Key Employees and which of the Key Employees,
directors and consultants shall be granted Options;
c. Determine the number of Shares for which an Option or Options
shall be granted, provided, however, that in no event shall Options to
purchase more than 500,000 Shares be granted to any Participant in any
fiscal year of the Company; and
d. Specify the terms and conditions upon which an Option or
Options may be granted;
provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Section 422 of the Code of those Options which are designated as
ISOs. Subject to the foregoing, the interpretation and construction by the
Administrator of any
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provisions of the Plan or of any Option granted under it shall be final, unless
otherwise determined by the Board of Directors, if the Administrator is the
Committee.
5. ELIGIBILITY FOR PARTICIPATION. The Administrator will, in its sole
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discretion, name the Participants in the Plan, provided, however, that each
Participant must be a Key Employee, director or consultant of the Company or of
an Affiliate at the time an Option is granted. Notwithstanding the foregoing,
the Administrator may authorize the grant of an Option to a person not then an
employee, director or consultant of the Company or of an Affiliate, provided,
however, that the actual grant of such Option shall be conditioned upon such
person becoming eligible to become a Participant at or prior to the time of the
delivery of the Option Agreement evidencing such Option. ISOs may be granted
only to Key Employees. Non-Qualified Options may be granted to any Key Employee,
director or consultant of the Company or an Affiliate. The granting of any
Option to any individual shall neither entitle that individual to, nor
disqualify him or her from, participation in any other grant of Options.
6. TERMS AND CONDITIONS OF OPTIONS. Each Option shall be set forth in
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writing in an Option Agreement, duly executed by the Company and, to the extent
required by law or requested by the Company, by the Participant. The
Administrator may provide that Options be granted subject to such terms and
conditions, consistent with the terms and conditions specifically required under
this Plan, as the Administrator may deem appropriate including, without
limitation, subsequent approval by the shareholders of the Company of this Plan
or any amendments thereto.
A. Non-Qualified Options: Each Option intended to be a Non-
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Qualified Option shall be subject to the terms and conditions which the
Administrator determines to be appropriate and in the best interest of
the Company, subject to the following minimum standards for any such
Non-Qualified Option:
a. Option Price: Each Option Agreement shall state the option
price (per share) of the Shares covered by each Option, which option
price shall be determined by the Administrator but shall not be less
than the par value per share of Common Stock.
b. Each Option Agreement shall state the number of Shares to
which it pertains;
c. Each Option Agreement shall state the date or dates on which
it first is exercisable and the date after which it may no longer be
exercised, and may provide that the Option rights accrue or become
exercisable in installments over a period of months or years, or
upon the occurrence of certain conditions or the attainment of
stated goals or events; and
d. Exercise of any Option may be conditioned upon the
Participant's execution of a Share purchase agreement in form
satisfactory to the Administrator providing for certain protections
for the Company and its other shareholders, including requirements
that:
i. The Participant's or the Participant's Survivors' right
to sell or transfer the Shares may be restricted; and
ii. The Participant or the Participant's Survivors may be
required to execute letters of investment intent and must also
acknowledge that the Shares will bear legends noting any
applicable restrictions.
e. Directors Grants: Each director of the Company who is not an
employee of the Company or any Affiliate, who is first elected or
appointed to the Board of Directors after the date on which the
initial underwritten public offering of the Company's Common Stock
is consummated, upon such election or appointment and upon every
fourth anniversary thereof provided that on such dates such director
has been in the continued and uninterrupted service of the Company
as a director since his or her election or appointment and is a
director of the
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Company and is not an employee of the Company at such times, shall
be granted a Non-Qualified Option to purchase 40,000 Shares. Any
non-employee director serving in office on the date on which the
initial underwritten public offering of the Company's Common Stock
is consummated, who has been a member of the Board of Directors
prior to such date shall be granted on such date and upon every
fourth anniversary thereof, a Non-Qualified Option to purchase
40,000 Shares, provided that on such date such director has been in
the continued and uninterrupted service of the Company as a director
since his or her election or appointment and is a director of the
Company and is not an employee of the Company at such time. If any
non-employee director should cease to be a director and thereafter
shall be elected or appointed to the Board of Directors, upon such
election or appointment and upon every fourth anniversary thereof
provided that on such dates such director has been in the continued
and uninterrupted service of the Company as a director since his or
her election or appointment and is a director of the Company and is
not an employee of the Company at such times, shall be granted a
Non-Qualified Option to purchase 40,000 Shares. Each such Option
shall (i) have an exercise price equal to the Fair Market Value (per
share) of the Shares on the date of grant of the Option, (ii) have a
term of ten (10) years, and (iii) shall become cumulatively
exercisable in four (4) equal annual installments of twenty five
percent (25%) each, upon completion of one full year of service on
the Board of directors after the date of grant, and continuing on
each of the next three (3) full years of service thereafter. Any
director entitled to receive an Option grant under this subparagraph
may elect to decline the Option.
Except as otherwise provided in the pertinent Option
Agreement, if a director who received Options pursuant to this
subparagraph (e):
i. Ceases to be a member of the Board of Directors
for any reason other than death or Disability, any then
unexercised Options granted to such director may be exercised
by the director within a period of ninety (90) days after the
date the director ceases to be a member of the Board of
Directors, but only to the extent of the number of shares with
respect to which the Options are exercisable on the date the
director ceases to be a member of the Board of Directors, and
in no event later than the expiration date of the Option; or
ii. Ceases to be a member of the Board of Directors
of the Company by reason of his or her death or Disability,
any then unexercised Options granted to such director may be
exercised by the director (or by the director's personal
representative, or director's Survivors in the event of death)
within a period of one hundred eighty (180) days after the
date the director ceases to be a member of the Board of
Directors, but only to the extent of the number of Shares with
respect to which the Options are exercisable on the date the
director ceases to be a member of the Board of Directors, and
in no event later than the expiration date of the Option.
B. ISOs: Each Option intended to be an ISO shall be issued only
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to a Key Employee and be subject to the following terms and conditions,
with such additional restrictions or changes as the Administrator
determines are appropriate but not in conflict with Section 422 of the
Code and relevant regulations and rulings of the Internal Revenue
Service:
a. Minimum standards: The ISO shall meet the minimum
standards required of Non-Qualified Options, as described in
Paragraph 6A above, except clause a and clause e thereunder.
b. Option Price: Immediately before the Option is granted, if
the Participant owns, directly or by reason of the applicable
attribution rules in Section 424(d) of the Code:
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i. Ten percent (10%) or less of the total combined
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voting power of all classes of share capital of the Company or an
Affiliate, the Option price per share of the Shares covered by each
Option shall not be less than one hundred percent (100%) of the Fair
Market Value per share of the Shares on the date of the grant of the
Option.
ii. More than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or an Affiliate,
the Option price per share of the Shares covered by each Option
shall not be less than one hundred ten percent (110%) of the said
Fair Market Value on the date of grant.
c. Term of Option: For Participants who own
i. Ten percent (10%) or less of the total combined voting power
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of all classes of share capital of the Company or an Affiliate, each
Option shall terminate not more than ten (10) years from the date of
the grant or at such earlier time as the Option Agreement may
provide.
ii. More than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or an Affiliate, each
Option shall terminate not more than five (5) years from the date of
the grant or at such earlier time as the Option Agreement may
provide.
d. Limitation on Yearly Exercise: The Option Agreements shall
restrict the amount of Options which may be exercisable in any calendar
year (under this or any other ISO plan of the Company or an Affiliate)
so that the aggregate Fair Market Value (determined at the time each
ISO is granted) of the stock with respect to which ISOs are exercisable
for the first time by the Participant in any calendar year does not
exceed one hundred thousand dollars ($100,000), provided that this
subparagraph (d) shall have no force or effect if its inclusion in the
Plan is not necessary for Options issued as ISOs to qualify as ISOs
pursuant to Section 422(d) of the Code.
7. EXERCISE OF OPTIONS AND ISSUE OF SHARES. An Option (or any part or
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installment thereof) shall be exercised by giving written notice to the Company
at its principal executive office address, together with provision for payment
of the full purchase price in accordance with this Paragraph for the Shares as
to which the Option is being exercised, and upon compliance with any other
condition(s) set forth in the Option Agreement. Such written notice shall be
signed by the person exercising the Option, shall state the number of Shares
with respect to which the Option is being exercised and shall contain any
representation required by the Plan or the Option Agreement. Payment of the
purchase price for the Shares as to which such Option is being exercised shall
be made (a) in United States dollars in cash or by check, or (b) at the
discretion of the Administrator, through delivery of shares of Common Stock
having a Fair Market Value equal as of the date of the exercise to the cash
exercise price of the Option, or (c) at the discretion of the Administrator, by
having the Company retain from the shares otherwise issuable upon exercise of
the Option, a number of shares having a Fair Market Value equal as of the date
of exercise to the exercise price of the Option, or (d) at the discretion of the
Administrator, by delivery of the grantee's personal recourse note bearing
interest payable not less than annually at no less than 100% of the applicable
Federal rate, as defined in Section 1274(d) of the Code, or (e) at the
discretion of the Administrator, in accordance with a cashless exercise program
established with a securities brokerage firm, and approved by the Administrator,
or (f) at the discretion of the Administrator, by any combination of (a), (b),
(c), (d) and (e) above. Notwithstanding the foregoing, the Administrator shall
accept only such payment on exercise of an ISO as is permitted by Section 422 of
the Code.
The Company shall then reasonably promptly deliver the Shares as to
which such Option was exercised to the Participant (or to the Participant's
Survivors, as the case may be). In determining what constitutes "reasonably
promptly", it is expressly understood that the delivery of the Shares may be
delayed by the Company in order to
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comply with any law or regulation (including, without limitation, state
securities or "blue sky" laws) which requires the Company to take any action
with respect to the Shares prior to their issuance. The Shares shall, upon
delivery, be evidenced by an appropriate certificate or certificates for fully
paid, non-assessable Shares.
The Administrator shall have the right to accelerate the date of
exercise of any installment of any Option; provided that the Administrator shall
not accelerate the exercise date of any installment of any Option granted to any
Key Employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Paragraph 19) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in Paragraph
6.B.d.
The Administrator may, in its discretion, amend any term or condition
of an outstanding Option provided (i) such term or condition as amended is
permitted by the Plan, (ii) any such amendment shall be made only with the
consent of the Participant to whom the Option was granted, or in the event of
the death of the Participant, the Participant's Survivors, if the amendment is
adverse to the Participant, and (iii) any such amendment of any ISO shall be
made only after the Administrator, after consulting the counsel for the Company,
determines whether such amendment would constitute a "modification" of any
Option which is an ISO (as that term is defined in Section 424(h) of the Code)
or would cause any adverse tax consequences for the holder of such ISO.
8. RIGHTS AS A SHAREHOLDER. No Participant to whom an Option has been
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granted shall have rights as a shareholder with respect to any Shares covered by
such Option, except after due exercise of the Option and tender of the full
purchase price for the Shares being purchased pursuant to such exercise and
registration of the Shares in the Company's share register in the name of the
Participant.
9. ASSIGNABILITY AND TRANSFERABILITY OF OPTIONS. By its terms, an
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Option granted to a Participant shall not be transferable by the Participant
other than (i) by will or by the laws of descent and distribution, or (ii) as
otherwise determined by the Administrator and set forth in the applicable Option
Agreement. The designation of a beneficiary of an Option by a Participant shall
not be deemed a transfer prohibited by this Paragraph. Except as provided above,
an Option shall be exercisable, during the Participant's lifetime, only by such
Participant (or by his or her legal representative) and shall not be assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment or similar process. Any
attempted transfer, assignment, pledge, hypothecation or other disposition of
any Option or of any rights granted thereunder contrary to the provisions of
this Plan, or the levy of any attachment or similar process upon an Option,
shall be null and void.
10. EFFECT OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE" OR DEATH OR
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DISABILITY. Except as otherwise provided in the pertinent Option Agreement, in
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the event of a termination of service (whether as an employee, director or
consultant) with the Company or an Affiliate before the Participant has
exercised all Options, the following rules apply:
a. A Participant who ceases to be an employee, director or
consultant of the Company or of an Affiliate (for any reason other than
termination "for cause", Disability, or death for which events there
are special rules in Paragraphs 11, 12, and 13, respectively), may
exercise any Option granted to him or her to the extent that the Option
is exercisable on the date of such termination of service, but only
within such term as the Administrator has designated in the pertinent
Option Agreement.
b. Except as provided in Subparagraph (c) below, or in Paragraph
12 or 13, in no event may an Option Agreement provide, if the Option is
intended to be an ISO, that the time for exercise be later than three
(3) months after the Participant's termination of employment.
c. The provisions of this Paragraph, and not the provisions of
Paragraph 12 or 13, shall apply to a Participant who subsequently
becomes Disabled or dies after the termination of employment, director
status or consultancy, provided, however, in the case of a
Participant's Disability or death within
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three (3) months after the termination of employment, director status
or consultancy, the Participant or the Participant's Survivors may
exercise the Option within one (1) year after the date of the
Participant's termination of employment, but in no event after the date
of expiration of the term of the Option.
d. Notwithstanding anything herein to the contrary, if subsequent
to a Participant's termination of employment, termination of director
status or termination of consultancy, but prior to the exercise of an
Option, the Board of Directors determines that, either prior or
subsequent to the Participant's termination, the Participant engaged in
conduct which would constitute "cause", then such Participant shall
forthwith cease to have any right to exercise any Option.
e. A Participant to whom an Option has been granted under the
Plan who is absent from work with the Company or with an Affiliate
because of temporary disability (any disability other than a permanent
and total Disability as defined in Paragraph 1 hereof), or who is on
leave of absence for any purpose, shall not, during the period of any
such absence, be deemed, by virtue of such absence alone, to have
terminated such Participant's employment, director status or
consultancy with the Company or with an Affiliate, except as the
Administrator may otherwise expressly provide.
f. Except as required by law or as set forth in the pertinent
Option Agreement, Options granted under the Plan shall not be affected
by any change of a Participant's status within or among the Company and
any Affiliates, so long as the Participant continues to be an employee,
director or consultant of the Company or any Affiliate.
11. EFFECT OF TERMINATION OF SERVICE "FOR CAUSE". Except as otherwise
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provided in the pertinent Option Agreement, the following rules apply if the
Participant's service (whether as an employee, director or consultant) with the
Company or an Affiliate is terminated "for cause" prior to the time that all his
or her outstanding Options have been exercised:
a. All outstanding and unexercised Options as of the time the
Participant is notified his or her service is terminated "for cause"
will immediately be forfeited.
b. For purposes of this Plan, "cause" shall include (and is not
limited to) dishonesty with respect to the Company or any Affiliate,
insubordination, substantial malfeasance or non-feasance of duty,
unauthorized disclosure of confidential information, and conduct
substantially prejudicial to the business of the Company or any
Affiliate. The determination of the Administrator as to the existence
of "cause" will be conclusive on the Participant and the Company.
c. "Cause" is not limited to events which have occurred prior to
a Participant's termination of service, nor is it necessary that the
Administrator's finding of "cause" occur prior to termination. If the
Administrator determines, subsequent to a Participant's termination of
service but prior to the exercise of an Option, that either prior or
subsequent to the Participant's termination the Participant engaged in
conduct which would constitute "cause," then the right to exercise any
Option is forfeited.
d. Any definition in an agreement between the Participant and the
Company or an Affiliate, which contains a conflicting definition of
"cause" for termination and which is in effect at the time of such
termination, shall supersede the definition in this Plan with respect
to such Participant.
12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY. Except as
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otherwise provided in the pertinent Option Agreement, a Participant who ceases
to be an employee, director or consultant of the Company or of an Affiliate by
reason of Disability may exercise any Option granted to such Participant:
a. To the extent exercisable but not exercised on the date of
Disability; and
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b. In the event rights to exercise the Option accrue periodically,
to the extent of a pro rata portion of any additional rights as would
have accrued had the Participant not become Disabled prior to the end
of the accrual period which next ends following the date of Disability.
The proration shall be based upon the number of days of such accrual
period prior to the date of Disability.
A Disabled Participant may exercise such rights only within the period
ending one (1) year after the date of the Participant's termination of
employment, directorship or consultancy, as the case may be, notwithstanding
that the Participant might have been able to exercise the Option as to some or
all of the Shares on a later date if the Participant had not become disabled and
had continued to be an employee, director or consultant or, if earlier, within
the originally prescribed term of the Option.
The Administrator shall make the determination both of whether
Disability has occurred and the date of its occurrence (unless a procedure for
such determination is set forth in another agreement between the Company and
such Participant, in which case such procedure shall be used for such
determination). If requested, the Participant shall be examined by a physician
selected or approved by the Administrator, the cost of which examination shall
be paid for by the Company.
13. EFFECT OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT. Except
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as otherwise provided in the pertinent Option Agreement, in the event of the
death of a Participant while the Participant is an employee, director or
consultant of the Company or of an Affiliate, such Option may be exercised by
the Participant's Survivors:
a. To the extent exercisable but not exercised on the date of
death; and
b. In the event rights to exercise the Option accrue periodically,
to the extent of a pro rata portion of any additional rights which
would have accrued had the Participant not died prior to the end of the
accrual period which next ends following the date of death. The
proration shall be based upon the number of days of such accrual period
prior to the Participant's death.
If the Participant's Survivors wish to exercise the Option, they must
take all necessary steps to exercise the Option within one (1) year after the
date of death of such Participant, notwithstanding that the decedent might have
been able to exercise the Option as to some or all of the Shares on a later date
if he or she had not died and had continued to be an employee, director or
consultant or, if earlier, within the originally prescribed term of the Option.
14. PURCHASE FOR INVESTMENT. Unless the offering and sale of the Shares
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to be issued upon the particular exercise of an Option shall have been
effectively registered under the Securities Act of 1933, as now in force or
hereafter amended (the "1933 Act"), the Company shall be under no obligation to
issue the Shares covered by such exercise unless and until the following
conditions have been fulfilled:
a. The person(s) who exercise(s) such Option shall warrant to the
Company, prior to the receipt of such Shares, that such person(s) are
acquiring such Shares for their own respective accounts, for
investment, and not with a view to, or for sale in connection with, the
distribution of any such Shares, in which event the person(s) acquiring
such Shares shall be bound by the provisions of the following legend
which shall be endorsed upon the certificate(s) evidencing their Shares
issued pursuant to such exercise or such grant:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN TAKEN FOR
INVESTMENT AND THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED BY ANY
PERSON, INCLUDING A PLEDGEE, UNLESS (1) EITHER (A) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SHARES SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) THE COMPANY SHALL HAVE
RECEIVED AN OPINION OF COUNSEL
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SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT IS THEN AVAILABLE, AND (2) THERE SHALL HAVE BEEN COMPLIANCE
WITH ALL APPLICABLE STATE SECURITIES LAWS."
b. At the discretion of the Administrator, the Company shall
have received an opinion of its counsel that the Shares may be issued
upon such particular exercise in compliance with the 1933 Act without
registration thereunder.
15. DISSOLUTION OR LIQUIDATION OF THE COMPANY. Upon the dissolution or
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liquidation of the Company, all Options granted under this Plan which as of such
date shall not have been exercised will terminate and become null and void;
provided, however, that if the rights of a Participant or a Participant's
Survivors have not otherwise terminated and expired, the Participant or the
Participant's Survivors will have the right immediately prior to such
dissolution or liquidation to exercise any Option to the extent that the Option
is exercisable as of the date immediately prior to such dissolution or
liquidation.
16. ADJUSTMENTS. Upon the occurrence of any of the following events, a
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Participant's rights with respect to any Option granted to him or her hereunder
which has not previously been exercised in full shall be adjusted as hereinafter
provided, unless otherwise specifically provided in the pertinent Option
Agreement:
A. Stock Dividends and Stock Splits. If (i) the shares of Common
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Stock shall be subdivided or combined into a greater or smaller number
of shares or if the Company shall issue any shares of Common Stock as a
stock dividend on its outstanding Common Stock, or (ii) additional
shares or new or different shares or other securities of the Company or
any other non cash assets are distributed with respect to such shares
of Common Stock, the number of shares of Common Stock deliverable upon
the exercise of such Option may be appropriately increased or decreased
proportionately, and appropriate adjustments may be made in the
purchase price per share to reflect such events. The number of Shares
subject to options to be granted to directors pursuant to Paragraph 6Ae
and the number of shares subject to the limitation in Paragraph 4c
shall also be proportionately adjusted upon the occurrence of such
events.
B. Consolidations or Mergers. If the Company is to be consolidated
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with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise (an
"Acquisition"), the Administrator or the board of directors of any
entity assuming the obligations of the Company hereunder (the
"Successor Board"), shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by
substituting on an equitable basis for the Shares then subject to such
Options either the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Acquisition
or securities of any successor or acquiring entity; or (ii) upon
written notice to the Participants, provide that all Options must be
exercised (either to the extent then exercisable or, at the discretion
of the Administrator, all Options being made fully exercisable for
purposes of this Subparagraph), within a specified number of days of
the date of such notice, at the end of which period the Options shall
terminate; or (iii) terminate all Options in exchange for a cash
payment equal to the excess of the Fair Market Value of the shares
subject to such Options (either to the extent then exercisable or, at
the discretion of the Administrator, all Options being made fully
exercisable for purposes of this Subparagraph) over the exercise price
thereof.
C. Recapitalization or Reorganization. In the event of a
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recapitalization or reorganization of the Company (other than a
transaction described in Subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued with
respect to the outstanding shares of Common Stock, a Participant upon
exercising an Option shall be entitled to receive for the purchase
price paid upon such exercise the securities which would have been
received if such Option had been exercised prior to such
recapitalization or reorganization.
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D. Modification of ISOs. Notwithstanding the foregoing, any
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adjustments made pursuant to Subparagraph A, B or C with respect to
ISOs shall be made only after the Administrator, after consulting with
counsel for the Company, determines whether such adjustments would
constitute a "modification" of such ISOs (as that term is defined in
Section 424(h) of the Code) or would cause any adverse tax consequences
for the holders of such ISOs. If the Administrator determines that such
adjustments made with respect to ISOs would constitute a modification
of such ISOs, it may refrain from making such adjustments, unless the
holder of an ISO specifically requests in writing that such adjustment
be made and such writing indicates that the holder has full knowledge
of the consequences of such "modification" on his or her income tax
treatment with respect to the ISO.
17. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
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issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. Except as expressly provided herein, no adjustments shall be
made for dividends paid in cash or in property (including without limitation,
securities) of the Company.
18. FRACTIONAL SHARES. No fractional shares shall be issued under
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the Plan and the person exercising such right shall receive from the Company
cash in lieu of such fractional shares equal to the Fair Market Value thereof.
19. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.
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The Administrator, at the written request of any Participant, may in its
discretion take such actions as may be necessary to convert such Participant's
ISOs (or any portions thereof) that have not been exercised on the date of
conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the Participant is an employee of the Company
or an Affiliate at the time of such conversion. Such actions may include, but
not be limited to, extending the exercise period or reducing the exercise price
of the appropriate installments of such Options. At the time of such conversion,
the Administrator (with the consent of the Participant) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the
Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any Participant the right to have such Participant's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action. The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such conversion.
20. WITHHOLDING. In the event that any federal, state, or local income
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taxes, employment taxes, Federal Insurance Contributions Act ("F.I.C.A.")
withholdings or other amounts are required by applicable law or governmental
regulation to be withheld from the Participant's salary, wages or other
remuneration in connection with the exercise of an Option or a Disqualifying
Disposition (as defined in Paragraph 21), the Company may withhold from the
Participant's compensation, if any, or may require that the Participant advance
in cash to the Company, or to any Affiliate of the Company which employs or
employed the Participant, the amount of such withholdings unless a different
withholding arrangement, including the use of shares of the Company's Common
Stock or a promissory note, is authorized by the Administrator (and permitted by
law). For purposes hereof, the fair market value of the shares withheld for
purposes of payroll withholding shall be determined in the manner provided in
Paragraph 1 above, as of the most recent practicable date prior to the date of
exercise. If the fair market value of the shares withheld is less than the
amount of payroll withholdings required, the Participant may be required to
advance the difference in cash to the Company or the Affiliate employer. The
Administrator in its discretion may condition the exercise of an Option for less
than the then Fair Market Value on the Participant's payment of such additional
withholding.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each Key Employee
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who receives an ISO must agree to notify the Company in writing immediately
after the Key Employee makes a Disqualifying Disposition of any shares acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is
10
<PAGE>
any disposition (including any sale) of such shares before the later of (a) two
years after the date the Key Employee was granted the ISO, or (b) one year after
the date the Key Employee acquired Shares by exercising the ISO. If the Key
Employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
22. TERMINATION OF THE PLAN. The Plan will terminate on June 30, 2007.
-----------------------
The Plan may be terminated at an earlier date by vote of the shareholders of the
Company, provided, however, that any such earlier termination shall not affect
any Option Agreements executed prior to the effective date of such termination.
23. AMENDMENT OF THE PLAN AND AGREEMENTS. The Plan may be amended by
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the shareholders of the Company. The Plan may also be amended by the
Administrator, including, without limitation, to the extent necessary to qualify
any or all outstanding Options granted under the Plan or Options to be granted
under the Plan for favorable federal income tax treatment (including deferral of
taxation upon exercise) as may be afforded incentive stock options under Section
422 of the Code, and to the extent necessary to qualify the shares issuable upon
exercise of any outstanding Options granted, or Options to be granted, under the
Plan for listing on any national securities exchange or quotation in any
national automated quotation system of securities dealers. Any amendment
approved by the Administrator which the Administrator determines is of a scope
that requires shareholder approval shall be subject to obtaining such
shareholder approval. Any modification or amendment of the Plan shall not,
without the consent of a Participant, adversely affect his or her rights under
an Option previously granted to him or her. With the consent of the Participant
affected, the Administrator may amend outstanding Option Agreements in a manner
which may be adverse to the Participant but which is not inconsistent with the
Plan. In the discretion of the Administrator, outstanding Option Agreements may
be amended by the Administrator in a manner which is not adverse to the
Participant.
24. EMPLOYMENT OR OTHER RELATIONSHIP. Nothing in this Plan or any
--------------------------------
Option Agreement shall be deemed to prevent the Company or an Affiliate from
terminating the employment, consultancy or director status of a Participant, nor
to prevent a Participant from terminating his or her own employment, consultancy
or director status or to give any Participant a right to be retained in
employment or other service by the Company or any Affiliate for any period of
time.
25. GOVERNING LAW. This Plan shall be construed and enforced in
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accordance with the law of the State of Delaware.
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