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FNR SYSTEMS, INC.
1998 STOCK PLAN
August 5, 1998
SECTION 1. Purpose.
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The purpose of the 1998 Stock Plan (the "Plan") is to secure for FNR
Systems, Inc., (the "Company"), its parent (if any) and any subsidiaries of the
Company (collectively the "Related Corporations") the benefits arising from
capital stock ownership by those employees, directors, officers and consultants
of the Company and any Related Corporations who will be responsible for the
Company's future growth and continued success.
The Plan will provide a means whereby (a) employees of the Company and any
Related Corporations may purchase stock in the Company pursuant to options which
qualify as "incentive stock options" ("Incentive Stock Options") under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), (b)
directors, employees and consultants of the Company and any Related Corporations
may purchase stock in the Company pursuant to options granted hereunder which do
not qualify as Incentive Stock Options ("Non-Qualified Option" or "Non-Qualified
Options"); (c) directors, employees and consultants of the Company and any
Related Corporations may be awarded stock in the Company ("Awards"); (d)
directors, employees and consultants of the Company and any Related Corporations
may receive stock appreciation rights ("SARs"); and (e) directors, employees and
consultants of the Company and any Related Corporations may make direct
purchases of stock in the Company ("Purchases"). Both Incentive Stock Options
and Non-Qualified Options are referred to hereafter individually as an "Option"
and collectively as "Options." As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation" as those
terms are defined in Section 424 of the Code. Options, Awards, SARs and
Purchases are referred to hereafter individually as a "Plan Benefit" and
collectively as "Plan Benefits." Directors, employees and consultants of the
Company and any Related Corporations are referred to herein as "Participants."
SECTION 2. Administration.
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2.1 Board of Directors and the Committee. The Plan will be administered
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by the Board of Directors of the Company whose construction and interpretation
of the terms and provisions hereof shall be final and conclusive. Any director
to whom a Plan Benefit is awarded shall be ineligible to vote upon his or her
Plan Benefit, but Plan Benefits may be granted any such director by a vote of
the remainder of the directors, except as limited below. The Board of Directors
may in its sole discretion grant Options, issue shares upon exercise of such
Options, grant Awards, grant SARs and approve Purchases, all as provided in the
Plan. The Board of Directors shall have authority, subject to the express
provisions of the Plan, to construe the Plan and its related agreements, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective Option, Award, SAR and
Purchase
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agreements, which need not be identical, and to make all other determinations in
the judgment of the Board of Directors necessary or desirable for the
administration of the Plan. The Board of Directors may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any related
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such expediency. No
director shall be liable for any action or determination made in good faith. The
Board of Directors may delegate any or all of its powers under the Plan to a
Compensation Committee or other Committee (the "Committee") appointed by the
Board of Directors consisting of at least two members of the Board of Directors.
If the Company has a class of stock registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), then members
of the Committee shall at all times be: (i) "outside directors" as such term is
defined in Treas. Reg. (S) 1.162-27(e)(3) (or any successor regulation); and
(ii) "non-employee directors" within the meaning of Rule 16b-3 (or any successor
rule) under the Exchange Act, as such terms are interpreted from time to time.
If the Committee is so appointed, all references to the Board of Directors
herein shall mean and relate to such Committee, unless the context otherwise
requires.
2.2 Compliance with Section 162(m) of the Code. Section 162(m) of the
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Code, added by the Omnibus Budget Reconciliation Act of 1993, generally limits
the tax deductibility to publicly held companies of compensation in excess of
$1,000,000 paid to certain "covered employees" ("Covered Employees"). If the
Company is subject to Section 162(m) of the Code, it is the Company's intention
to preserve the deductibility of such compensation to the extent it is
reasonably practicable and to the extent it is consistent with the Company's
compensation objectives. For purposes of this Plan, Covered Employees of the
Company shall be those employees of the Company described in Section 162(m)(3)
of the Code.
SECTION 3. Eligibility.
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3.1 Incentive Stock Options. Participants who are employees shall be
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eligible to receive Incentive Stock Options pursuant to the Plan; provided that
no person shall be granted any Incentive Stock Option under the Plan who, at the
time such Option is granted, owns, directly or indirectly, Common Stock of the
Company possessing more than l0% of the total combined voting power of all
classes of stock of the Company or of its Related Corporations, unless the
requirements of Section 6.6(b) hereof are satisfied. In determining whether this
10% threshold has been reached, the stock attribution rules of Section 424(d) of
the Code shall apply. Directors who are not regular employees are not eligible
to receive Incentive Stock Options.
3.2 Non-Qualified Options, Awards, SARs and Purchases. Non-Qualified
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Options, Awards, SARs and authorizations to make Purchases may be granted to any
Participant.
3.3 Generally. The Board of Directors may take into consideration a
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Participant's individual circumstances in determining whether to grant an
Incentive Stock Option, a Non-Qualified Option, an Award or an SAR or to approve
a Purchase. Granting of any Option, Award or SAR or approval of any Purchase for
any individual shall neither entitle that individual to, nor disqualify that
individual from, participation in any other grant of Plan Benefits.
SECTION 4. Stock Subject to Plan.
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Subject to adjustment as provided in Sections 10 and 11 hereof, the stock to
be offered under the Plan shall consist of shares of the Company's Common Stock,
par value $.01 per share, and the maximum number of shares of stock which will
be reserved for issuance, and in respect of which Plan Benefits may be granted
pursuant to the provisions of the Plan, shall not exceed in the aggregate Four
Hundred Twenty Thousand (420,000) shares. Such shares may be authorized and
unissued shares or may be treasury shares. If an Option or SAR granted hereunder
shall expire or terminate for any reason without having been exercised in full,
or if the Company shall reacquire any unvested shares issued pursuant to Awards
or Purchases, the unpurchased shares subject thereto and any unvested shares so
reacquired shall again be available for subsequent grants of Plan Benefits under
the Plan. Stock issued pursuant to the Plan may be subject to such restrictions
on transfer, repurchase rights or other restrictions as shall be determined by
the Board of Directors.
SECTION 5. Granting of Options, Awards and SARs and Approvals of Purchases.
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Options, Awards and SARs may be granted and Purchases may be approved under
the Plan at any time after August 5, 1998 and prior to August 5, 2008. The date
of grant of an Option, Award or SAR or approval of a Purchase under the Plan
will be the date specified by the Board of Directors at the time the Board of
Directors grants such Option, Award or SAR or approves such Purchase; provided,
however, that such date shall not be prior to the date on which the Board of
Directors takes such action. The Board of Directors shall have the right, with
the consent of a Participant, to convert an Incentive Stock Option granted under
the Plan to a Non-Qualified Option pursuant to Section 6.7. Plan Benefits may be
granted alone or in addition to other grants under the Plan
SECTION 6. Special Provisions Applicable to Options and SARs.
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6.1 Purchase Price and Shares Subject to Options and SARs.
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(a) The purchase price per share of stock deliverable upon the exercise of
an Option shall be determined by the Board of Directors, provided, however,
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that (i) in the case of an Incentive Stock Option, the exercise price shall
not be less than l00% of the fair market value of such stock on the day the
option is granted (except as modified in Section 6.6(b) hereof), and (ii)
in the case of a Non-Qualified Option, the exercise price shall not be less
than 50% of the fair market value of such stock on the day such Option is
granted.
(b) Options granted under the Plan may provide for the payment of the
exercise price by delivery of (i) cash or a check payable to the order of
the Company in an amount equal to the exercise price of such Options, (ii)
shares of Common Stock of the Company owned by the Participant having a
fair market value equal in amount to the exercise price of the Options
being exercised, or (iii) any combination of (i) and (ii). The fair market
value of any shares of the Company's Common Stock which may be delivered
upon exercise of an Option shall be determined by the Board of Directors.
The Board of Directors may also permit Participants, either on a selective
or aggregate basis, to simultaneously exercise Options and sell the shares
of Common Stock thereby acquired, pursuant to a brokerage or similar
arrangement, approved in advance by the Board of Directors, and to use the
proceeds from such sale as payment of the purchase price of such shares.
(c) If, at the time an Option is granted under the Plan, the Company's
Common Stock is publicly traded, "fair market value" shall be determined as
of the last business day for which the prices or quotes discussed in this
sentence are available prior to the date such Option is granted (the
"Determination Date") and shall mean (i) the average (on the Determination
Date) of the high and low prices of the Common Stock on the principal
national securities exchange on which the Common Stock is traded, if such
Common Stock is then traded on a national securities exchange; (ii) the
last reported sale price (on the Determination Date) of the Common Stock on
the Nasdaq
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Stock Market if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on the Determination Date) by an established quotation
service for over-the-counter securities, if the Common Stock is not
reported on the Nasdaq Stock Market. However, if the Common Stock is not
publicly traded at the time an Option is granted under the Plan, "fair
market value" shall be deemed to be the fair value of the Common Stock as
determined by the Board of Directors after taking into consideration all
factors which it deems appropriate, including, without limitation, recent
sale and offer prices of the Common Stock in private transactions
negotiated at arm's length.
(d) If the Company is subject to Section 162(m) of the Code, the maximum
number of shares with respect to which Options or SARs may be granted to
any employee, including any cancellations or repricings which may occur,
shall be limited to 7,000 shares in any calendar year.
6.2 Duration of Options and SARs. Subject to Section 6.6(b) hereof, each
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Option and SAR and all rights thereunder shall be expressed to expire on such
date as the Board of Directors may determine, but in no event later than ten
years from the day on which the Option or SAR is granted and shall be subject to
earlier termination as provided herein.
6.3 Exercise of Options and SARs.
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(a) Subject to Section 6.6(b) hereof, each Option and SAR granted under
the Plan shall be exercisable at such time or times and during such period
as shall be set forth in the instrument evidencing such Option or SAR. To
the extent that an Option or SAR is not exercised by a Participant when it
becomes initially exercisable, it shall not expire but shall be carried
forward and shall be exercisable, on a cumulative basis, until the
expiration of the exercise period. No partial exercise may be for less than
ten (l0) full shares of Common Stock (or its equivalent).
(b) The Board of Directors shall have the right to accelerate the date of
exercise of any installments of any Option or SAR; provided that the Board
of Directors shall not accelerate the exercise date of any installment of
any Option granted to a Participant as an Incentive Stock Option (and not
previously converted into a Non-Qualified Option pursuant to Section 6.7)
if such acceleration would violate the annual vesting limitation contained
in Section 422(d)(1) of the Code, which provides generally that the
aggregate fair market value (determined at the time the Option is granted)
of the stock with respect to which Incentive Stock Options granted to any
Participant are exercisable for the first time by such Participant during
any calendar year (under all plans of the Company and any Related
Corporations) shall not exceed $100,000.
6.4 Nontransferability of Options and SARs.
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No Option or SAR granted under the Plan shall be assignable or transferable by
the Participant, either voluntarily or by operation of law, except by will or
the laws of descent and distribution or, with respect to Non-Qualified Options
and SARs, pursuant to a qualified domestic relations order as defined by the
Code or Title I of the Employee Retirement Income Security Act ("ERISA") or the
rules promulgated thereunder or unless the Participant's non-qualified stock
option agreement granting such options (the "Non-Qualified Stock Option
Agreement") or the Participant's SAR agreement granting such SARs (the "SAR
Agreement") provides otherwise. Unless otherwise provided by the Non-Qualified
Stock Option Agreement or the SAR Agreement, during the life of the Participant,
the Option or SAR shall be exercisable only by him or her. If any Participant
should attempt to dispose of or encumber his or her Options or SARs, other than
in accordance with the applicable terms of a Non-Qualified Stock Option
Agreement or SAR Agreement, his or her interest in such Options or SARs shall
terminate.
6.5 Effect of Termination of Employment or Death.
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(a) If a Participant ceases to be employed by the Company or a Related
Corporation for any reason, including retirement but other than death, any
Option or SAR granted to such Participant under the Plan shall immediately
terminate; provided, however, that any portion of such Option or SAR which
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was otherwise exercisable on the date of termination of the Participant's
employment may be exercised within the three-month period following the
date on which the Participant ceased to be so employed, but in no event
after the expiration of the exercise period. Any such exercise may be made
only to the extent of the number of shares subject to the Option or SAR
which were purchasable on the date of such termination of employment. If
the Participant dies during such three-month period, the Option or SAR
shall be exercisable by the Participant's personal representatives, heirs
or legatees to the same extent and during the same period that the
Participant could have exercised the Option or SAR on the date of his or
her death.
(b) If the Participant dies while an employee of the Company or any
Related Corporation, any Option or SAR granted to such Participant under
the Plan shall be exercisable by the Participant's personal
representatives, heirs or legatees, for the purchase of that number of
shares and to the same extent that the Participant could have exercised the
Option or SAR on the date of his or her death. The Option or SAR or any
unexercised portion thereof shall terminate unless so exercised prior to
the earlier of the expiration of six months from the date of such death or
the expiration of the exercise period.
6.6 Designation of Incentive Stock Options; Limitations.
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Options granted under the Plan which are intended to be Incentive Stock
Options qualifying under Section 422 of the Code shall be designated as
Incentive Stock Options and shall be subject to the following additional terms
and conditions:
(a) Dollar Limitation. The aggregate fair market value (determined at the
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time the option is granted) of the Common Stock for which Incentive Stock
Options are exercisable for the first time during any calendar year by any
person under the Plan (and all other incentive stock option plans of the
Company and any Related Corporations) shall not exceed $100,000. In the
event that Section 422(d)(1) of the Code is amended to alter the limitation
set forth therein so that following such amendment such limitation shall
differ from the limitation set forth in this Section 6.6(a), the limitation
of this Section 6.6(a) shall be automatically adjusted accordingly.
(b) l0% Stockholder. If any employee to whom an Incentive Stock Option is
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to granted pursuant to the provisions of the Plan is on the date of grant
the owner of stock possessing more than l0% of the total combined voting
power of all classes of stock of the Company or any Related Corporations,
then the following special provisions shall be applicable to the Incentive
Stock Option granted to such individual:
(i) The option price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the fair market
value of one share of Common Stock on the date of grant; and
(ii) The option exercise period shall not exceed five years from the
date of grant.
In determining whether the 10% threshold has been reached, the stock
attribution rules of Section 424(d) of the Code shall apply.
(c) Except as modified by the preceding provisions of this Section 6.6,
all of the provisions of the Plan shall be applicable to Incentive Stock
Options granted hereunder.
6.7 Conversion of Incentive Stock Options into Non-Qualified Options;
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Termination of Incentive Stock Options. The Board of Directors, at the written
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request of any Participant, may in its discretion take such actions as may be
necessary to convert such Participant's Incentive Stock Options (or
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any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time prior
to the expiration of such Incentive Stock Options, regardless of whether the
Participant is an employee of the Company or a Related Corporation 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 Board of
Directors (with the consent of the Participant) may impose such conditions on
the exercise of the resulting Non-Qualified Options as the Board of Directors in
its discretion may determine, provided that such conditions shall not be
inconsistent with the Plan. Nothing in the Plan shall be deemed to give any
Participant the right to have such Participant's Incentive Stock Options
converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Board of Directors takes appropriate action. The Board of
Directors, with the consent of the Participant, may also terminate any portion
of any Incentive Stock Option that has not been exercised at the time of such
termination.
6.8 Stock Appreciation Rights. An SAR is the right to receive, without
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payment, an amount equal to the excess, if any, of the fair market value of a
share of Common Stock on the date of exercise over the grant price, which amount
will be multiplied by the number of shares with respect to which the SARs shall
have been exercised. The grant of SARs under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the express terms of the Plan, as the Board of
Directors shall deem desirable:
(a) Grant. SARs may be granted in tandem with, in addition to or
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completely independent of any Plan Benefit.
(b) Grant Price. The grant price of an SAR may be the fair market value of
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a share of Common Stock on the date of grant or such other price as the
Board of Directors may determine.
(c) Exercise. An SAR may be exercised by a Participant in accordance with
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procedures established by the Board of Directors or as otherwise provided
in any agreement evidencing any SARs. The Board of Directors may provide
that an SAR shall be automatically exercised on one or more specified
dates.
(d) Form of Payment. Payment upon exercise of an SAR may be made in cash,
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in shares of Common Stock or any combination thereof, as the Board of
Directors shall determine.
(e) Fair Market Value. Fair market value shall be determined in accordance
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with Section 6.1(c) with the "Determination Date" being determined by
reference to the date of grant or the date of exercise of an SAR, as
applicable.
6.9 Rights as a Stockholder.
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The holder of an Option or SAR shall have no rights as a stockholder with
respect to any shares covered by the Option or SAR until the date of issue of a
stock certificate to him or her for such shares. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or other rights
for which the record date is prior to the date such stock certificate is issued.
6.10 Special Provisions Applicable to Non-Qualified Options and SARs
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Granted to Covered Employees.
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If the Company is subject to Section 162(m) of the Code, in order for the full
value of Non-Qualified Options or SARs granted to Covered Employees to be
deductible by the Company for federal income tax purposes, the Company may
intend for such Non-Qualified Options or SARs to be treated as "qualified
performance-based compensation" as described in Treas. Reg. (S)1.162-27(e) (or
any successor regulation). In such case, Non-Qualified Options or SARs granted
to Covered Employees shall be subject to the following additional requirements:
(a) such options and rights shall be granted only by the Committee; and
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(b) the exercise price of such Options and the grant price of such SARs
granted shall in no event be less than the fair market value of the Common
Stock as of the date of grant of such Options or SARs.
SECTION 7. Special Provisions Applicable to Awards
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7.1 Grants of Awards. The Board of Directors may grant a Participant an
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Award subject to such terms and conditions as the Board of Directors deems
appropriate, including, without limitation, restrictions on the pledging, sale,
assignment, transfer or other disposition of such shares and the requirement
that the Participant forfeit all or a portion of such shares back to the Company
upon termination of employment.
7.2 Conditions. Approvals of Awards may be subject to the following
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conditions:
(a) Each Participant receiving an Award shall enter into an
agreement (a "Stock Restriction Agreement") with the Company, if
required by the Board of Directors, in a form specified by the Board
of Directors agreeing to such terms and conditions of the Award as the
Board of Directors deems appropriate.
(b) Shares issued and transferred to a Participant pursuant to an
Award may, if required by the Board of Directors, be deposited with
the Treasurer or other officer of the Company designated by the Board
of Directors to be held until the lapse of the restrictions upon such
shares, and each Participant shall execute and deliver to the Company
stock powers enabling the Company to exercise its rights hereunder.
(c) Certificates for shares issued pursuant to an Award shall, if
the Company shall deem it advisable, bear a legend to the effect that
they are issued subject to specified restrictions.
(d) Certificates representing the shares issued pursuant to an
Award shall be registered in the name of the Participant and shall be
owned by such Participant. Such Participant shall be the holder of
record of such shares for all purposes, including voting and receipt
of dividends paid with respect to such shares.
7.3 Nontransferability. Shares issued pursuant to an Award may not be
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sold, assigned, transferred, alienated, commuted, anticipated, or otherwise
disposed of (except, subject to the provisions of such Participant's Stock
Restriction Agreement, by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or Title
I of ERISA or the rules promulgated thereunder), or pledged or hypothecated as
collateral for a loan or as security for the performance of any obligation, or
be otherwise encumbered, and are not subject to attachment, garnishment,
execution or other legal or equitable process, prior to the lapse of
restrictions on such shares, and any attempt at action in contravention of this
Section shall be null and void. If any Participant should attempt to dispose of
or encumber his or her shares issued pursuant to an Award prior to the lapse of
the restrictions imposed on such shares, his or her interest in such shares
shall terminate.
7.4 Effect of Termination of Employment or Death on Awards. If, prior to
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the lapse of restrictions applicable to Awards, the Participant ceases to be an
employee of the Company or the Related Companies for any reason, Awards to such
Participant, as to which restrictions have not lapsed, shall be forfeited to the
Company, effective on the date of the Participant's termination of employment.
The Board of Directors shall have the sole power to decide in each case to what
extent leaves of absence shall be deemed a termination of employment.
SECTION 8. Special Provisions Applicable to Purchases.
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All approvals of Purchases which provide that the Company has a right to
repurchase the shares subject to such Purchase (the "Restricted Shares") shall
be subject to the terms and conditions set forth in
<PAGE>
the related agreement (the "Stock Purchase Restriction Agreement") approved by
the Board of Directors, and shall be subject to the other terms and conditions
of this Section 8.
8.1 Conditions. All approvals of Purchases shall be subject to the
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following conditions:
(a) Prior to the issuance and transfer of Restricted Shares, the
Participant shall pay to the Company the purchase price (the "Purchase
Price") of the Restricted Shares in cash or in such other manner as shall
be as approved by the Board of Directors.
(b) Restricted Shares issued and transferred to a Participant may, if
required by the Board of Directors, be deposited with the Treasurer or
other officer of the Company designated by the Board of Directors to be
held until the lapse of the restrictions upon such Restricted Shares, and
each Participant shall execute and deliver to the Company stock powers
enabling the Company to exercise its rights hereunder.
(c) Certificates for Restricted Shares shall, if the Company shall deem it
advisable, bear a legend to the effect that they are issued subject to
specified restrictions.
(d) Certificates representing the Restricted Shares shall be registered in
the name of the Participant and shall be owned by such Participant. Such
Participant shall be the holder of record of such Restricted Shares for all
purposes, including voting and receipt of dividends paid with respect to
such Restricted Shares.
8.2 Nontransferability. A Participant's Restricted Shares may not be sold,
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assigned, transferred, alienated, commuted, anticipated, or otherwise disposed
of (except, subject to the provisions of such Participant's Stock Purchase
Restriction Agreement by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or Title
I of ERISA or the rules promulgated thereunder), or pledged or hypothecated as
collateral for a loan or as security for the performance of any obligation, or
be otherwise encumbered, and are not subject to attachment, garnishment,
execution or other legal or equitable process, prior to the lapse of
restrictions on such Restricted Shares, and any attempt at action in
contravention of this Section shall be null and void. If any Participant should
attempt to dispose of or encumber his or her Restricted Shares prior to the
lapse of the restrictions imposed on such Restricted Shares, his or her interest
in the Restricted Shares awarded to him or her shall terminate.
SECTION 9. Requirements of Law.
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9.1 Violations of Law. No shares shall be issued and delivered upon
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exercise of any Option or the making of any Award or Purchase or the payment of
any SAR unless and until, in the opinion of counsel for the Company, any
applicable registration requirements of the Securities Act of l933, as amended,
any applicable listing requirements of any national securities exchange on which
stock of the same class is then listed, and any other requirements of law or of
any regulatory bodies having jurisdiction over such issuance and delivery, shall
have been fully complied with. Each Participant may, by accepting Plan Benefits,
be required to represent and agree in writing, for himself or herself and for
his or her transferees by will or the laws of descent and distribution, that the
stock acquired by him, her or them is being acquired for investment. The
requirement for any such representation may be waived at any time by the Board
of Directors.
9.2 Compliance with Rule 16b-3. If the Company has a class of stock
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registered pursuant to Section 12 of the Exchange Act, the intent of this Plan
is to qualify for the exemption provided by Rule 16b-3 under the Exchange Act.
To the extent any provision of the Plan does not comply with the requirements of
Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and
deemed advisable by the Board of Directors and shall not affect the validity of
the Plan. In the event Rule 16b-3 is
<PAGE>
revised or replaced, the Board of Directors may exercise discretion to modify
this Plan in any respect necessary to satisfy the requirements of the revised
exemption or its replacement.
SECTION 10. Recapitalization.
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In the event that dividends are payable in Common Stock of the Company or
in the event there are splits, sub-divisions or combinations of shares of Common
Stock of the Company, the number of shares available under the Plan shall be
increased or decreased proportionately, as the case may be, and the number of
shares deliverable upon the exercise thereafter of any Option previously granted
shall be increased or decreased proportionately, as the case may be, without
change in the aggregate purchase price, and the number of shares to which
granted SARs relate shall be increased or decreased proportionately, as the case
may be, and the grant price of such SARs shall be decreased or increased
proportionately, as the case may be.
SECTION 11. Reorganization.
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In case the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, or, in case the property or stock
of the Company is acquired by any other corporation, or in case of a
reorganization or liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company hereunder, shall, as to outstanding Plan Benefits, either (i)
make appropriate provision for the protection of any such outstanding Plan
Benefits by the substitution on an equitable basis of appropriate stock of the
Company or of the merged, consolidated or otherwise reorganized corporation
which will be issuable in respect of the shares of Common Stock of the Company,
provided only that the excess of the aggregate fair market value of the shares
subject to the Plan Benefits immediately after such substitution over the
purchase price thereof is not more than the excess of the aggregate fair market
value of the shares subject to such Plan Benefits immediately before such
substitution over the purchase price thereof, (ii) upon written notice to the
Participants, provide that all unexercised Plan Benefits must be exercised
within a specified number of days of the date of such notice or such Plan
Benefits will be terminated, or (iii) upon written notice to the Participants,
provide that the Company or the merged, consolidated or otherwise reorganized
corporation shall have the right, upon the effective date of any such merger,
consolidation, sale of assets or reorganization, to purchase all Plan Benefits
held by each Participant and unexercised as of that date at an amount equal to
the aggregate fair market value on such date of the shares subject to the Plan
Benefits held by such Participant over the aggregate purchase price therefor,
such amount to be paid in cash or, if stock of the merged, consolidated or
otherwise reorganized corporation is issuable in respect of the shares of the
Common Stock of the Company, then, in the discretion of the Board of Directors,
in stock of such merged, consolidated or otherwise reorganized corporation equal
in fair market value to the aforesaid amount. In any such case the Board of
Directors shall, in good faith, determine fair market value and may, in its
discretion, advance the lapse of any waiting or installment periods and exercise
dates.
SECTION 12. No Special Employment Rights.
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Nothing contained in the Plan or in any Plan Benefit documentation shall
confer upon any Participant receiving a grant of any Plan Benefit any right with
respect to the continuation of his or her employment by the Company (or any
Related Corporation) or interfere in any way with the right of the Company (or
any Related Corporation), subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to
increase or decrease the compensation of the Participant from the rate in
existence at the time of the grant of any Plan Benefit. Whether an authorized
<PAGE>
leave of absence, or absence in military or government service, shall constitute
termination of employment shall be determined by the Board of Directors.
SECTION 13. Amendment of the Plan.
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The Board of Directors may at any time and from time to time modify or
amend the Plan in any respect. The termination or any modification or amendment
of the Plan shall not, without the consent of a recipient of any Plan Benefit,
affect his or her rights under any Plan Benefit previously granted. With the
consent of the affected Participant, the Board of Directors may amend
outstanding agreements relating to any Plan Benefit, in a manner not
inconsistent with the Plan. The Board of Directors hereby reserves the right to
amend or modify the terms and provisions of the Plan and of any outstanding
Options to the extent necessary to qualify any or all Options under the Plan for
such favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code, provided, however, that the consent of an optionee is required if such
amendment or modification would cause unfavorable income tax treatment for such
optionee.
SECTION 14. Withholding.
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The Company's obligation to deliver shares of stock upon the exercise of
any Option or the granting of an Award or to make payment upon any exercise of
any SAR or making of a Purchase shall be subject to the satisfaction by the
Participant of all applicable federal, state and local income and employment tax
withholding requirements.
SECTION 15. Effective Date and Duration of the Plan.
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15.1 Effective Date. The Plan shall become effective when adopted by the
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Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's stockholders. If such stockholder approval is not obtained within l2
months after the date of the Board's adoption of the Plan, then any Incentive
Stock Options previously granted under the Plan shall terminate and no further
Incentive Stock Options shall be granted. Subject to such limitation, Options
may be granted under the Plan at any time after the effective date and before
the date fixed herein for termination of the Plan.
15.2 Duration. Unless sooner terminated in accordance with Section l1
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hereof, the Plan shall terminate upon the earlier of (i) the tenth anniversary
of the date of its adoption by the Board of Directors or (ii) the date on which
all shares available for issuance under the Plan shall have been issued pursuant
to any Awards or Purchases or the exercise or cancellation of Options and SARs
granted hereunder. If the date of termination is determined under (i) above,
then Plan Benefits outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such Plan
Benefits.
SECTION 16. Governing Law.
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The Plan and all actions taken thereunder shall be governed by the
laws of the State of Connecticut.
