<PAGE>
As filed with the Securities and Exchange Commission on October 4, 1996
Registration No. 333-_________
================================================================================
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
PUBLIC STORAGE, INC.
(Exact name of registrant as specified in its charter)
California
(State or other jurisdiction of incorporation or organization)
95-3551121
(I.R.S. Employer Identification No.)
701 Western Avenue, Suite 200
Glendale, California 91201-2397
(Address of Principal Executive Offices with Zip Code)
PUBLIC STORAGE, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
(Full Title of the Plan)
HUGH W. HORNE
Public Storage, Inc.
701 Western Avenue, Suite 200
Glendale, California 91201-2397
(818) 244-8080
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------
With a copy to:
DAVID GOLDBERG, ESQ.
Public Storage, Inc.
701 Western Avenue, Suite 200
Glendale, California 91203-1241
-------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Proposed Proposed
Amount maximum maximum Amount of
Title of securities to be offering price aggregate registration
to be registered registered per share offering price fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.10 par
value per share 3,850,000 Shares $22.375(1) $86,143,750(1) $26,105
- --------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
(1) Estimated solely for the purpose of calculating the filing fee and,
pursuant to Rule 457(c), based on the average of the high and low prices of the
Common Stock on the New York Stock Exchange on September 30, 1996.
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part I will be sent
or given to employees as specified by Rule 428(b)(1). In accordance with the
instructions to Part I of Form S-8, such documents will not be filed with the
Securities and Exchange Commission (the "Commission") either as part of this
Registration Statement or as prospectuses or prospectus supplements pursuant to
Rule 424.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed by Public Storage, Inc. (the "Company") with
the Commission are incorporated in this Registration Statement by reference:
(i) the Annual Report on Form 10-K for the year ended December 31, 1995, as
amended by a Form 10-K/A dated April 29, 1995, a Form 10-K/A dated May 14, 1996
and a Form 10-K/A dated May 15, 1996, (ii) the Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1996 and June 30, 1996, (iii) the Current
Reports on Form 8-K dated January 22, 1996, September 6, 1996 and September 18,
1996, and (iv) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, effective June 30, 1981, as
supplemented by the description of the Company's Common Stock contained in the
Prospectus dated March 12, 1996 included in the Company's Registration Statement
on Form S-3 (File no. 333-00965).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934 on or after the date of this
Registration Statement and prior to the filing of a post-effective amendment to
this Registration Statement which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold, are
deemed to be incorporated by reference in this Registration Statement and shall
be a part thereof from the date of filing of those documents.
Item 4. Description of Securities
A description of the Company's Common Stock, $.10 par value per share, is
incorporated by reference under Item 3.
Item 5. Interests of Named Experts and Counsel
LEGAL OPINIONS
David Goldberg, senior vice president and general counsel of the Company,
has delivered an opinion to the effect that the shares of Common Stock covered
by this Registration Statement will be legally issued, fully paid and non-
assessable. Mr. Goldberg owns 72,815 shares of the Company's Common Stock and
1,600 shares of the Company's preferred stock, and has options to acquire an
additional 142,500 shares of the Company's Common Stock.
2
<PAGE>
EXPERTS
The consolidated financial statements and related schedules of the Company
for the year ended December 31, 1995 appearing in the Company's Annual Report on
Form 10-K, as amended by a Form 10-K/A (Amendment No. 3) dated May 15, 1996, and
the combined summaries of historical information relating to operating revenues
and specified expenses--certain properties (the "Combined Summaries") for the
properties and periods indicated in Note 1 to such Combined Summaries, appearing
in the Company's Current Report on Form 8-K dated September 6, 1996 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports included in the Company's Annual Report on Form 10-K and the Company's
Current Report on Form 8-K dated September 6, 1996 and incorporated herein by
reference. Such consolidated financial statements and Combined Summaries are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
Item 6. Indemnification of Directors and Officers
In August 1988, the Company's Articles of Incorporation were amended (as
approved by the shareholders in August 1988) to provide that the Company may
indemnify the agents of the Company to the maximum extent permitted under
California law. In October 1988, the Company also entered into indemnity
agreements (in the form approved by the shareholders in August 1988) with its
management and non-management directors and executive officers. The agreements
permit the Company to indemnify directors and executive officers to the maximum
extent permitted under California law and prohibit the Company from terminating
its indemnification obligations as to acts or omissions of any director or
executive officer occurring before the termination. The indemnification and
limitations on liability permitted by the amendment to the Articles of
Incorporation and the agreements are subject to the limitations set forth by
California law. The Company believes the indemnification agreements will assist
it in attracting and retaining qualified individuals to serve as directors and
executive officers of the Company.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
See Exhibit Index contained herein.
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement
to include any material information with respect to the Plan of
Distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933 (the "Act"), each such post-effective
amendment shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3
<PAGE>
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain
unsold at the termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Glendale, State of California, on the 3rd day of
October, 1996.
PUBLIC STORAGE, INC.
By: /s/ B. Wayne Hughes
-------------------------
B. Wayne Hughes, Chairman
of the Board
Each person whose signature appears below hereby authorizes B. Wayne Hughes
and Harvey Lenkin, and each of them, as attorney-in-fact, to sign on his behalf,
individually and in each capacity stated below, any amendment, including post-
effective amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission.
4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
<S> <C> <C>
/s/ B. Wayne Hughes Chairman of the Board, Chief October 3, 1996
- --------------------------- Executive Officer and Director
B. Wayne Hughes (principal executive officer)
/s/ Harvey Lenkin President and Director October 3, 1996
- ---------------------------
Harvey Lenkin
/s/ Ronald L. Havner, Jr. Senior Vice President and Chief October 3, 1996
- --------------------------- Financial Officer (principal
Ronald L. Havner, Jr. financial officer)
/s/ John Reyes Vice President and Controller October 3, 1996
- --------------------------- (principal accounting officer)
John Reyes
/s/ Robert J. Abernethy Director October 3, 1996
- ---------------------------
Robert J. Abernethy
/s/ Dann V. Angeloff Director October 3, 1996
- ---------------------------
Dann V. Angeloff
/s/ William C. Baker Director October 3, 1996
- ---------------------------
William C. Baker
/s/ Uri P. Harkham Director October 3, 1996
- ---------------------------
Uri P. Harkham
</TABLE>
5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
5.1 Opinion of David Goldberg as to the legality of the securities
being registered.
23.1 Consent of independent auditors.
23.2 Consent of David Goldberg (including in Exhibit 5.1).
99.1 The Company's 1996 Stock Option and Incentive Plan.
6
<PAGE>
Exhibit 5.1
DAVID GOLDBERG
Senior Vice President and General Counsel
701 Western Avenue, Suite 200
Glendale, California 91201-2397
October 3, 1996
Public Storage, Inc.
701 Western Avenue, Suite 200
Glendale, California 91201-2397
Gentlemen:
As Senior Vice President and General Counsel of Public Storage, Inc. (the
"Company"), I have examined the Registration Statement on Form S-8, which is
being filed by the Company on or about the date hereof with the Securities and
Exchange Commission (the "Registration Statement"), relating to the offer and
sale of up to 3,850,000 shares of the Company's Common Stock, par value $.10 per
share (the "Securities"), pursuant to the 1996 Stock Option and Incentive Plan
(the "Plan").
I am familiar with the proceedings taken and proposed to be taken by the
Company relating to the authorization and issuance of the Securities in the
manner set forth in the Registration Statement and the Plan.
Subject to the taking of the contemplated proceedings in connection with
the foregoing matters, I am of the opinion that the Securities, when issued and
sold in the manner set forth in the Registration Statement and the Plan, will be
legally issued and outstanding, fully paid and non-assessable.
I hereby consent to the reference to me under the caption "Legal Opinions"
in the Registration Statement and to the filing of this opinion as an exhibit to
the Registration Statement.
Very truly yours,
/s/ David Goldberg
7
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-8 No. 333-_____________) pertaining to the Public
Storage, Inc. 1996 Stock Option and Incentive Plan and to the incorporation by
reference therein of our report dated February 26, 1996 with respect to the
consolidated financial statements and schedules of Public Storage, Inc. in its
Annual Report on Form 10-K, as amended by a Form 10-K/A (Amendment No. 3) dated
May 15, 1996, for the year ended December 31, 1995 filed with the Securities and
Exchange Commission.
We also consent to the incorporation by reference of our report dated
September 6, 1996 on the combined summaries of historical information relating
to operating revenues and specified expenses -- certain properties which is
included in the Current Report on Form 8-K dated September 6, 1996 and
incorporated by reference in the Registration Statement on Form S-8 (No. 333-
_________________).
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Los Angeles, California
October 3, 1996
8
<PAGE>
Exhibit 99.1
PUBLIC STORAGE, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
Public Storage, Inc., a California corporation (the "Company"), sets forth
herein the terms of its 1996 Stock Option and Incentive Plan (the "Plan") as
follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and retain
highly qualified officers, key employees, outside directors, and other persons
to advance the interests of the Company by providing such persons with stronger
incentives to continue to serve the Company and its affiliates (as defined
herein) and to expend maximum effort to improve the business results and
earnings of the Company. The Plan is intended to accomplish this objective by
providing to eligible persons an opportunity to acquire or increase a direct
proprietary interest in the operations and future success of the Company. To
this end, the Plan provides for the grant of stock options, restricted stock and
restricted stock units in accordance with the terms hereof. Stock options
granted under the Plan may be non-qualified stock options or incentive stock
options, as provided herein, except that stock options granted to outside
directors shall in all cases be non-qualified stock options.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award
Agreements), the following definitions shall apply:
2.1 "affiliate" of, or person "affiliated" with, a person means any company
or other trade or business that controls, is controlled by or is under common
control with such person within the meaning of Rule 405 of Regulation C under
the 1933 Act (as defined herein).
2.2 "Award Agreement" means the stock option agreement, restricted stock
agreement, restricted stock unit agreement or other written agreement between
the Company and a Grantee that evidences and sets out the terms and conditions
of a Grant.
2.3 "Benefit Arrangement" shall have the meaning set forth in Section 14
hereof.
2.4 "Board" means the Board of Directors of the Company.
<PAGE>
2.5 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.
2.6 "Committee" means a Committee of, and designated from time to time by
resolution of, the Board, which shall consist of no fewer than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any affiliate, and each of whom shall qualify in all respects as a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act
or any successor rule or regulation. Commencing on the Effective Date, and
until such time as the Board shall determine otherwise, the Committee shall be
the Audit Committee of the Board.
2.7 "Company" means Public Storage, Inc.
2.8 "Effective Date" means August 13, 1996, the date on which the Plan was
adopted by the Board.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.10 "Fair Market Value" means the value of a share of Stock, determined as
follows: if on the Grant Date or other determination date the Stock is listed
on an established national or regional stock exchange, is admitted to quotation
on the Nasdaq National Market, or is publicly traded on an established
securities market, the Fair Market Value of a share of Stock shall be the
closing price of the Stock on such exchange or in such market (the highest such
closing price if there is more than one such exchange or market) on the Grant
Date or such other determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high and low sale prices on such trading day)
or, if no sale of Stock is reported for such trading day, on the next preceding
day on which any sale shall have been reported. If the Stock is not listed on
such an exchange, quoted on such system or traded on such a market, Fair Market
Value shall be the value of the Stock as determined by the Committee in good
faith.
2.11 "Grant" means an award of an Option, Restricted Stock or Restricted
Stock Units under the Plan.
2.12 "Grant Date" means (a) for Grants other than Grants to Outside
Directors, the later of (i) the date as of which the Committee approves the
Grant or (ii) the date as of which the Grantee and the Company or Service
Provider enter into the relationship resulting in the Grantee's becoming
eligible to receive a Grant, and (b) for Grants to Outside Directors, the date
on which such Grant is made in accordance with Section 7 hereof.
2
<PAGE>
2.13 "Grantee" means a person who receives or holds an Option, Restricted
Stock or Restricted Stock Units under the Plan.
2.14 "Incentive Stock Option" means an "incentive stock option" within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.15 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.16 "Option Period" means the period during which Options may be exercised
as set forth in Section 11 hereof.
2.17 "Option Price" means the purchase price for each share of Stock subject
to an Option.
2.18 "Other Agreement" shall have the meaning set forth in Section 14
hereof.
2.19 "Outside Director" means a member of the Board who is not an officer or
employee of the Company.
2.20 "Plan" means the Public Storage, Inc. 1996 Stock Option and Incentive
Plan.
2.21 "Reporting Person" means a person who is required to file reports under
Section 16(a) of the Exchange Act.
2.22 "Restricted Period" means the period during which Restricted Stock or
Restricted Stock Units are subject to restrictions or conditions pursuant to
Section 13.2 hereof.
2.23 "Restricted Stock" means shares of Stock, awarded to a Grantee pursuant
to Section 13 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.24 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant to
Section 13 hereof, which represents a conditional right to receive a share of
Stock in the future, and which is subject to restrictions and to a risk of
forfeiture.
2.25 "Securities Act" means the Securities Act of 1933, as now in effect or
as hereafter amended.
2.26 "Service Provider" means a consultant or adviser to the Company, a
manager of the Company's properties or affairs, or other similar service
provider or
3
<PAGE>
affiliate of the Company, and employees of any of the foregoing, as such persons
may be designated from time to time by the Committee pursuant to Section 6
hereof.
2.27 "Stock" means the common stock, par value $0.10 per share, of the
Company.
2.28 "Subsidiary" means any "subsidiary corporation" of the Company within
the meaning of Section 425(f) of the Code.
2.29 "Termination Date" shall be the date upon which an Option shall
terminate or expire, as set forth in Section 11.2 hereof.
3. ADMINISTRATION OF THE PLAN
3.1 General. The Plan shall be administered by the Committee. The Board
-------
may remove members, add members, and fill vacancies on the Committee from time
to time, all in accordance with the Company's articles of incorporation and by-
laws and applicable law; provided, however, that each member of the Committee
-----------------
shall at all times qualify in all respects as a "non-employee director" within
the meaning of Rule 16b-3 under the Exchange Act or any successor rule or
regulation.
3.2 Plenary Authority of the Committee. Subject to Section 3.4 hereof,
----------------------------------
the Committee shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company's articles of
incorporation and by-laws and applicable law. The Committee shall have full
power and authority to take all actions and to make all determinations required
or provided for under the Plan, any Grant or any Award Agreement, and shall have
full power and authority to take all such other actions and determinations not
inconsistent with the specific terms and provisions of the Plan that the
Committee deems to be necessary or appropriate to the administration of the
Plan, any Grant or any Award Agreement. All such actions and determinations
shall be by the affirmative vote of a majority of the members of the Committee
present at a meeting or by unanimous consent of the Committee executed in
writing in accordance with the Company's articles of incorporation and by-laws
and applicable law. The interpretation and construction by the Committee of any
provision of the Plan, any Grant or any Award Agreement shall be final and
conclusive.
3.3 Discretionary Grants. Subject to Section 3.4 hereof and to the other
--------------------
terms and conditions of the Plan, the Committee shall have full and final
authority to designate Grantees, (i) to determine the type or types of Grant to
be made to a Grantee, (ii) to determine the number of shares of Stock to be
subject to a Grant, (iii) to establish the terms and conditions of each Grant
(including, but not limited to, the exercise price of any Option, the nature and
duration of any restriction or condition (or provision for lapse thereof)
relating to the vesting, exercise, transfer,
4
<PAGE>
or forfeiture of a Grant or the shares of Stock subject thereto, and any terms
or conditions that may be necessary to qualify Options as Incentive Stock
Options), (iv) to prescribe the form of each Award Agreement evidencing a Grant,
and (v) to amend, modify, or supplement the terms of any outstanding Grant. Such
authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify Grants to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy, or
custom. As a condition to any subsequent Grant, the Committee shall have the
right, at its discretion, to require Grantees to return to the Company Grants
previously awarded under the Plan. Subject to the terms and conditions of the
Plan, any such new Grant shall be upon such terms and conditions as are
specified by the Committee at the time the new Grant is made.
3.4 Grants to Outside Directors. With respect to Grants of Options to
----------------------------
Outside Directors pursuant to Section 7 hereof, the Committee's responsibilities
under the Plan shall be limited to taking all legal actions necessary to
document the Options so granted, to interpret the Award Agreements evidencing
such Options, to maintain appropriate records and reports regarding such
Options, and to take all acts authorized by this Plan or otherwise reasonably
necessary to effect the purposes hereof.
3.5 No Liability. No member of the Board or of the Committee shall be
------------
liable for any action or determination made in good faith with respect to the
Plan or any Grant or Award Agreement.
3.6 Applicability of Rule 16b-3. Those provisions of the Plan that make
---------------------------
express reference to Rule 16b-3 under the Exchange Act shall apply only to
Reporting Persons.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 17 hereof, the number of shares
of Stock available for issuance under the Plan shall be 3,850,000. Stock issued
or to be issued under the Plan shall be authorized but unissued shares. If any
shares covered by a Grant are not purchased or are forfeited, or if a Grant
otherwise terminates without delivery of any Stock subject thereto, then the
number of shares of Stock counted against the aggregate number of shares
available under the Plan with respect to such Grant shall, to the extent of any
such forfeiture or termination, again be available for making Grants under the
Plan.
5
<PAGE>
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1 Effective Date. The Plan shall be effective as of the Effective Date,
--------------
subject to approval of the Plan within one year of the Effective Date, by a
majority of the votes cast on the proposal at a meeting of shareholders,
provided that the total votes cast represent a majority of all shares entitled
to vote. Upon approval of the Plan by the shareholders of the Company as set
forth above, all Grants made under the Plan on or after the Effective Date shall
be fully effective as if the shareholders of the Company had approved the Plan
on the Effective Date. If the shareholders fail to approve the Plan within one
year after the Effective Date, any Grants made hereunder shall be null and void
and of no effect.
5.2 Term. The Plan has no termination date; however, no Incentive Stock
----
Option may be granted on or after the tenth anniversary of the Effective Date.
6. DISCRETIONARY GRANTS
6.1 Company or Subsidiary Employees. Grants (including Grants of Incentive
-------------------------------
Stock Options) may be made under the Plan to any employee of the Company or of
any Subsidiary, including any such employee who is an officer or director of the
Company or of any Subsidiary, as the Committee shall determine and designate
from time to time.
6.2 Service Providers. Grants may be made under the Plan to any Service
-----------------
Provider whose participation in the Plan is determined by the Committee to be in
the best interests of the Company and is so designated by the Committee;
provided, however, that Grants to Service Providers who are not employees of the
- --------
Company or of any Subsidiary shall not be Incentive Stock Options.
6.3 Successive Grants. An eligible person may receive more than one Grant,
-----------------
subject to such restrictions as are provided herein.
7. GRANTS TO OUTSIDE DIRECTORS
7.1 Initial Grants of Options. Each Outside Director who is initially
-------------------------
elected to the Board on or after the Effective Date shall, upon the date of his
or her initial election by the Board or the shareholders of the Company,
automatically be awarded a Grant of an Option, which shall not be an Incentive
Stock Option, to purchase 15,000 shares of Stock (which amount shall be subject
to adjustment as provided in Section 17 hereof).
7.2 Subsequent Grants of Options. Immediately following each Annual
----------------------------
Meeting of Shareholders of the Company held after the Effective Date, each
Outside Director then duly elected and serving (other than an Outside Director
initially elected to the Board at such Annual Meeting of Shareholders) shall
automatically
6
<PAGE>
be awarded a Grant of an Option, which shall not be an Incentive Stock Option,
to purchase 2,500 shares of Stock (which amount shall be subject to adjustment
as provided in Section 17 hereof); provided, however, that no Outside Director
-----------------
shall be eligible to receive a Grant of Options under this Section 7.2 unless
such person attended, in person or by telephone, at least seventy-five percent
of the meetings held by the Board during the immediately preceding calendar year
(or such portion thereof during which the Outside Director served on the Board).
8. LIMITATIONS ON GRANTS
8.1 Limitation on Shares of Stock Subject to Grants. The maximum number of
------------------------------------------------
shares of Stock subject to Options that can be awarded under the Plan to any
person eligible for a Grant under Section 6 hereof is 2,500,000 during the first
ten years after the Effective Date and 250,000 per year thereafter. The maximum
number of shares of Restricted Stock that can be awarded under the Plan
(including for this purpose any shares of Stock represented by Restricted Stock
Units) to any person eligible for a Grant under Section 6 hereof is 250,000 per
year.
8.2 Limitations on Incentive Stock Options. An Option shall constitute an
---------------------------------------
Incentive Stock Option only (i) if the Grantee of such Option is an employee of
the Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the shares of Stock with respect to which all Incentive Stock Options held by
such Grantee become exercisable for the first time during any calendar year
(under the Plan and all other plans of the Grantee's employer and its
affiliates) does not exceed $100,000. This limitation shall be applied by
taking Options into account in the order in which they were granted.
9. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award Agreement, to
be executed by the Company and by the Grantee, in such form or forms as the
Committee shall from time to time determine. Award Agreements granted from time
to time or at the same time need not contain similar provisions but shall be
consistent with the terms of the Plan. Each Award Agreement evidencing a Grant
of Options shall specify whether such Options are intended to be non-qualified
stock options or Incentive Stock Options.
7
<PAGE>
10. OPTION PRICE
The Option Price of each Option shall be fixed by the Committee and stated
in the Award Agreement evidencing such Option. The Option Price shall be the
aggregate Fair Market Value on the Grant Date of the shares of Stock subject to
the Option; provided, however, that in the event that a Grantee would otherwise
-------- -------
be ineligible to receive an Incentive Stock Option by reason of the provisions
of Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than
ten percent of the Company's outstanding Stock), the Option Price of an Option
granted to such Grantee that is intended to be an Incentive Stock Option shall
be not less than the greater of the par value of a share of Stock or 110 percent
of the Fair Market Value of a share of Stock on the Grant Date. In no case
shall the Option Price of any Option be less than the par value of a share of
Stock.
11. VESTING, TERM AND EXERCISE OF OPTIONS
11.1 Vesting and Option Period. Each Option granted under the Plan shall
-------------------------
become exercisable in accordance with the following schedule: (i) prior to the
first anniversary of the Grant Date, the Option shall not be exercisable; (ii)
on the first anniversary of the Grant Date, the Option shall become exercisable
with respect to one-third of the shares of Stock subject to such Option; (iii)
on the second anniversary of the Grant Date, the Option shall become exercisable
with respect to an additional one-third of the shares of Stock subject to such
Option and (iv) on the third anniversary of the Grant Date, the Option shall
become exercisable with respect to the remaining shares of Stock subject to such
Option and shall remain exercisable in full up to (but not including) the
Termination Date (as defined in Section 11.2 hereof). For purposes of this
Section 11.1, fractional numbers of shares of Stock subject to an Option shall
be rounded down to the next nearest whole number. The period during which any
Option shall be exercisable in accordance with the foregoing schedule shall
constitute the "Option Period" with respect to such Option.
11.2 Term. Each Option granted under the Plan shall terminate, and all
----
rights to purchase shares of Stock thereunder shall cease, upon the expiration
of ten years from the date such Option is granted, or under such circumstances
and on such date prior thereto as is set forth in the Plan or as may be fixed by
the Committee and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee would
-------- -------
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the outstanding Stock), an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant Date.
8
<PAGE>
11.3 Acceleration. Any limitation on the exercise of an Option contained in
------------
any Award Agreement may be rescinded, modified or waived by the Committee, in
its sole discretion, at any time and from time to time after the Grant Date of
such Option, so as to accelerate the time at which the Option may be exercised.
Notwithstanding any other provision of the Plan, no Option shall be exercisable
in whole or in part prior to the date the Plan is approved by the shareholders
of the Company as provided in Section 5.1 hereof.
11.4 Termination of Employment or Other Relationship. Upon the termination
-----------------------------------------------
(i) of the employment of a Grantee with the Company or a Service Provider, (ii)
of a Service Provider's relationship with the Company, or (iii) of an Outside
Director's service to the Company, other than, in the case of individuals, by
reason of death or "permanent and total disability" (within the meaning of
Section 22(e)(3) of the Code), any Option or portion thereof held by such
Grantee that has not vested in accordance with the provisions of Section 11.1
hereof shall terminate immediately, and any Option or portion thereof that has
vested in accordance with the provisions of Section 11.1 hereof but has not been
exercised shall terminate at the close of business on the thirtieth day
following the Grantee's termination of service, employment, or other
relationship, unless the Committee, in its discretion, extends the period during
which the Option may be exercised (which period may not be extended beyond the
original term of the Option). Upon termination of an Option or portion thereof,
the Grantee shall have no further right to purchase shares of Stock pursuant to
such Option or portion thereof. Whether a leave of absence or leave on military
or government service shall constitute a termination of employment for purposes
of the Plan shall be determined by the Committee, which determination shall be
final and conclusive. For purposes of the Plan, a termination of employment,
service or other relationship shall not be deemed to occur if the Grantee is
immediately thereafter employed with the Company or any other Service Provider,
or is engaged as a Service Provider or an Outside Director of the Company.
Whether a termination of a Service Provider's or an Outside Director's
relationship with the Company shall have occurred shall be determined by the
Committee, which determination shall be final and conclusive.
11.5 Rights in the Event of Death. If a Grantee dies while employed by the
----------------------------
Company or a Service Provider, or while serving as a Service Provider or an
Outside Director, all Options granted to such Grantee shall fully vest on the
date of death, and the executors or administrators or legatees or distributees
of such Grantee's estate shall have the right, at any time within one year after
the date of such Grantee's death (or such longer period as the Committee, in its
discretion, may determine prior to the expiration of such one-year period) and
prior to termination of the Option pursuant to Section 11.2 above, to exercise
any Option held by such Grantee at the date of such Grantee's death.
11.6 Rights in the Event of Disability. If a Grantee terminates employment
---------------------------------
with the Company or a Service Provider, or (if the Grantee is a Service Provider
9
<PAGE>
who is an individual or is an Outside Director) ceases to provide services to
the Company, in either case by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Grantee, such
Grantee's Options shall continue to vest, and shall be exercisable to the extent
that they are vested, for a period of one year after such termination of
employment or service (or such longer period as the Committee, in its
discretion, may determine prior to the expiration of such one-year period),
subject to earlier termination of the Option as provided in Section 11.2 above.
Whether a termination of employment or service is to be considered by reason of
"permanent and total disability" for purposes of the Plan shall be determined by
the Committee, which determination shall be final and conclusive.
11.7 Limitations on Exercise of Option. Notwithstanding any other provision
---------------------------------
of the Plan, in no event may any Option be exercised, in whole or in part, prior
to the date the Plan is approved by the shareholders of the Company as provided
herein, or after ten years following the date upon which the Option is granted,
or after the occurrence of an event referred to in Section 17 hereof which
results in termination of the Option.
11.8 Method of Exercise. An Option that is exercisable may be exercised by
------------------
the Grantee's delivery to the Company of written notice of exercise on any
business day, at the Company's principal office, addressed to the attention of
the Committee. Such notice shall specify the number of shares of Stock with
respect to which the Option is being exercised and shall be accompanied by
payment in full of the Option Price of the shares for which the Option is being
exercised. The minimum number of shares of Stock with respect to which an
Option may be exercised, in whole or in part, at any time shall be the lesser of
(i) 100 shares or such lesser number set forth in the applicable Award Agreement
and (ii) the maximum number of shares available for purchase under the Option at
the time of exercise. Payment of the Option Price for the shares purchased
pursuant to the exercise of an Option shall be made (i) in cash or in cash
equivalents; (ii) through the tender to the Company of shares of Stock, which
shares shall be valued, for purposes of determining the extent to which the
Option Price has been paid thereby, at their Fair Market Value on the date of
exercise; or (iii) by a combination of the methods described in (i) and (ii).
The Committee may provide, by inclusion of appropriate language in an Award
Agreement, that payment in full of the Option Price need not accompany the
written notice of exercise provided that the notice of exercise directs that the
certificate or certificates for the shares of Stock for which the Option is
exercised be delivered to a licensed broker acceptable to the Company as the
agent for the individual exercising the Option and, at the time such certificate
or certificates are delivered, the broker tenders to the Company cash (or cash
equivalents acceptable to the Company) equal to the Option Price for the shares
of Stock purchased pursuant to the exercise of the Option plus the amount (if
any) of federal and/or other taxes which the Company may in its judgment, be
required to withhold with respect to the exercise of the Option. An attempt to
exercise any Option granted
10
<PAGE>
hereunder other than as set forth above shall be invalid and of no force and
effect. Unless otherwise stated in the applicable Award Agreement, an individual
holding or exercising an Option shall have none of the rights of a shareholder
(for example, the right to receive cash or dividend payments or distributions
attributable to the subject shares of Stock or to direct the voting of the
subject shares of Stock ) until the shares of Stock covered thereby are fully
paid and issued to him. Except as provided in Section 17 hereof, no adjustment
shall be made for dividends, distributions or other rights for which the record
date is prior to the date of such issuance.
11.9 Delivery of Stock Certificates. Promptly after the exercise of an
------------------------------
Option by a Grantee and the payment in full of the Option Price, such Grantee
shall be entitled to the issuance of a stock certificate or certificates
evidencing his or her ownership of the shares of Stock subject to the Option.
12. TRANSFERABILITY OF OPTIONS
Each Option granted pursuant to this Plan shall, during a Grantee's
lifetime, be exercisable only by the Grantee or his or her permitted
transferees, and neither the Option nor any right thereunder shall be
transferable by the Grantee, by operation of law or otherwise, other than as may
be provided in the Award Agreement evidencing such Option or as may be provided
by will or the laws of descent and distribution. Except as may be provided in
the Award Agreement evidencing an Option, no Option shall be pledged or
hypothecated (by operation of law or otherwise) or subject to execution,
attachment or similar processes.
13. RESTRICTED STOCK
13.1 Grant of Restricted Stock or Restricted Stock Units. The Committee may
---------------------------------------------------
from time to time grant Restricted Stock or Restricted Stock Units to persons
eligible to receive such Grants as set forth in Section 6 hereof, subject to
such restrictions, conditions and other terms as the Committee may determine.
13.2 Restrictions. At the time a Grant of Restricted Stock or Restricted
------------
Stock Units is made, the Committee shall establish a period of time (the
"Restricted Period") applicable to such Restricted Stock or Restricted Stock
Units. Each Grant of Restricted Stock or Restricted Stock Units may be subject
to a different Restricted Period. The Committee may, in its sole discretion, at
the time a Grant of Restricted Stock or Restricted Stock Units is made,
prescribe restrictions in addition to or other than the expiration of the
Restricted Period, including the satisfaction of corporate or individual
performance objectives, which may be applicable to all or any portion of the
Restricted Stock or Restricted Stock Units. Such performance objectives shall
be established in writing by the Committee prior to the ninetieth day of the
year in which the Grant is made and while the outcome is substantially
uncertain. Performance objectives shall be based on Stock price,
11
<PAGE>
market share, sales, earnings per share, return on equity or costs. Performance
objectives may include positive results, maintaining the status quo or limiting
economic losses. The Committee also may, in its sole discretion, shorten or
terminate the Restricted Period or waive any other restrictions applicable to
all or a portion of the Restricted Stock or Restricted Stock Units. Neither
Restricted Stock nor Restricted Stock Units may be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the Restricted Period or
prior to the satisfaction of any other restrictions prescribed by the Committee
with respect to such Restricted Stock or Restricted Stock Units.
13.3 Restricted Stock Certificates. The Company shall issue, in the name of
-----------------------------
each Grantee to whom Restricted Stock has been granted, stock certificates
representing the total number of shares of Restricted Stock granted to the
Grantee, as soon as reasonably practicable after the Grant Date. The Secretary
of the Company shall hold such certificates for the Grantee's benefit until such
time as the Restricted Stock is forfeited to the Company, or the restrictions
lapse.
13.4 Rights of Holders of Restricted Stock. Unless the Committee otherwise
-------------------------------------
provides in an Award Agreement, holders of Restricted Stock shall have the right
to vote such Stock and the right to receive any dividends declared or paid with
respect to such Stock. The Committee may provide that any dividends paid on
Restricted Stock must be reinvested in shares of Stock, which may or may not be
subject to the same vesting conditions and restrictions applicable to such
Restricted Stock. All distributions, if any, received by a Grantee with respect
to Restricted Stock as a result of any stock split, stock dividend, combination
of shares, or other similar transaction shall be subject to the restrictions
applicable to the original Grant.
13.5 Rights of Holders of Restricted Stock Units. Unless the Committee
-------------------------------------------
otherwise provides in an Award Agreement, holders of Restricted Stock Units
shall have no rights as stockholders of the Company. The Committee may provide
in an Award Agreement evidencing a Grant of Restricted Stock Units that the
holder of such Restricted Stock Units shall be entitled to receive, upon the
Company's payment of a cash dividend on its outstanding Stock, a cash payment
for each Restricted Stock Unit held equal to the per-share dividend paid on the
Stock. Such Award Agreement may also provide that such cash payment will be
deemed reinvested in additional Restricted Stock Units at a price per unit equal
to the Fair Market Value of a share of Stock on the date that such dividend is
paid.
13.6 Termination of Employment or Other Relationship. Upon the termination
-----------------------------------------------
of the employment of a Grantee with the Company or a Service Provider, or of a
Service Provider's relationship with the Company, in either case other than, in
the case of individuals, by reason of death or "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code), any Restricted Stock or
Restricted Stock Units held by such Grantee that has not vested, or with
12
<PAGE>
respect to which all applicable restrictions and conditions have not lapsed,
shall immediately be deemed forfeited, unless the Committee, in its discretion,
determines otherwise. Upon forfeiture of Restricted Stock or Restricted Stock
Units, the Grantee shall have no further rights with respect to such Grant,
including but not limited to any right to vote Restricted Stock or any right to
receive dividends with respect to shares of Restricted Stock or Restricted Stock
Units. Whether a leave of absence or leave on military or government service
shall constitute a termination of employment for purposes of the Plan shall be
determined by the Committee, which determination shall be final and conclusive.
For purposes of the Plan, a termination of employment, service or other
relationship shall not be deemed to occur if the Grantee is immediately
thereafter employed with the Company or any other Service Provider, or is
engaged as a Service Provider. Whether a termination of a Service Provider's
relationship with the Company shall have occurred shall be determined by the
Committee, which determination shall be final and conclusive.
13.7 Rights in the Event of Death. If a Grantee dies while employed by the
----------------------------
Company or a Service Provider or while serving as a Service Provider, all
Restricted Stock or Restricted Stock Units granted to such Grantee shall fully
vest on the date of death, and the shares of Stock represented thereby shall be
deliverable in accordance with the terms of the Plan to the executors,
administrators, legatees or distributees of the Grantee's estate.
13.8 Rights in the Event of Disability. If a Grantee terminates employment
---------------------------------
with the Company or a Service Provider, or (if the Grantee is a Service Provider
who is an individual) ceases to provide services to the Company, in either case
by reason of the "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code) of such Grantee, such Grantee's Restricted Stock or
Restricted Stock Units shall continue to vest in accordance with the applicable
Award Agreement for a period of one year after such termination of employment or
service (or such longer period as the Committee, in its discretion, may
determine prior to the expiration of such one-year period), subject to the
earlier forfeiture of such Restricted Stock or Restricted Stock Units in
accordance with the terms of the applicable Award Agreement. Whether a
termination of employment or service is to be considered by reason of "permanent
and total disability" for purposes of the Plan shall be determined by the
Committee, which determination shall be final and conclusive.
13.9 Delivery of Stock and Payment Therefor. Upon the expiration or
--------------------------------------
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to shares of
Restricted Stock or Restricted Stock Units shall lapse, and, upon payment by the
Grantee to the Company, in cash or by check, of the aggregate par value of the
shares of Stock represented by such Restricted Stock or Restricted Stock Units,
a stock certificate
13
<PAGE>
for such shares shall be delivered, free of all such restrictions, to the
Grantee or the Grantee's beneficiary or estate, as the case may be.
14. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Company or any Subsidiary, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
participants or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any
payment or other benefit under this Plan shall not become exercisable or vested
(i) to the extent that such right to exercise, vesting, payment, or benefit,
taking into account all other rights, payments, or benefits to or for the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements,
would cause any payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
---
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Grantee from the Company under this Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount that could be
received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Grantee as described in clause
(ii) of the preceding sentence, then the Grantee shall have the right, in the
Grantee's sole discretion, to designate those rights, payments, or benefits
under this Plan, any Other Agreements, and any Benefit Arrangements that should
be reduced or eliminated so as to avoid having the payment or benefit to the
Grantee under this Plan be deemed to be a Parachute Payment.
14
<PAGE>
15. REQUIREMENTS OF LAW
15.1 General. The Company shall not be required to sell or issue any shares
-------
of Stock under any Grant if the sale or issuance of such shares would constitute
a violation by the Grantee, any other individual exercising an Option, or the
Company of any provision of any law or regulation of any governmental authority,
including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion,
that the listing, registration or qualification of any shares subject to a
Grant upon any securities exchange or under any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to such Grant
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Company,
and any delay caused thereby shall in no way affect the date of termination of
the Grant. Specifically, in connection with the Securities Act, upon the
exercise of any Option or the delivery of any shares of Restricted Stock or
Stock underlying Restricted Stock Units, unless a registration statement under
such Act is in effect with respect to the shares of Stock covered by such Grant,
the Company shall not be required to sell or issue such shares unless the
Committee has received evidence satisfactory to it that the Grantee or any other
individual exercising an Option may acquire such shares pursuant to an
exemption from registration under the Securities Act. Any determination in this
connection by the Committee shall be final, binding, and conclusive. The
Company may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the Securities Act. The Company shall not be
obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares of Stock pursuant to the Plan to comply with
any law or regulation of any governmental authority. As to any jurisdiction
that expressly imposes the requirement that an Option shall not be exercisable
until the shares of Stock covered by such Option are registered or are exempt
from registration, the exercise of such Option (under circumstances in which the
laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
15.2 Rule 16b-3. It is the intent of the Company that Grants pursuant to
----------
the Plan and the exercise of Options granted hereunder will qualify for the
exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any
provision of the Plan or action by the Committee 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 Committee, and shall not affect the
validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the
Board may exercise its discretion to modify this Plan in any respect necessary
to satisfy the requirements of, or to take advantage of any features of, the
revised exemption or its replacement.
15
<PAGE>
16. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Grants have not been
made; provided, however, that the Board shall not, without approval of the
-------- -------
Company's shareholders, amend the Plan such that it does not comply with the
Code. The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of the Grantee taking
actions in "competition with the Company," as defined in the applicable Award
Agreement. Furthermore, the Company may annul a Grant if the Grantee is an
employee of the Company or an affiliate and is terminated "for cause" as defined
in the applicable Award Agreement. Except as permitted under this Section 16 or
Section 17 hereof, no amendment, suspension, or termination of the Plan shall,
without the consent of the Grantee, alter or impair rights or obligations under
any Grant theretofore awarded under the Plan.
17. EFFECT OF CHANGES IN CAPITALIZATION
17.1 Changes in Stock. If the number of outstanding shares of Stock is
----------------
increased or decreased or the shares of Stock are changed into or exchanged for
a different number or kind of shares or other securities of the Company on
account of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the Effective
Date, the number and kinds of shares for which Grants of Options, Restricted
Stock and Restricted Stock Units may be made under the Plan shall be adjusted
proportionately and accordingly by the Company. In addition, the number and
kind of shares for which Grants are outstanding shall be adjusted
proportionately and accordingly so that the proportionate interest of the
Grantee immediately following such event shall, to the extent practicable, be
the same as immediately before such event. Any such adjustment in outstanding
Options shall not change the aggregate Option Price payable with respect to
shares that are subject to the unexercised portion of the Option outstanding but
shall include a corresponding proportionate adjustment in the Option Price per
share.
17.2 Reorganization in Which the Company Is the Surviving Entity and in
------------------------------------------------------------------
Which No Change of Control Occurs. Subject to Section 17.3 hereof, if the
- ---------------------------------
Company shall be the surviving entity in any reorganization, merger, or
consolidation of the Company with one or more other entities, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price
16
<PAGE>
of the shares remaining subject to the Option immediately prior to such
reorganization, merger, or consolidation. Subject to any contrary language in an
Award Agreement evidencing a Grant of Restricted Stock, any restrictions
applicable to such Restricted Stock shall apply as well to any replacement
shares received by the Grantee as a result of the reorganization, merger or
consolidation.
17.3 Reorganization, Sale of Assets or Sale of Stock Which Involves a Change
-----------------------------------------------------------------------
of Control. Upon the dissolution or liquidation of the Company or upon a
- -----------
merger, consolidation, or reorganization of the Company with one or more other
entities in which the Company is not the surviving entity, or upon a sale of
substantially all of the assets of the Company to another entity, or upon any
transaction (including, without limitation, a merger or reorganization in which
the Company is the surviving entity) approved by the Board that results in any
person or entity (or person or entities acting as a group or otherwise in
concert, other than B. Wayne Hughes and members of his family and their
affiliates) owning fifty percent or more of the combined voting power of all
classes of securities of the Company, (i) all outstanding shares of Restricted
Stock and Restricted Stock Units shall be deemed to have vested, and all
restrictions and conditions applicable to such shares of Restricted Stock and
Restricted Stock Units shall be deemed to have lapsed, immediately prior to the
occurrence of such event, and (ii) all Options outstanding hereunder shall
become immediately exercisable for a period of fifteen days immediately prior to
the scheduled consummation of the event. Any exercise of an Option during such
fifteen-day period shall be conditioned upon the consummation of the event and
shall be effective only immediately before the consummation of the event. Upon
consummation of any such event, the Plan and all outstanding but unexercised
Options shall terminate, except to the extent provision is made in writing in
connection with such transaction for the continuation of the Plan or the
assumption of such Options theretofore granted, or for the substitution for such
Options of new options covering the stock of a successor Company, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares or units and exercise prices, in which event the Plan and Options
theretofore granted shall continue in the manner and under the terms so
provided. The Committee shall send written notice of an event that will result
in such a termination to all individuals who hold Options not later than the
time at which the Company gives notice thereof to its shareholders.
17.4 Adjustments. Adjustments under this Section 17 related to shares of
-----------
Stock or securities of the Company shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive. No
fractional shares or other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share.
17.5 No Limitations on Company. The making of Grants pursuant to the Plan
-------------------------
shall not affect or limit in any way the right or power of the Company to make
17
<PAGE>
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, consolidate, dissolve, or liquidate, or to sell
or transfer all or any part of its business or assets.
18. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company or any Service Provider
either to increase or decrease the compensation or other payments to any
individual at any time, or to terminate any employment or other relationship
between any individual and the Company or a Service Provider. No provision in
the Plan or in any Grant awarded or Award. Agreement entered into pursuant to
the Plan shall be construed to confer upon any individual the right to remain in
the service of the Company as a director (including as an Outside Director), or
shall interfere with or restrict in any way the rights of the Company's
shareholders to remove any director pursuant to the provisions of the California
General Corporation Law, as from time to time amended. In addition,
notwithstanding anything contained in the Plan to the contrary, unless otherwise
stated in the applicable Award Agreement, no Grant awarded under the Plan shall
be affected by any change of duties or position of the Optionee (including a
transfer to or from the Company or a Service Provider), so long as such Grantee
continues to be a director, officer, consultant, employee, or independent
contractor (as the case may be) of the Company or a Service Provider. The
obligation of the Company to pay any benefits pursuant to this Plan shall be
interpreted as a contractual obligation to pay only those amounts described
herein, in the manner and under the conditions prescribed herein. The Plan
shall in no way be interpreted to require the Company to transfer any amounts to
a third party trustee or otherwise hold any amounts in trust or escrow for
payment to any participant or beneficiary under the terms of the Plan. No
Grantee shall have any of the rights of a shareholder with respect to the shares
of Stock subject to an Option except to the extent the certificates for such
shares of Stock shall have been issued upon the exercise of the Option.
19. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
18
<PAGE>
20. WITHHOLDING TAXES
The Company, a Subsidiary or a Service Provider, as the case may be, shall
have the right to deduct from payments of any kind otherwise due to a Grantee
any Federal, state, or local taxes of any kind required by law to be withheld
with respect to the vesting of or other lapse of restrictions applicable to
Restricted Stock or Restricted Stock Units or upon the issuance of any shares of
Stock upon the exercise of an Option. At the time of such vesting, lapse, or
exercise, the Grantee shall pay to the Company, the Subsidiary or the Service
Provider, as the case may be, any amount that the Company, the Subsidiary or the
Service Provider may reasonably determine to be necessary to satisfy such
withholding obligation. Subject to the prior approval of the Company, the
Subsidiary or the Service Provider, which may be withheld by the Company, the
Subsidiary or the Service Provider, as the case may be, in its sole discretion,
the Grantee may elect to satisfy such obligations, in whole or in part, (i) by
causing the Company, the Subsidiary or the Service Provider to withhold shares
of Stock otherwise issuable pursuant to the Grantee or (ii) by delivering to the
Company, the Subsidiary or the Service Provider shares of Stock already owned by
the Grantee. The shares of Stock so delivered or withheld shall have an
aggregate Fair Market Value equal to such withholding obligations. The Fair
Market Value of the shares of Stock used to satisfy such withholding obligation
shall be determined by the Company, the Subsidiary or the Service Provider as of
the date that the amount of tax to be withheld is to be determined. A Grantee
who has made an election pursuant to this Section 20 may satisfy his or her
withholding obligation only with shares of Stock that are not subject to any
repurchase, forfeiture, unfulfilled vesting, or other similar requirements.
21. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
22. OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Committee,
in its sole discretion.
23. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include the
plural form, the masculine gender shall include the feminine gender, etc., as
the context requires.
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24. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
25. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing
the Grants awarded hereunder shall be governed by the laws of the State of
California.
* * *
The Plan was duly adopted and approved by the Board of Directors of the
Company as of the 13th day of August, 1996.
/s/ SARAH HASS
----------------
Sarah Hass
Secretary of the Company
The Plan was duly approved by the shareholders of the Company on the
________ day of ______________, 1996.
--------------------
Sarah Hass
Secretary of the Company
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