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COGNITRONICS CORPORATION
DIRECTORS' STOCK OPTION PLAN, AS AMENDED
1. PURPOSE
The Director' Stock Option Plan (the "Plan") is intended to
provide incentives to non-employee directors and officers of
Cognitronics Corporation (the "Company") by more closely aligning
their compensation with stockholder value.
2. ADMINISTRATION
The Plan shall be administered by the Company's Board of Directors.
The Board shall have authority, subject to the terms of the
Plan, to interpret the Plan and make all determinations necessary
or advisable for its administration. The Board may consult with
legal counsel, who may be counsel to the Company, and shall not
incur any liability for any action taken in good faith in reliance
upon the advice of counsel.
3. ELIGIBILITY
All outside directors and officers (individually "Participants",
collectively "Participants") shall be eligible to participate in the
Plan. An outside director or officer means a director or officer who
is neither an employee of the Company nor of any subsidiary of the
Company.
4. STOCK
The stock as to which options may be granted shall be the
Company's common stock, par value $.20 per share ("Common Stock").
When options are exercised the Company may either issue unissued
Common Stock or transfer issued Common Stock held in its treasury.
The total number of shares of Common Stock which may be sold to
Participants under the Plan pursuant to options shall not exceed
52,500 shares. If an option expires, or is otherwise terminated
prior to its exercise, the Common Stock covered by such option
immediately prior to such expiration or other termination shall
continue to be available under the Plan.
5. AWARDING OF OPTIONS
Options shall be awarded to Participants as follows:
(a) Upon the Effective Date, an option to purchase 3,000
shares of Common Stock.
(b) On each August 1 subsequent to the Effective Date, an
option to purchase 3,000 shares of Common Stock.
The "Date of Award" of an option shall be the date on which the
option is awarded under the Plan. The award of any option to any
Participant shall neither entitle such Participant to, nor disqualify
him from, participation in any other plan which provides for the
issuance of Common Stock.
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6. TERMS AND CONDITIONS OF OPTIONS
Options shall be evidenced by instruments in form approved by
the Board. Such instruments shall conform to the following terms and
conditions:
(a) Option price. The option price per share of Common
Stock shall be the Fair Market Value of a share of Common Stock
on the Date of Award.. "Fair Market Value" shall be the
closing price of the Common Stock recorded on the American
Stock Exchange on the Date of Award or, if the Common Stock is
not traded on such date, on the last trading day prior thereto.
(b) Term and exercise of options. Each option shall expire
no later than the fifth anniversary of its Date of Grant and
shall become exercisable on the date one year after the Date of
Grant. The Board may waive any exercise conditions or
accelerate the exercisability of the option at any time. After
becoming exercisable, each option shall remain exercisable until
its expiration or termination. An option may be exercised from
time to time, in whole or part, up to the total number of shares
with respect to which it is then exercisable. Payment of the
purchase price will be made in such manner as the Board may
provide in the option, which may include cash (including cash
equivalents) or any other manner permitted by law as
determined by the Committee or any combination of the
foregoing.
(c) Termination of Participant. If a Participant ceases, other
than by reason of death or retirement, to be a director or
officer of the Company, all options awarded to him and
exercisable on the date of he ceases to be a director or
officer shall terminate on the earlier of such options'
expiration or three months after the day he ceases to be a
director or officer or as otherwise determined by the Committee.
Any option not exercisable on the date of such termination shall
lapse and be thenceforth unexercisable.
(d) Retirement of Participant. If a Participant retires, all
options held by him on the date of his retirement shall become
exercisable on the date of his retirement and shall terminate
on the earlier of such option's expiration or the first
anniversary of the day of his retirement.
(e) Death of Participant. If a Participant dies, his options
may be exercised, to the extent of the number of shares with
respect to which he could have exercised on the date of his
death, by his estate, personal representative or beneficiary
who acquires the option by will or by the laws of descent and
distribution, at any time prior to the earlier of such option's
expiration or the first anniversary of the Participant's death.
On the earlier of such dates, the option shall terminate.
(f) Assignability. No option shall be assignable or
transferable by the Participant except by will or by laws of
descent and distribution, and during the lifetime of the
Participant the option shall be exercisable only by him. At the
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request of a Participant, shares of Common Stock purchased on
exercise of an option may be issued or transferred in the name
of the Participant and another person jointly with the right of
survivorship.
(g) Other provisions. Instruments evidencing options may
contain such other provisions, not inconsistent with the Plan,
as the Board deems advisable, including a requirement that a
Participant represent to the Company in writing, when an
option is awarded, or when he receives shares on its exercise,
that he is accepting such option, or receiving such shares
(unless they are then covered by a Securities Act of 1933
registration statement), for his own account for investment
only. All certificates representing shares issued under the
Plan may bear a legend deemed appropriate by the Committee to
confirm an exemption from the registration requirements of the
Securities Act of 1933.
7. CAPITAL ADJUSTMENTS
In the event of any merger, reorganization, consolidation, sale of
substantially all assets, recapitalization, stock dividend, stock
split, spin-off, distribution of assets or other change in corporate
structure affecting the Common Stock such that an adjustment is
determined by the Board to be appropriate, the Board shall, in such a
manner as it may deem equitable in its sole discretion, substitute or
adjust any or all of (i) the aggregate number and kind of shares
reserved for issuance under the Plan, (ii) the number and kind of
shares as to which awards may be granted to any individual in any
fiscal year, (iii) the number and kind of shares subject to
outstanding awards, and (iv) the exercise price of outstanding stock
options; provided, however, that no such adjustment shall increase
the aggregate value of any outstanding award.
In addition, upon the dissolution or liquidation of the Company or
upon any reorganization, merger, or consolidation as a result of
which the Company is not the surviving corporation (or survives as a
wholly-owned subsidiary of another corporation), or upon a sale of
substantially all the assets of the Company, the Board may take such
action as it in its discretion deems appropriate to (i) accelerate
the time when stock options may be exercised, (ii) cash out such
stock options at or immediately prior to the date of such event, or
(iii) provide for the assumption of outstanding stock options by
surviving, successor or transferee corporations.
The Board's determination as to which adjustments shall be made and
the extent thereof shall be final, binding and conclusive.
8. CHANGE OF CONTROL
Notwithstanding the provisions of Section 6(b) hereof, in the event
of a Change in Control, as hereinafter defined, all options held by a
Participant shall become exercisable on the date of the Change in
Control.
"Change in Control" means an event in which:
(a) the stockholders of the Company approve (i) any
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consolidation or merger of the Company or any of its
subsidiaries where the stockholders of the Company, immediately
prior to the consolidation or merger, would not, immediately
after the consolidation or merger, beneficially own, directly or
indirectly, shares representing in the aggregate more than 50%
of all votes to which all stockholders of the corporation
issuing cash or securities in the consolidation or merger (or of
its ultimate parent corporation, if any) would be entitled under
ordinary circumstances to vote in an election of directors or
where the members of the Board, immediately prior to the
consolidation or merger, would not, immediately after the
consolidation or merger, constitute a majority of the Board of
Directors of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation,
if any), (ii) any sale, lease, exchange or other transfer (in
one transaction or a series of transactions contemplated or
arranged by any person as a single plan) of all or substantially
all of the assets of the Company or (iii) any plan or proposal
for the liquidation or dissolution of the Company;
(b) persons who, as of the effective date hereof, constitute
the entire Board (as of the date hereof the "Incumbent
Directors") cease for any reason to constitute at least a
majority of the Board, provided, however, that any person
becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, is approved by a vote of at least a majority of
the then Incumbent Directors (other than an election or
nomination of a person whose assumption of office is the result
of an actual or threatened election contest relating to the
election of directors of the Company, as such terms are used in
Rule 14a-11 under the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act")), shall be
considered an Incumbent Director; or
(c) any "person", as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any of its
subsidiaries, any employee benefit plan of the Company or any of
its subsidiaries or any entity organized, appointed or
established by the Company for or pursuant to the terms of such
plan), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Exchange Act) of such
person, becomes the "beneficial owner" or "beneficial owners"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of securities of the Company
representing in the aggregate 20% or more of either (i) the then
outstanding shares of Common Stock or (ii) the combined voting
power of all then outstanding securities of the Company having
the right under ordinary circumstances to vote in an election of
directors to the Board ("Voting Securities") (in either such
case other than as a result of acquisitions of such securities
directly from the Company).
Notwithstanding the foregoing, a "Change in Control" will not have
occurred for purposes of clause (c) solely as the result of an
acquisition of securities by the Company which, by reducing the
number of shares of Common Stock or other Voting Securities
outstanding, increases (i) the proportionate number of shares of
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Common Stock beneficially owned by any person to 20% or more of the
shares of Common Stock then outstanding or (ii) the proportionate
voting power represented by the Voting Securities beneficially owned
by any person to 20% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any person
referred to in clause (i) or (ii) of this sentence thereafter becomes
the beneficial owner of any additional shares of Common Stock or
other Voting Securities (other than pursuant to a stock split, stock
dividend or similar transaction), then a "Change in Control" will
have occurred for purposes of clause (c).
9. TERM; AMENDMENT OF PLAN
The Board or the Committee may discontinue the Plan at any time and
may amend it from time to time. No amendment or discontinuation of
the Plan shall adversely affect any outstanding award without the
Participant's written consent. Amendments may be made without
stockholder approval except as required to satisfy applicable law or
stock exchange requirements.
10. EFFECTIVE DATE
The Plan is in accordance with a Resolution of the Board duly
adopted and approved by unanimous written consent on September 17,
1998 (the "Effective Date") and a Resolution of Stockholders on May
13, 1999 and amended by a Resolution of Stockholders on May 11, 2000.
11. NEW YORK STATE LAW
The Terms of the Plan shall be governed by the laws of the State of
New York.
