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EXHIBIT 10.8
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AMENDED AND RESTATED
1997 EMPLOYEE STOCK INCENTIVE PLAN
OF
TELLIUM, INC.
(formerly MWD, Inc.)
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TABLE OF CONTENTS
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ARTICLE I.
Definitions............................................................................ -1-
ARTICLE II.
SHARES SUBJECT TO PLAN................................................................. -5-
2.1. Shares Subject to Plan........................................................ -5-
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2.2. Add-back of Awards............................................................ -5-
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ARTICLE III.
GRANTING OF OPTIONS.................................................................... -6-
3.1. Eligibility................................................................... -6-
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3.2. Disqualification for Stock Ownership.......................................... -6-
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3.3 Qualification of Incentive Stock Options...................................... -6-
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3.4 Granting of Options........................................................... -6-
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ARTICLE IV.
TERMS OF OPTIONS....................................................................... -7-
4.1. Option Agreement.............................................................. -7-
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4.2. Option Price.................................................................. -7-
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4.3. Option Term................................................................... -8-
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4.4. Option Vesting................................................................ -8-
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4.5. Consideration................................................................. -8-
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ARTICLE V.
EXERCISE OF OPTIONS.................................................................... -9-
5.1. Partial Exercise.............................................................. -9-
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5.2. Manner of Exercise............................................................ -9-
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5.3. Conditions to Issuance of Stock Certificates.................................. -10-
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5.4. Rights as Stockholders........................................................ -10-
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5.5. Ownership and Transfer Restrictions........................................... -11-
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ARTICLE VI.
RESTRICTED STOCK....................................................................... -11-
6.1. Restricted Stock.............................................................. -11-
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6.2. Terms and Conditions.......................................................... -12-
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6.3. Agreements.................................................................... -13-
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ARTICLE VII.
ADMINISTRATION......................................................................... -13-
7.1 Compensation Committee........................................................ -13-
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7.2. Duties and Powers of Committee................................................ -13-
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7.3. Majority Rule; Unanimous Written Consent...................................... -13-
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7.4. Compensation; Professional Assistance; Good Faith Actions.................... -14-
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ARTICLE VIII.
MISCELLANEOUS PROVISIONS.............................................................. -14-
8.1. Not Transferable............................................................. -14-
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8.2. Amendment, Suspension or Termination of this Plan............................ -14-
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8.3. Changes in Common Stock or Assets of the Company, Acquisition
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or Liquidation of the Company and Other Corporate Events..................... -15-
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8.4. Approval of Plan by Stockholders............................................. -17-
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8.5. Tax Withholding.............................................................. -18-
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8.6. Loans........................................................................ -18-
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8.7. Forfeiture Provisions........................................................ -18-
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8.8. Limitations Applicable to Performance-Based Compensation..................... -18-
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8.9. Effect of Plan Upon Options and Compensation Plans........................... -18-
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8.10. Compliance with Laws......................................................... -18-
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8.11. Titles....................................................................... -19-
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8.12. Governing Law................................................................ -19-
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THE AMENDED AND RESTATED 1997 EMPLOYEE STOCK INCENTIVE PLAN
OF
TELLIUM, INC.
TELLIUM, INC. (formerly MWD, Inc.), a Delaware corporation (the "Company"),
has adopted the following amendment and restatement of its 1997 Employee Stock
Option Plan of MWD, Inc. (the "Plan"), effective November 16, 2000, for the
benefit of its eligible employees and consultants.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for key Employees and consultants
to further the growth, development and financial success of the Company by
personally benefiting through the ownership of Options (as defined below) to
purchase Common Stock of the Company and/or Restricted Stock (as defined below).
(2) To enable the Company to obtain and retain the services of key
Employees considered essential to the long range success of the Company by
offering them an opportunity to own Options to purchase Common Stock of the
Company and/or Restricted Stock.
This amended and restated plan (a) increases the number of shares issuable
upon exercise of options granted under the Plan to 91,250,000 shares, (b)
provides for the issuance of the Restricted Stock, and (c) makes certain other
changes.
ARTICLE I
Definitions
1.1. General. Wherever the following terms are used in this Plan they shall
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have the meanings specified below, unless the context clearly indicates
otherwise. The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.
1.2. Award. "Award" shall mean an Option or Restricted Stock.
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1.3. Award Limit. "Award Limit" shall mean 1,500,000 shares of Common
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Stock.
1.4. Board. "Board" shall mean the Board of Directors of the Company.
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1.5. Change in Control. "Change in Control" shall mean a change in
-----------------
ownership or control of the Company effected through either of the following
transactions:
(a) any person or related group of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities possessing more than fifty percent (50%) of the total
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combined voting power of the Company's outstanding securities pursuant to a
tender or exchange offer made directly to the Company's stockholders which the
Board does not recommend such stockholders to accept; or
(b) there is a change in the composition of the Board over a period
of thirty-six (36) consecutive months (or less) such that a majority of the
Board members ceases, by reason of one or more proxy contests for the election
of Board members, to be comprised of individuals who either (i) have been Board
members continuously since the beginning of such period or (ii) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board or by
persons who were nominated by such Board members.
1.6. Code. "Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
1.7. Committee. "Committee" shall mean the Compensation Committee of the
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Board, or another committee of the Board, appointed as provided in Section 7.1.
1.8. Common Stock. "Common Stock" shall mean the common stock of the
------------
Company, par value $0.001 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options or other rights to purchase Common Stock.
1.9. Company. "Company" shall mean Tellium, Inc., a Delaware corporation.
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1.10. Corporate Transaction. "Corporate Transaction" shall mean any of
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the following stockholder-approved transactions to which the Company is a party:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated, form a holding company or
effect a similar reorganization as to form whereupon this Plan and all Options
are assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause (a) above; or
(c) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are transferred or
issued to a person or persons different from those who held such securities
immediately prior to such merger.
1.11. Director. "Director" shall mean a member of the Board.
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1.12. Employee. "Employee" shall mean any officer or other employee (as
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defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
1.13. Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
------------
of 1934, as amended.
1.14. Fair Market Value. "Fair Market Value" of a share of Common Stock as
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of a given date shall be (i) the closing price of a share of Common Stock on the
principal exchange on which shares of Common Stock are then trading, if any (or
as reported on any composite index which includes such principal exchange), on
the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (ii) if Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation system,
or if shares were not traded on the trading day previous to such date, then on
the next preceding date on which a trade occurred; or (iii) if Common Stock is
not publicly traded on an exchange and not quoted on NASDAQ or a successor
quotation system, the fair market value of a share of Common Stock as
established by the Committee acting in good faith.
1.15. Grantee. "Grantee" shall mean an Employee to whom an Award has been
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granted under the Plan.
1.16. Incentive Stock Option. "Incentive Stock Option" shall mean an
----------------------
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.
1.17. Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean
--------------------------
an Option which is not designated as an Incentive Stock Option by the Committee.
1.18. Option. "Option" shall mean a stock option granted under Article
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III of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option.
1.19. Optionee. "Optionee" shall mean an Employee granted an Option under
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this Plan.
1.20. Performance Goals. "Performance Goals" shall mean the performance
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goals established by the Committee in connection with the grant of Restricted
Stock. In the case of Qualified Performance-Based Awards, (i) such goals shall
be based on the attainment of specified levels of one or more of the following
measures: return on equity, return on assets, operating income, earnings per
share, net income, total shareholder return, share price, shareholder value
added, cash value added and/or achievement of pre-determined, objectively
defined strategic performance goals and (ii) such Performance Goals shall be set
by the
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Committee within the time period prescribed by Section 162(m) of the Code and
related regulations. Performance Goals may be stated in the alternative or in
combination.
1.21. Plan. "Plan" shall mean The 1997 Amended and Restated Employee Stock
----
Incentive Plan of Tellium, Inc.
1.22. QDRO. "QDRO" shall mean a qualified domestic relations order as
----
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
1.23. Qualified Performance Based Award. "Qualified Performance Based
----------------------------------
Award" shall mean an Award of Restricted Stock designated as such by the
Committee at the time of grant based upon a determination that the Committee
wishes such Award to qualify for the exemption from deductibility imposed by
Section 162(m) of the Code.
1.24. Restricted Stock. "Restricted Stock" shall mean any share of Common
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Stock granted under Article VI of this Plan.
1.25. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the
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Exchange Act, as such Rule may be amended from time to time.
1.26. Subsidiary. "Subsidiary" shall mean any corporation in an unbroken
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chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
50 percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
1.27. Termination of Employment. "Termination of Employment" shall mean the
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time when the employee-employer relationship between a Grantee and the Company
or any Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an Optionee by
the Company or any Subsidiary, (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Committee, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that, with respect to
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Incentive Stock Options, a leave of absence, change in status from an employee
to an independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section. Notwithstanding
any other provision of this Plan, the Company or any Subsidiary has an
4
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absolute and unrestricted right to terminate an Employee's employment at any
time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1. Shares Subject to Plan.
----------------------
(a) The shares of stock subject to Awards shall be Common Stock,
initially shares of the Company's Common Stock, par value $0.001 per share. The
aggregate number of such shares which may be available for grant under the Plan
shall not exceed ninety-one million two hundred fifty thousand (91,250,000). The
shares of Common Stock issuable upon exercise of Options or as Restricted Stock
may be either previously authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Options
granted under the Plan to any individual in any calendar year shall not exceed
the Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the Option
Limit and if, after grant of an Option, the price of shares subject to such
Option is reduced, the transaction is treated as a cancellation of the Option
and a grant of a new Option and both the Option deemed to be canceled and the
Option deemed to be granted are counted against the Award Limit.
2.2. Add-back of Awards. If any Option expires or is canceled without
------------------
having been fully exercised, or is exercised in whole or in part for cash as
permitted by this Plan, or if any share of Restricted Stock is forfeited,
expires or is canceled, the number of shares subject to such Award but as to
which such Option was not exercised prior to its expiration or cancellation, or
with respect to which such Restricted Stock expired, was canceled or forfeited,
may again be optioned, granted or awarded hereunder, subject to the limitations
of Section 2.1. Furthermore, any shares subject to Awards which are adjusted
pursuant to Section 8.3 and become exercisable with respect to shares of stock
of another corporation shall be considered canceled and may again be subject to
Awards, subject to the limitations of Section 2.1. Shares of Common Stock which
are delivered by the Optionee or withheld by the Company upon the exercise of
any Option under this Plan, in payment of the exercise price thereof, may again
be subject to Awards hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be optioned if such action would cause an Incentive Stock Option to
fail to qualify as an incentive stock option under Section 422 of the Code.
ARTICLE III
GRANTING OF OPTIONS
3.1. Eligibility. Any Employee or consultant selected by the Committee
-----------
pursuant to Section 3.4(a)(i) shall be eligible to be granted an Option.
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3.2. Disqualification for Stock Ownership. No person may be granted an
------------------------------------
Incentive Stock Option under this Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code as they relate to Incentive Stock Options
held by stockholders owning stock possessing more than 10% of the total combined
voting power of the capital stock of the Company.
3.3 Qualification of Incentive Stock Options. No Incentive Stock Option
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shall be granted to any person who is not an Employee of the Company.
3.4 Granting of Options.
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(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:
(i) Determine which Employees are key Employees and select from
among the key Employees and consultants (including Employees who have
previously received Options or other awards under this Plan) such of
them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of shares
to be subject to such Options granted to the selected key Employees;
(iii) Subject to Section 3.3, determine whether such Options are
to be Incentive Stock Options or Non-Qualified Stock Options and
whether such Options are to qualify as performance-based compensation
as described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that the terms and
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conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.
(b) Upon the selection of a key Employee or consultant to be granted
an Option, the Committee shall instruct the Secretary of the Company to issue
the Option and may impose such conditions on the grant of the Option as it deems
appropriate. Without limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee or consultant
that the Employee or consultant surrender for cancellation some or all of the
unexercised Options which have been previously granted to him under this Plan or
otherwise. An Option, the grant of
6
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which is conditioned upon such surrender, may have an option price lower (or
higher) than the exercise price of such surrendered Option, may cover the same
(or a lesser or greater) number of shares as such surrendered Option, may
contain such other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, exercise period or any other term or condition of such
surrendered Option.
(c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.
ARTICLE IV
TERMS OF OPTIONS
4.1. Option Agreement. Each Option shall be evidenced by a written Stock
----------------
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as the
Committee shall determine, consistent with this Plan. Stock Option Agreements
evidencing Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Stock Option Agreements evidencing Incentive Stock Options
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
4.2. Option Price. The price per share of the shares subject to each
------------
Option shall be set by the Committee; provided, however, that such price shall
-------- -------
be no less than the par value of a share of Common Stock, unless otherwise
permitted by applicable state law, and (i) in the case of Incentive Stock
Options and Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, such price shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted; and (ii) in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code) such price shall not be less than 110% of the Fair
Market Value of a share of Common Stock on the date the Option is granted.
4.3. Option Term. The term of an Option shall be set by the Committee in
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its discretion; provided, however, that in the case of Incentive Stock Options,
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the term shall not be more than ten (10) years from the date the Incentive Stock
Option is granted, or five (5) years from such date if the Incentive Stock
Option is granted to an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation thereof
(within the meaning of Section 422 of the Code). Except as it may cause a
disqualifying disposition under Section 421 of the Code and regulations and
rulings thereunder applicable to Incentive Stock Options, the Committee may
extend the term of any outstanding Option in connection with any
7
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Termination of Employment of the Optionee, or amend any other term or condition
of such Option relating to such a termination.
4.4. Option Vesting.
--------------
(a) Unless otherwise determined by the Committee in its sole
discretion, options granted under the Plan shall become exercisable in
cumulative installments, 1/4th on the first anniversary of the date of Option
grant, and the remainder in 36 equal monthly installments, commencing on the
first day of the thirteenth month following the date of Option grant. At any
time after grant of an Option, the Committee may, in its sole and absolute
discretion and subject to whatever terms and conditions it selects, accelerate
the period during which an Option vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment, shall thereafter become exercisable, except as may be otherwise
provided by the Committee either in the Stock Option Agreement or by action of
the Committee following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall be treated as Non-Qualified Options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the Fair Market Value of
stock shall be determined as of the time the Option with respect to such stock
is granted.
4.5. Consideration. Unless the Committee determines otherwise in its sole
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discretion, in consideration of the granting of an Option, the Optionee shall
agree, in the written Stock Option Agreement, to remain in the employ of the
Company or any Subsidiary for a period of at least one year (or such shorter
period as may be fixed in the Stock Option Agreement or by action of the
Committee following grant of the Option) after the Option is granted. Nothing in
this Plan or in any Stock Option Agreement hereunder shall confer upon any
Optionee any right to continue in the employ of, or as a consultant for, the
Company or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Optionee at any time for any reason whatsoever, with or without
good cause.
ARTICLE V
EXERCISE OF OPTIONS
5.1. Partial Exercise. An exercisable Option may be exercised in whole or
----------------
in part. However, an Option shall not be exercisable with respect to fractional
shares and the Committee may require that, by the terms of the Option, a partial
exercise be with respect to a minimum number of shares.
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5.2. Manner of Exercise. All or a portion of an exercisable Option shall
------------------
be deemed exercised upon delivery of all of the following to the Secretary of
the Company or his office:
(a) A written notice complying with the applicable rules established
by the Committee (or the Board, in the case of Options granted to Independent
Directors) stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to exercise
the Option or such portion;
(b) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee may, in its
absolute discretion, also take whatever additional actions it deems appropriate
to effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 5.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised. However,
the Committee may in its discretion (i) allow a delay in payment up to thirty
(30) days from the date the Option, or portion thereof, is exercised; (ii) allow
payment, in whole or in part, through the delivery of shares of Common Stock
owned by the Optionee, duly endorsed for transfer to the Company with a Fair
Market Value on the date of delivery equal to the aggregate exercise price of
the Option or exercised portion thereof; (iii) allow payment, in whole or in
part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee; (vi) allow payment, in whole or in part,
through the delivery of a notice that the Optionee has placed a market sell
order with a broker with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the Committee may
also prescribe the form of such note and the security to be given for such note.
The Option may not be exercised, however, by delivery of a promissory note or by
a loan from the Company when or where such loan or other extension of credit is
prohibited by law.
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5.3. Conditions to Issuance of Stock Certificates. The Company shall not
--------------------------------------------
be required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory body
which the Committee, in its absolute discretion, deems necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
5.4. Rights as Stockholders. The holders of Options shall not be, nor have
----------------------
any of the rights or privileges of, stockholders of the Company in respect of
any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
5.5. Ownership and Transfer Restrictions. The Committee, in its absolute
-----------------------------------
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Stock Option Agreement
and may be referred to on the certificates evidencing such shares. The
Committee may require the Employee to give the Company prompt notice of any
disposition of shares of Common Stock acquired by exercise of an Incentive Stock
Option within (i) two years from the date of granting such Option to such
Employee or (ii) one year after the transfer of such shares to such Employee.
The Committee may direct that the certificates evidencing shares acquired by
exercise of an Option refer to such requirement to give prompt notice of
disposition.
ARTICLE VI
RESTRICTED STOCK
6.1. Restricted Stock. The Committee may from time to time cause the
----------------
Company to grant pursuant to the Plan Awards of Restricted Stock to Employees
and consultants for such
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consideration, if any, as the Committee shall determine, subject to such
restrictions, conditions and other terms as the Committee may determine.
(a) Certificates. The Company shall issue, in the name of each
------------
Grantee to whom shares of Restricted Stock have been granted, certificates
representing the total number of shares of Restricted Stock granted to the
Grantee, as soon as reasonably practicable after the grant. The Company, at the
direction of the Committee, shall hold such certificates, properly endorsed for
transfer, for the recipient's benefit until such time as the shares of
Restricted Stock are forfeited to the Company or the restrictions lapse. Each
such certificate shall bear the following legend, in addition to such other
legends as counsel to the Corporation may require:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO TRANSFER AND OTHER RESTRICTIONS UNDER THE AMENDED
AND RESTATED 1997 EMPLOYEE STOCK INCENTIVE PLAN OF
TELLIUM, INC. AND UNDER A RESTRICTED STOCK AGREEMENT
WITH THE CORPORATION. NO INTEREST IN THE SHARES
REPRESENTED HEREBY MAY BE TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE PROVISIONS OF SUCH PLAN AND
AGREEMENT.
(b) Rights of Grantee. Except as provided in this Article VI or as
-----------------
otherwise determined by the Committee, holders of Restricted Stock shall have
the rights of a stockholder of the Company holding the class or series of Common
Stock that is the subject of the Restricted Stock, including, if applicable, the
right to vote such Restricted Stock and the right to receive any distributions
of regular cash dividends with respect to such shares. If so determined by the
Committee in the applicable Restricted Stock Agreement and subject to Article
II, (A) cash dividends or distributions of property other than Common Stock with
respect to the class or series of Common Stock that is the subject of the
Restricted Stock Award shall be automatically deferred and reinvested in
additional Restricted Stock, held subject to the vesting of the underlying
Restricted Stock, or held subject to meeting Performance Goals applicable only
to dividends, and (B) dividends payable in Common Stock shall be paid in the
form of Restricted Stock of the same class as the Common Stock with which such
dividend was paid, held subject to the vesting of the underlying Restricted
Stock, or held subject to meeting Performance Goals applicable only to
dividends.
(c) Delivery of Restricted Stock. Upon the expiration or termination
----------------------------
of the Restricted Period and the satisfaction of any Performance Goals and any
other conditions prescribed by the Committee, the restrictions applicable to the
Restricted Stock shall lapse and a certificate for the number of Shares with
respect to which the restrictions have lapsed shall be delivered, free of all
such restrictions, to the Grantee.
6.2. Terms and Conditions. Shares of Restricted Stock shall be subject to
--------------------
the following terms and conditions:
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<PAGE>
(a) The Committee may, prior to or at the time of grant, designate an
Award of Restricted Stock as a Qualified Performance-Based Award, in which event
it shall condition the grant or vesting, as applicable, of such Restricted Stock
upon the attainment of Performance Goals. If the Committee does not designate an
Award of Restricted Stock as a Qualified Performance-Based Award, it may also
condition the grant or vesting thereof upon the attainment of Performance Goals.
Regardless of whether an Award of Restricted Stock is a Qualified Performance-
Based Award, the Committee may also condition the grant of vesting thereof upon
the continued service of the Grantee. The conditions for grant or vesting and
the other provisions of Restricted Stock Awards (including without limitation
any applicable Performance Goals) need not be the same with respect to each
recipient. The Committee may at any time, in its sole discretion, accelerate or
waive, in whole of in part, any of the foregoing restrictions; provided,
--------
however, that (except as otherwise provided in Section 6.2(c) or 8.3 in the case
-------
of Restricted Stock that is a Qualified Performance-Based Award) the applicable
Performance Goals have been satisfied;
(b) Subject to the provisions of the Plan and the Restricted Stock
Agreement, during the period, if any, set by the Committee, commencing with the
date of such Award for which such continued service is required (the
"Restriction Period"), and until either, as determined by the Committee, the
later of (i) the expiration of the Restriction Period and (ii) the date the
applicable Performance Goals (if any) are satisfied, the Grantee shall not be
permitted to sell, assign, transfer, pledge or otherwise encumber shares of
Restricted Stock;
(c) except to the extent otherwise provided in the applicable
Restricted Stock Agreement or this Article VI, upon a Termination of Employment
for any reason during the Restriction Period or before the applicable
Performance Goals are satisfied, all shares still subject to restriction shall
be forfeited by the Grantee; provided, however, that the Committee shall have
the discretion to waive, in whole of in part, any of all remaining restrictions
(other than, in the case of Restricted Stock which is a Qualified Performance-
Based Award, satisfaction of the applicable Performance Goals unless the
employment is terminated by reason of death or Disability) with respect to any
or all of such shares of Restricted Stock;
6.3. Agreements. Restricted Stock Awards granted under the Plan shall be
----------
evidenced by written documents ("Restricted Stock Agreements") in such form as
the Committee shall, from time to time, approve, which Restricted Stock
Agreements shall contain such provisions, not inconsistent with the provisions
of the Plan. Each Grantee shall enter into, and be bound by, the terms of the
Restricted Stock Agreement.
ARTICLE VII.
ADMINISTRATION
7.1 Compensation Committee. Prior to the Company's initial registration
----------------------
of Common Stock under Section 12 of the Exchange Act, the Compensation Committee
shall be appointed by the Board and may consist of one or members of the Board
or the entire Board . Following such registration, the Compensation Committee
(or another committee or a subcommittee of the Board assuming the functions of
the Committee under this Plan) shall
12
<PAGE>
consist solely of two or more persons appointed by and holding office at the
pleasure of the Board, each of whom is both a "non-employee director" as defined
by Rule 16b-3 and an "outside director" for purposes of Section 162(m) of the
Code. Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.
7.2. Duties and Powers of Committee. It shall be the duty of the
------------------------------
Committee to conduct the general administration of this Plan in accordance with
its provisions. The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Awards are granted, and to adopt such rules for
the administration, interpretation, and application of this Plan as are
consistent therewith and to interpret, amend or revoke any such rules. Any such
grant under this Plan need not be the same with respect to each Grantee. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee.
7.3. Majority Rule; Unanimous Written Consent. The Committee shall act by
----------------------------------------
a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.
7.4. Compensation; Professional Assistance; Good Faith Actions. Members
---------------------------------------------------------
of the Committee shall receive such compensation for their services as members
as may be determined by the Board. All expenses and liabilities which members
of the Committee incur in connection with the administration of this Plan shall
be borne by the Company. The Committee may, with the approval of the Board,
employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding upon all
Grantees, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or Awards, and all
members of the Committee and the Board shall be fully protected by the Company
in respect of any such action, determination or interpretation.
ARTICLE VIII.
MISCELLANEOUS PROVISIONS
8.1. Not Transferable. Awards under this Plan may not be sold, pledged,
----------------
assigned, or transferred in any manner other than by will or the laws of descent
and distribution or, in the case of Restricted Stock or Non-Qualified Stock
Options, pursuant to a QDRO, unless and until, in the case of Options, shares
underlying such Options have been issued, and in the case of
13
<PAGE>
Restricted Stock, such shares have vested. No Award or interest or right therein
shall be liable for the debts, contracts or engagements of the Grantee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
During the lifetime of the Optionee, only he may exercise an Option (or any
portion thereof) granted to him under the Plan, unless it has been disposed of
pursuant to a QDRO. After the death of the Optionee, any exercisable portion of
an Option may, prior to the time when such portion becomes unexercisable under
the Plan or the applicable Stock Option Agreement, be exercised by his personal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.
8.2. Amendment, Suspension or Termination of this Plan. Except as
-------------------------------------------------
otherwise provided in this Section 8.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action by
the Board or the Committee, no action of the Board or the Committee may, except
as provided in Section 8.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan or modify the Award
Limit, and no action of the Board or the Committee may be taken that would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. No amendment, suspension or termination of this Plan shall, without
the consent of the holder of Awards, alter or impair any rights or obligations
under any Awards theretofore granted, unless the award itself otherwise
expressly so provides. No Awards may be granted during any period of suspension
or after termination of this Plan, and in no event may any Incentive Stock
Option be granted under this Plan after the first to occur of the following
events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's stockholders under Section 8.4.
8.3. Changes in Common Stock or Assets of the Company, Acquisition or
----------------------------------------------------------------
Liquidation of the Company and Other Corporate Events.
-----------------------------------------------------
(a) Subject to Section 8.3(d), in the event that the Committee
determines that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company (including, but not limited to, a
Corporate Transaction), or exchange of
14
<PAGE>
Common Stock or other securities of the Company, issuance of warrants or other
rights to purchase Common Stock or other securities of the Company, or other
similar corporate transaction or event, in the Committee's sole discretion,
affects the Common Stock such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to an Award, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Awards may be granted
under the Plan (including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares
which may be issued and adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Awards, and
(iii) the grant or exercise price with respect to any Award.
(b) Subject to Section 8.3(d), in the event of any Corporate
Transaction or other transaction or event described in Section 8.3(a) or any
unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee in its discretion is hereby authorized to take any one
or more of the following actions whenever the Committee determines that such
action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any Award under this Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:
(i) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either
by the terms of the agreement or by action taken prior to the
occurrence of such transaction or event and either automatically or
upon the Optionee's request, for either the purchase of any such
Option for an amount of cash equal to the amount that could have been
attained upon the exercise of such Option or realization of the
Optionee's rights had such Option been currently exercisable (less the
exercise price) or the replacement of such Option with other rights or
property selected by the Committee in its sole discretion;
(ii) In its sole and absolute discretion, the Committee may
provide, either by the terms of such Option or by action taken prior
to the occurrence of such transaction or event that it cannot be
exercised after such event;
(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either
by the
15
<PAGE>
terms of such Option or by action taken prior to the occurrence of
such transaction or event, that for a specified period of time prior
to such transaction or event, such Option shall be exercisable as to
all shares covered thereby, notwithstanding anything to the contrary
in Section 4.4 hereof or the provisions of such Option;
(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either
by the terms of such Award or by action taken prior to the occurrence
of such transaction or event, that upon such event, such Award be
assumed by the successor or survivor corporation, or a parent or
subsidiary thereof, or shall be substituted for by similar options,
rights or awards covering the stock of the successor or survivor
corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices;
(v) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either
by the terms of such Restricted Stock or by action taken prior to the
occurrence of such transaction or event, that upon such event, the
restrictions and deferral limitations applicable to any outstanding
Restricted Stock shall lapse, and such Restricted Stock shall become
free of all restrictions and become fully vested and transferable to
the full extent of the original grant; and
(vi) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may make adjustments
in the number and type of shares of Common Stock (or other securities
or property) subject to outstanding Awards and/or in the terms and
conditions of (including the exercise price with respect to Options)
and the criteria included in, outstanding Awards and Awards which may
be granted in the future.
(c) Subject to Sections 8.3(d) and 8.8, the Committee may, in its
discretion, include such further provisions and limitations in any Award
agreement or certificate, as it may deem equitable and in the best interests of
the Company.
(d) With respect to Incentive Stock Options intended to qualify as
performance-based compensation under Section 162(m), no adjustment or action
described in this Section 8.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code or would cause such Option to fail to so
qualify under Section 162(m), as the case may be, or any successor provisions
thereto. Furthermore, no such adjustment or action shall be authorized to the
extent such adjustment or action would result in short-swing profits liability
under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the
Committee determines that the Award is not to comply with such exemptive
conditions. The number of shares of Common Stock subject to any Award shall
always be rounded to the next whole number.
16
<PAGE>
8.4. Approval of Plan by Stockholders. The Plan became effective on
--------------------------------
November 16, 2000. This amendment and restatement of the Plan is effective as
of November 16, 2000; provided, however, that no Award granted in excess of the
-------- -------
shares previously reserved for issuance upon exercise of Awards granted
hereunder shall be exercisable by a Grantee unless and until the amendments
hereto increasing the number of shares subject to the Plan to 91,250,000 shall
have been approved by the stockholders of the Company in accordance with the
provisions of its Certificate of Incorporation and By-laws, which approval shall
be obtained within twelve (12) months after the adoption of such amendment by
the Board. This Plan will be submitted for the approval of the Company's
stockholders within twelve months after the date of the Board's initial adoption
of this Plan. Awards may be awarded prior to such stockholder approval,
provided that Options shall not be exercisable prior to the time when this Plan
is approved by the stockholders, and provided further that if such approval has
not been obtained at the end of said twelve-month period, all Awards previously
granted under this Plan shall thereupon be canceled and become null and void.
8.5. Tax Withholding. The Company shall be entitled to require payment in
---------------
cash or deduction from other compensation payable to each Optionee of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting or exercise of any Option. The Committee may in its
discretion and in satisfaction of the foregoing requirement allow such Optionee
to elect to have the Company withhold shares of Common Stock otherwise issuable
under such Option (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld.
8.6. Loans. The Committee may, in its discretion, extend one or more loans
-----
to key Employees in connection with the exercise or receipt of an Award granted
under this Plan. The terms and conditions of any such loan shall be set by the
Committee.
8.7. Forfeiture Provisions. Pursuant to its general authority to determine
---------------------
the terms and conditions applicable to Options under the Plan, the Committee
shall have the right to provide in the terms of Options, or to require the
recipient to agree by separate written instrument, that the Option shall
terminate and any unexercised portion of such Option (whether or not vested)
shall be forfeited, if (a) a Termination of Employment occurs prior to a
specified date, or within a specified time period following exercise of the
Option, or (b) the recipient at any time, or during a specified time period,
engages in any activity in competition with the Company, or which is inimical,
contrary or harmful to the interests of the Company, as further defined by the
Committee.
8.8. Limitations Applicable to Performance-Based Compensation. Except as
--------------------------------------------------------
set forth in Sections 6.2 and 8.3(b), any Award intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.
17
<PAGE>
8.9. Effect of Plan Upon Options and Compensation Plans. The adoption of
--------------------------------------------------
this Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company (i) to establish any other forms of incentives or
compensation for Employees, Directors or consultants of the Company or any
Subsidiary or (ii) to grant or assume options or other rights otherwise than
under this Plan in connection with any proper corporate purpose including, but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.
8.10. Compliance with Laws. This Plan, the granting and vesting of Awards
--------------------
and the issuance and delivery of shares of Common Stock and the payment of money
under this Plan or under Awards granted hereunder are subject to compliance with
all applicable federal and state laws, rules and regulations (including but not
limited to state and federal securities law and federal margin requirements) and
to such approvals by any listing, regulatory or governmental authority as may,
in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Any securities delivered under this Plan shall be subject
to such restrictions, and the person acquiring such securities shall, if
requested by the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure compliance with
all applicable legal requirements. To the extent permitted by applicable law,
the Plan and Awards granted hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
8.11. Titles. Titles are provided herein for convenience only and are not
------
to serve as a basis for interpretation or construction of this Plan.
8.12. Governing Law. This Plan and any agreements hereunder shall be
-------------
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflict of laws principles thereof.
* * * *
I hereby certify that the foregoing Amended and Restated Plan was duly
adopted by the Board of Directors of Tellium, Inc. on November 16, 2000.
Executed on this 18th day of November, 2000.
/s/
--------------------------------------------
Michael J. Losch
Secretary
18
