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SEEQ TECHNOLOGY INCORPORATED
RESTATED 1982 STOCK OPTION PLAN
AMENDED AND RESTATED THROUGH FEBRUARY 1, 1996
I. PURPOSE OF THE PLAN
This Restated 1982 Stock Option Plan (the "Plan") is a consolidation of two
pre-existing stock option plans maintained by SEEQ Technology Incorporated, a
Delaware corporation ("Company"): (i) the 1982 Incentive Stock Option Plan and
(ii) the 1982 Supplemental Stock Option Plan, and this restated Plan shall
accordingly supersede those two plans and serve as their successor. The Plan is
intended to promote the interests of the Company, by providing a method whereby
(i) employees (including officers) of the Company and its parent or subsidiary
corporations who are primarily responsible for the management, growth and
financial success of the Company and its parent or subsidiary corporations and
(ii) consultants or other independent contractors (other than non-employee
members of the Board) who perform valuable services for the Company and its
parent or subsidiary corporations may be offered incentives and rewards which
will encourage them to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Company and continue to render services to
the Company or its parent or subsidiary corporations.
II. ADMINISTRATION OF THE PLAN
The Plan shall be administered in accordance with the following standards:
(a) The Company's Board of Directors (the "Board") shall appoint a
committee ("Committee") consisting of not less than two (2) Board members
to administer the Plan, including (without limitation) the power to grant
options under the Plan, the power to accelerate the exercisability of
granted options and the power to administer the option surrender provisions
of the Plan. This committee shall function as the "Primary Committee under
the Plan and shall have sole and exclusive authority to grant stock options
to officers of the Company who are Board members. No Board member shall be
eligible to serve on the Primary Committee if such individual has, within
the twelve (12)-month period immediately preceding the date he is to be
appointed to the Primary Committee, received an option grant under this
Plan or an option grant or stock issuance under any other stock option,
stock appreciation, stock bonus or other stock plan of the Company (or any
parent or subsidiary corporation), other than the SEEQ Technology
Incorporated 1989 Non-Employee Director Stock Option Plan.
(b) Administration of the Plan with respect to the officers of the
Company who are not Board members and all other key employees eligible to
participate in the Plan may, at the Board's discretion, be vested in the
Primary Committee or in a secondary committee of two or more Board members
appointed by the Board, or the Board may retain the power to administer the
Plan with respect to all individuals who are not Board members. Should a
secondary committee be appointed, the membership may include Board members
who are employees of the Company eligible to receive option grants under
this Plan or option grants or stock issuances under any other stock option,
stock appreciation, stock bonus or other stock plan of the Company (or any
parent or subsidiary corporation).
(c) Members of the Primary Committee or any secondary committee shall
serve for such term as the Board may determine and shall be subject to
removal by the Board at any time.
(d) The term "Plan Administrator" as used from time to time in this
plan document shall mean the particular entity, whether the Primary
Committee or any secondary committee, which is authorized to administer the
option grant and option surrender provisions of the Plan with respect to
one or more classes of eligible individuals, to the extent such entity is
carrying out its administrative functions under the Plan with respect to
those individuals.
(e) The Plan Administrator shall have full power and authority
(subject to the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the
plan functions within the scope of its administrative authority and to make
any and all
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determinations with respect to those functions which it may deem necessary
or advisable. All decisions of the Plan Administrator within the scope of
its administrative authority under the Plan shall be final and binding on
all parties who have an interest in any outstanding option granted pursuant
to such authority.
III. ELIGIBILITY FOR OPTION GRANTS
(a) The persons who shall be eligible to receive options pursuant to the
Plan are those employees (including officers) and consultants or other
independent contractors (other than non-employee members of the Board) of the
Company or its parent or subsidiary corporations who render services which tend
to contribute materially to the success of the Company or its parent or
subsidiary corporations or which may reasonably be anticipated to contribute
materially to the future success of the Company or its parent or subsidiary
corporations.
(b) Non-employee members of the Board shall not be eligible to participate
in the Plan or in any other stock bonus, stock purchase, stock option or other
stock plan of the Company or its parent or subsidiary corporations other than
the SEEQ Technology Incorporated 1989 Non-Employee Director Stock Option Plan.
(c) The Plan Administrator shall have the sole and exclusive authority,
within the scope of its administrative functions under the Plan, to select the
eligible individuals who are to receive option grants under the Plan and to
determine the number of shares to be covered by each such option grant, the
status of the granted option as either an incentive stock option ("Incentive
Option") which satisfies the requirements of Section 422 of the Internal Revenue
Code or a non-qualified option not intended to meet such requirements, the time
or times at which such option is to become exercisable and the maximum term for
which the option is to remain outstanding.
(d) For purposes of this Plan, the following provisions shall be applicable
in determining the parent and subsidiary corporations of the Company:
(i) Any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company shall be considered to be a parent
corporation of the Company, provided each such corporation in the unbroken
chain (other than the Company) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
(ii) Each corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company shall be considered to be a
subsidiary of the Company, provided each such corporation (other than the
last corporation) in the unbroken chain owns, at the time of determination,
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
IV. STOCK SUBJECT TO THE PLAN
(a) The stock issuable under the Plan shall be shares of the Company's
authorized but unissued or reacquired common stock ("Common Stock"). The maximum
number of shares of Common Stock issuable over the term of the Plan shall not
exceed 7,760,000 shares. However, not more than 5,520,629 shares may be issued
under the Plan after February 1, 1996. The maximum number of shares issuable
over the term of the Plan and the maximum number of shares issuable after
February 1, 1996 shall be subject to periodic adjustment under subparagraph (d)
below in the event of certain changes in the Company's capital structure.
(b) Should an option terminate for any reason prior to exercise or
surrender in full (including options cancelled in accordance with the
cancellation-regrant provisions of Article VIII of the Plan), the shares subject
to the portion of the option not so exercised or surrendered shall be available
for subsequent option grants under this Plan. Shares subject to any option or
portion thereof surrendered or cancelled in accordance with Article IX of the
Plan and all share issuances under the Plan, whether or not the shares are
subsequently repurchased by the Company pursuant to its repurchase rights under
the Plan, shall reduce on a share-for-share basis the number of shares of Common
Stock available for subsequent option grants under the Plan. In
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addition, should the exercise price of an outstanding option under the Plan be
paid with shares of Common Stock or should shares of Common Stock otherwise
issuable under the Plan be withheld by the Company in satisfaction of the
withholding taxes incurred in connection with the exercise of an outstanding
option under the Plan, then the number of shares of Common Stock available for
issuance under the Plan shall be reduced by the gross number of shares for which
the option is exercised, and not by the net number of shares of Common Stock
actually issued to the option holder.
(c) The maximum number of shares of Common Stock for which any one
individual participating in this Plan may be granted stock options over the
remaining term of this Plan shall not exceed 2,500,000 shares. For purposes of
this latter limitation, any stock option grants made prior to January 1, 1994
shall not be taken into account. The maximum number of shares for which any one
participant may be granted stock options under the Plan after December 31, 1993
shall be subject to periodic adjustment under subparagraph (d) below in the
event of certain changes in the Company's capital structure.
(d) In the event any change is made to the Common Stock issuable under the
Plan by reason of any stock dividend, stock split, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding shares
of the Common Stock as a class without the Company's receipt of consideration,
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable over the term of the Plan, the maximum number and/or class
of securities issuable thereunder after February 1, 1996 and the maximum number
and/or class of securities for which any one individual participating in the
Plan may be granted stock options after December 31, 1993 and (ii) the number
and/or class of securities and the price per share in effect under each
outstanding option in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Primary Committee shall be final,
binding and conclusive.
V. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of the
Plan Administrator and may, at the discretion of the Plan Administrator, be
either Incentive Options or non-statutory options. Individuals who are not
employees of the Company or its parent or subsidiary corporations may only be
granted non-statutory options. Each granted option shall be evidenced by one or
more instruments in such form as the Plan Administrator shall from time to time
approve; provided, however, that each such instrument shall comply with the
terms and conditions specified below. Each instrument evidencing an Incentive
Option shall, in addition, be subject to the applicable provisions of Article
VI.
1. Option Price.
A. The option price per share shall be fixed by the Plan Administrator, but
in no event shall the option price per share be less than eighty-five percent
(85%) of the fair market value per share of Common Stock on the grant date.
B. If any individual to whom an option is to be granted pursuant to the
provisions of the Plan is on the date of grant the owner of stock (as determined
under Section 424(d) of the Internal Revenue Code) possessing 10% or more of the
total combined voting power of all classes of stock of the Company or any one of
its parent or subsidiary corporations (such person to be herein referred to as a
"10% Stockholder"), then the option price per share shall not be less than one
hundred ten percent (110%) of the fair market value per share of Common Stock on
the grant date.
C. The option price shall become immediately due upon exercise of the
option and shall, subject to the provisions of Article IX, be payable in one of
the alternative forms specified below:
(i) full payment in cash or check payable to the Company's order; or
(ii) full payment in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Company's earnings for financial
reporting purposes and valued at fair market value on the Exercise Date (as
such term is defined below) equal to the option price; or
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(iii) full payment through a combination of shares of Common Stock
held by the optionee for the requisite period necessary to avoid a charge
to the Company's reported earnings and valued at fair market value on the
Exercise Date and cash or check payable to the Company's order; or
(iv) full payment through a special sale and remittance procedure
pursuant to which the optionee is to provide irrevocable written
instructions (I) to a Company-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Company, out of the
sale proceeds available on the settlement date, an amount sufficient to
cover the aggregate option price payable for the purchased shares plus all
applicable Federal and State income and employment taxes required to be
withheld by the Company by reason of such purchase and (II) to the Company
to deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
For purposes of this subparagraph C, the Exercise Date shall be the date on
which written notice of the option exercise is delivered to the Company. Except
to the extent the sale and remittance procedure is utilized in connection with
the option exercise, payment of the option price for the purchased shares must
accompany such exercise notice.
D. The fair market value of a share of Common Stock on any relevant date
under subparagraph A, B or C above (and for all other valuation purposes under
the Plan) shall be determined in accordance with the following provisions:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the Nasdaq National Market,
then the fair market value shall be the closing selling price per share of
Common Stock on the date in question, as reported by the National
Association of Securities Dealers on the Nasdaq National Market. If there
is no reported closing selling on the date in question, then the closing
selling price on the last preceding date for which such quotation exists
shall be determinative of fair market value.
(ii) If the Common Stock is at the time listed or admitted to trading
on any national securities exchange, then the fair market value shall be
the closing selling price per share of Common Stock on the date in question
on the securities exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially quoted on
such exchange. If there is no reported sale of Common Stock on such
exchange on the date in question, then the fair market value shall be the
closing selling price of the Common Stock on the exchange on the last
preceding date for which such quotation exists.
2. Term and Exercise of Options. Each option granted under the Plan shall
be exercisable at such time or times, during such period, and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
instrument evidencing such option. However, no option granted under this Plan
shall have a term in excess of ten (10) years from the grant date. No option or
stock appreciation right outstanding under the Plan shall be assignable or
transferable by the optionee other than a transfer of the option by will or by
the laws of descent and distribution following the optionee's death, and during
the optionee's lifetime the option and all stock appreciation rights pertaining
to such option shall be exercisable only by the optionee.
3. Effect of Termination of Employment.
A. Should an optionee cease to be an Employee of the Company for any reason
(including death or permanent disability as defined in Section 22(e)(3) of the
Internal Revenue Code) while the holder of one or more outstanding options
granted to such optionee under the Plan, then such option or options shall in no
event remain exercisable for more than a twenty-four (24) month period (or such
shorter period as is determined by the Plan Administrator and set forth in the
option agreement) following the date of such cessation of Employee status, but
under no circumstances shall any such option be exercisable after the specified
expiration date of the option term. Each such option shall, during such
twenty-four (24) month or shorter period, be exercisable only to the extent of
the number of shares (if any) for which the option is exercisable on the date of
such cessation of Employee status. Upon the expiration of such twenty-four (24)
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month or shorter period or (if earlier) upon the expiration of the option term,
the option shall terminate and cease to be exercisable.
B. Any option granted to an optionee under the Plan and exercisable in
whole or in part on the date of the optionee's death may be subsequently
exercised, but only to the extent of the number of shares (if any) for which the
option is exercisable on the date of the optionee's cessation of Employee status
(less any option shares which the Optionee may subsequently purchase prior to
death), by the personal representative of the optionee's estate or by the person
or persons to whom the option is transferred pursuant to the optionee's will or
in accordance with the laws of descent and distribution, provided and only if
such exercise occurs prior to the earlier of (i) the expiration of the
eighteen-(18) month period following the death of the optionee or (ii) the
specified expiration date of the option term. Upon the occurrence of the earlier
event, the option shall terminate and cease to be exercisable.
C. If (i) the optionee's status as an Employee is terminated for cause
(including, but not limited to, any act of dishonesty, willful misconduct, fraud
or embezzlement or any unauthorized disclosure or use of confidential
information or trade secrets) or (ii) the optionee makes or attempts to make any
unauthorized use or disclosure of confidential information or trade secrets of
the Company or its parent or subsidiary corporations, then in any such event all
outstanding options granted the optionee under the Plan shall immediately
terminate and cease to be exercisable.
D. Notwithstanding subparagraphs A, B and C above, the Plan Administrator
shall have complete discretion, exercisable either at the time the option is
granted or at any time during which the option remains outstanding, to extend
the period of time for which the option is to remain exercisable following the
optionee's cessation of Employee status from the twenty-four (24) month or
shorter period previously established by the Plan Administrator and set forth in
the option agreement to such greater period of time as the Plan Administrator
shall deem appropriate; provided, however, that no option shall be exercisable
after the specified expiration date of the option term. The Plan Administrator
shall have similar discretion to establish as a provision applicable to the
exercise of one or more options granted under the Plan that during the period of
exercisability following cessation of Employee status (as provided in
subparagraph V.3.A. or V.3.B above), the option may be exercised not only with
respect to the number of shares for which it is exercisable at the time of the
optionee's cessation of Employee status but also with respect to one or more
installments of purchasable shares for which the option otherwise would have
become exercisable had such cessation of Employee status not occurred.
E. For purposes of the foregoing provisions of this Paragraph V.3, the
optionee shall be deemed to be an Employee of the Company for so long as the
optionee remains in the employ of the Company or one or more of parent or
subsidiary corporations.
F. If the option is granted to a consultant or other independent
contractor, then the instruments evidencing the granted option shall include
provisions comparable to subparagraphs V.3.A, V.3.B and V.3.C above, and may
include provisions comparable to subparagraph V.3.D above, with respect to the
optionee's termination of service with the Company or its parent or subsidiary
corporations.
4. Stockholder Rights. An option holder shall have none of the rights of a
stockholder with respect to any shares covered by the option until such
individual shall have exercised the option, paid the option price and been
issued a stock certificate for the purchased shares.
5. Repurchase Price. The shares of Common Stock acquired upon the exercise
of options granted under the Plan may be subject to one or more repurchase
rights of the Company in accordance with the following provisions:
(a) The Plan Administrator effecting the option grants may in its
discretion determine that it shall be a term and condition of one or more
of the granted options that the Company (or its assigns) shall have the
right, exercisable upon the optionee's cessation of Employee status, to
repurchase at the original option price any or all of the unvested shares
of Common Stock previously acquired by the optionee upon the exercise of
such option(s). Any such repurchase right shall be exercisable by the
Company (or its assigns) upon such terms and conditions (including the
establishment of the appropriate vesting schedule
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and other provisions of the expiration of such right in one or more
installments) as the Plan Administrator may specify in the instrument
evidencing such right.
(b) The Plan Administrator effecting the option grants shall also have
full power and authority to provide for the automatic termination of the
Company's outstanding repurchase rights, in whole or in part, and thereby
vest the optionees in one or more of the shares purchased or purchasable
under the granted options, upon the occurrence of any Corporate Transaction
specified in Article VII or any Change in Control specified in Article IX.
VI. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under the Plan. Options which are specifically
designated as "non-statutory" or "non-qualified" options when issued under the
Plan shall not be subject to such terms and conditions:
(a) Option Price. The option price per share of the Common Stock subject
to an Incentive Option shall in no event be less than one hundred percent (100%)
of the fair market value per share of Common Stock on the grant date.
(b) Sequential Exercise Rule. Except to the extent now or hereafter
permitted by Section 422 of the Internal Revenue Code, no Incentive Option
granted prior to January 1, 1987 may be exercised while there remains
outstanding (within the meaning of subsection (c)(7) of such Section 422) any
other pre-1987 Incentive Option which was granted at an earlier date to the
optionee to purchase stock in the Company or in any other corporation which is
on the date of grant of the later option either a parent of subsidiary
corporation of the Company of a predecessor corporation of any of such
corporations.
(c) Dollar Limitation. The following dollar limitations shall be in effect
for Incentive Options granted under the Plan:
(i) Pre-1987 Grants. The aggregate fair market value (determined as
of the respective date or dates of grant) of the Common Stock which may be
made the subject of Incentive Options granted under the Plan (or any other
option plan of the Company or its parent or subsidiary corporations) to any
Employee in any one calendar year prior to the 1987 calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000) plus any unused
Carryover to such pre-1987 calendar year. For purposes of the preceding
limitation, the term "Carryover" means one-half ( 1/2) of the amount by
which the sum of One Hundred Thousand Dollars ($100,000) exceeds the
aggregate fair market value (determined as of the respective date or dates
of grant) of the Common Stock for which the Employee was previously granted
Incentive Options under the Plan (or any other option plan of the Company
or its parent or subsidiary corporations) in each calendar year after 1980
and prior to 1987. The unused Carryover shall be available for each of the
three (3) pre-1987 calendar years immediately following the calendar year
in which the Carryover arises and shall increase the basic $100,000
limitation otherwise applicable to the Employee for each such pre-1987
calendar year by an amount equal to the Carryover, less the portion thereof
used in prior calendar years. Incentive Options granted the Employee during
any pre-1987 calendar year shall first be applied against the basic
$100,000 limitation in effect for such calendar year and then applied
against any of the Employee's unused Carryovers to such calendar year, in
the order in which such Carryovers arose in prior calendar years.
(ii) Post-1986 Grants. The aggregate fair market value (determined as
of the respective date or dates of grant) of the Common Stock for which one
or more options granted after December 31, 1986 to any Employee under this
Plan (or any other option plan of the Company or its parent or subsidiary
corporations) may for the first time become exercisable as an Incentive
Option during any one post-1986 calendar year shall not exceed the sum of
One Hundred Thousand Dollars ($100,000). To the extent the Employee holds
two or more such post-1986 options which become exercisable for the first
time in the same calendar year, the foregoing limitation on the
exercisability thereof as Incentive Options shall be applied on the basis
of the order in which such options are granted.
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(d) Maximum Term. If the individual to whom the Incentive Option is
granted is a 10% Stockholder (as defined in subparagraph V.1.b. above) on the
date of the option grant, then the option shall not have a term in excess of
five years from the grant date.
Except as modified by the preceding provisions of this Article VI, all the
terms and conditions of the Plan shall be applicable to the Incentive Options
granted hereunder.
VII. CORPORATE TRANSACTION
(a) In the event of one or more of the following transactions to which the
Company is a party ("Corporate Transaction"):
(i) a merger or acquisition in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the State of the Company's incorporation;
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company; or
(iii) any reverse merger in which the Company is the surviving entity,
then each option outstanding under the Plan shall automatically become
exercisable, during the five (5) business day period immediately prior to
the specified effective date for the Corporate Transaction, with respect to
the full number of shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of such shares. However,
an outstanding option under the Plan shall not be so accelerated if and to
the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation or parent
thereof or be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation or parent thereof or (ii) the
acceleration of such option would, when added to the present value of
certain other payments in the nature of compensation which become due and
payable to the option holder in connection with the Corporate Transaction,
result in the payment to such individual of an excess parachute payment
under Section 280G(b) of the Internal Revenue Code. The existence of any
such excess parachute payment shall be determined by the Plan Administrator
in the exercise of its reasonable business judgment and on the basis of tax
counsel provided the Company. Upon the consummation of the Corporate
Transaction, all outstanding options under the Plan shall, to the extent
not previously exercised or assumed by the successor corporation or its
parent corporation, terminate and cease to be exercisable.
(b) Each outstanding option which is assumed or is otherwise to continue in
effect in connection with the Corporate Transaction shall be appropriately
adjusted, immediately after such Corporate Transaction, to apply and pertain to
the number and class of securities which would have been issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Common Stock as are subject to such option immediately prior
to such Corporate Transaction. Appropriate adjustments shall also be made to the
option price payable per share, provided the aggregate option price payable for
such securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
(c) In connection with any Corporate Transaction, the exercise of any
accelerated pre-1987 Incentive Option shall remain subject to the sequential
exercise limitation of paragraph VI(b), and the exercisability as an incentive
stock option under the Federal tax laws of any accelerated post-1986 option
shall be subject to the applicable dollar limitation of paragraph VI(c)(ii).
(d) The grant of options under this Plan shall in no way affect the right
of the Company to adjust, reclassify, reorganize or otherwise change its capital
or business structure or to merger, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
VIII. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options under the Plan covering the same or different
numbers of shares of
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Common Stock but having an option price per share not less than (i) eighty-five
percent (85%) of the fair market value per share of Common Stock on the new
grant date, or (ii) one hundred percent (100%) of such fair market value if the
new option is to be an Incentive Option or (iii) one hundred ten percent (110%)
of fair market value in the case of a 10% Stockholder. If one or more of the
cancelled options are pre-1987 Incentive Options, then such options shall
(solely for purposes of the "sequential exercise" rule of paragraph VI(b) as
applied to other outstanding pre-1987 Incentive Options) be considered to be
outstanding options until the expiration date initially specified for the option
term.
IX. SURRENDER OF OPTIONS FOR CASH OR STOCK
(a) One or more option holders may, upon such terms and conditions as the
Plan Administrator may establish at the time of the option grant or at any time
thereafter, be granted the right to surrender all or part of an unexercised
option in exchange for a distribution equal in amount to the excess of (i) the
fair market value (on the option surrender date) of the number of shares in
which the optionee is at the time vested under the surrendered option (or
surrendered portion) over (ii) the aggregate option price payable for such
shares. No surrender of an option, however, shall be effective unless it is
approved by the Plan Administrator granting such right. If the surrender is so
approved, then the distribution to which the option holder shall accordingly
become entitled under this Article IX may be made in shares of Common Stock
valued at fair market value at date of surrender, in cash, or partly in shares
and partly in cash, as the Plan Administrator granting such right shall in its
sole discretion deem appropriate.
(b) If the surrender the option is not approved by the Plan Administrator
granting such right, then the option holder shall retain whatever rights the
option holder had under the surrendered option (or surrendered portion thereof)
on the date of surrender and may exercise such rights at any time prior to the
later of (i) the expiration of the 5 business-day period following receipt of
the rejection notice or (ii) the last day on which the option is otherwise
exercisable in accordance with the terms of the instrument evidencing such
option, but in no event may such rights be exercised at any time after ten (10)
years from the date of the option grant.
(c) Special limited stock appreciation rights may be granted by the Plan
Administrator in tandem with one or more option grants made under the Plan. The
grant and exercise of such rights shall be subject to the following terms and
conditions:
Pre-September 1, 1992 Grants. Limited rights may be granted prior to
September 1, 1992 to one or more officers or directors of the Company subject to
the short-swing profit restrictions of Section 16(b) of the Securities Exchange
Act of 1934 ("Section 16 Insider") which shall be exercisable as follows:
a. Upon the occurrence of the Change in Control at a time when one or
more classes of the Company's equity securities are registered under
Section 12(g) of the Exchange Act, each Section 16 Insider who holds such a
limited right in tandem with one or more of his/her outstanding options
under the Plan may surrender those options, to the extent such options (I)
have been outstanding with such limited rights for at least six (6) months
and (II) are at the time exercisable for one or more shares. In exchange
for each option so surrendered, the Section 16 Insider shall receive an
Appreciation Distribution from the Company in an amount equal to the excess
of (i) the Change in Control Price of the number of shares for which the
surrendered option (or surrendered portion) is at the time exercisable over
(ii) the aggregate option price payable for such shares.
b. Neither the approval of the Plan Administrator granting the limited
right nor the consent of the Board shall be required in connection with the
exercise of such right, and the Appreciation Distribution shall be made
entirely in cash.
c. For purposes of such Appreciation Distribution, the following
definitions shall be in effect:
Change-in-Control: the occurrence of any of the following
transactions: (i) the acquisition by a 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,
of twenty-five percent (25%) or more of the Company's outstanding Common
Stock pursuant to a tender or exchange offer which the Board does not
recommend the stockholders to accept, (ii) the acquisition by a person
or
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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, of fifty percent (50%) or more of the
Company's outstanding Common Stock in a single transaction or in a
series of related transactions (other than a Corporate Transaction), or
(iii) a change in the composition of the Board such that the individuals
elected to the Board at the last meeting of the stockholders at which
there is not a contested election subsequently cease to comprise a
majority of the Board by reason of a contested election for Board
membership.
Change in Control Price: the greater of (a) the fair market value
per share of Common Stock on the date of the option surrender, as
determined in accordance with the normal valuation provisions of the
Plan, or (b) the highest reported price per share paid in acquiring
ownership of the twenty-five percent (25%) or greater interest in the
Company's outstanding Common Stock in connection with the Change in
Control. However, if the surrendered option is an Incentive Option, then
the Change in Control Price per share of the Common Stock subject to the
surrendered option shall not exceed the value per share determined under
clause (a).
Post-August 31, 1992 Grants. One or more Section 16 Insiders may, in the
discretion of the Plan Administrator, be granted limited stock appreciation
rights on or after September 1, 1992 in tandem with the option grants made to
such individuals under the Plan. Any limited right so granted shall become
exercisable as follows:
a. Upon the occurrence of a Hostile Take-Over at a time when one or
more classes of the Company's equity securities are registered under
Section 12(g) of the Exchange Act, each outstanding option held by the
Section 16(b) Insider with such a limited right in effect for at least six
(6) months shall automatically be cancelled, to the extent such option is
at the time exercisable for fully-vested shares of Common Stock. The
Section 16(b) Insider shall in return be entitled to a cash distribution
from the Company in an amount equal to the excess of (I) the Take-Over
Price of the shares of Common Stock which are at the time vested under the
cancelled option (or cancelled portion) over (II) the aggregate exercise
price payable for such vested shares. The balance of the option (if any)
shall continue in full force and effect in accordance with the instrument
evidencing such grant.
b. The cash distribution payable upon such cancellation shall be made
within five (5) days following the consummation of the Hostile Take-Over.
Neither the approval of the Plan Administrator nor the consent of the Board
shall be required in connection with such option cancellation and cash
distribution.
c. For purposes of such option cancellation and cash distribution, the
following definitions shall be in effect:
A Hostile Take-Over shall be deemed to occur in the event (i) 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 of the Exchange
Act) of twenty-five percent (25%) or more of Company's outstanding
Common Stock pursuant to a tender or exchange offer made directly to the
Company's stockholders which the Board does not recommend such
stockholders to accept and (ii) more than fifty percent (50%) of the
securities so acquired in such tender or exchange offer are accepted
from holders other than Company officers and directors participating in
this Plan or the 1989 Non-Employee Directors Stock Option Plan.
The Take-Over Price per share shall be deemed to be equal to the
greater of (i) the fair market value per share on the option
cancellation date, as determined pursuant to the normal valuation
provisions of the Plan, or (ii) the highest reported price per share
paid in effecting such Hostile Take-Over. However, if the cancelled
option is an Incentive Option, then the Take-Over Price per share of the
Common Stock subject to the cancelled option shall not exceed the value
per share determined under clause (i).
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X. LOANS OR GUARANTEES OF LOANS
The Plan Administrator may assist any optionee (including any officer or
director) in the exercise of one or more options granted by such Plan
Administrator to such optionee under the Plan by (a) authorizing the extension
of a loan to such optionee from the Company, (b) permitting the optionee to pay
the option price for the purchased Common Stock in installments over a period of
years or (c) authorizing a guarantee by the Company of a third-party loan to the
optionee. The terms of any loan, installment method of payment or guarantee
(including the interest rate and terms of repayment) will be established by the
Plan Administrator in its sole discretion. Loans, installment payments and
guarantees may be granted without security or collateral (other than to
optionees who are consultants or independent contractors, in which event the
loan must be adequately secured by collateral other than the purchased shares),
but the maximum credit available to the optionee shall not exceed the sum of (i)
the aggregate option price payable for the purchased shares (less the par value
of those shares), plus (ii) any federal and state income and employment tax
liability incurred by the optionee in connection with the exercise of the
option.
XI. SPECIAL TAX WITHHOLDING ELECTION
The Plan Administrator may, in its discretion and in accordance with the
provisions of this Article XI and such supplemental rules as the Plan
Administrator may from time to time adopt, provide any or all holders of the
non-qualified options granted by such Plan Administrator under the Plan with the
right to use shares of the Company's Common Stock in satisfaction of the Federal
and State income and employment tax withholding liability incurred by such
holders in connection with the exercise of their options (the "Withholding
Taxes"). Such right may be provided to any such option holder in either or both
of the following formats:
1. Stock Withholding: The holder of the non-qualified option may be
provided with the election to have the Company withhold, from the shares of
Common Stock otherwise issuable upon the exercise of such non-qualified
option, a portion of such shares with an aggregate fair market value equal
to the designated percentage (up to 100% as specified by the option holder)
of the applicable Withholding Taxes.
Any such stock withholding election shall be subject to the following
terms and conditions:
(i) The election must be made on or before the date the amount of
the Federal and State income and employment tax liability incurred by
the option holder in connection with the exercise of the option is
determined (the "Tax Determination Date").
(ii) The election shall be irrevocable.
(iii) The election shall be subject to the approval of the Plan
Administrator, and none of the shares of Common Stock for which the
option is exercised shall be withheld in satisfaction of the Withholding
Taxes incurred in connection with such exercise except to the extent the
Plan Administrator approves the election.
(iv) The shares of Common Stock withheld pursuant to the election
shall be valued at fair market value on the Tax Determination Date in
accordance with the valuation procedures of the Plan.
(v) In no event may the number of shares requested to be withheld
exceed in value the dollar amount of Withholding Taxes incurred by the
option holder in connection with the exercise of the non-qualified
option.
If the stock withholding election is to be made by a Section 16
Insider, then the following limitations, in addition to the preceding
provisions of this Article XI, shall also be applicable:
(i) The election shall not become effective at any time prior to
the expiration of the six (6)-month period measured from the later of
the grant date of the non-qualified option to which such election
pertains or the actual grant date of the stock withholding election, and
no shares shall
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accordingly be withheld in connection with any Tax Determination Date
which occurs before the expiration of such six (6)-month period.
(ii) The election must be effected in accordance with either of the
following guidelines:
-- The election must be made six (6) months or more prior to the
Tax Determination Date, or
-- The exercise of such election and the exercise of the
non-qualified option to which it relates must occur concurrently
within a quarterly "window" period. Quarterly window periods shall
begin on the third (3rd) business day following the date of public
release of each quarterly or annual summary statement of the
Company's sales and earnings and end on the earlier of the twelfth
(12th) business day following such release date or the Tax
Determination Date.
(iii) The six (6)-month period specified in clauses (i) and (ii)
shall not be applicable in the event of the option holder's death.
2. Stock Delivery: The Plan Administrator may, in its discretion, provide
the holder of the non-qualified option with the election to deliver, at the time
the non-qualified option is exercised, one or more shares of Common Stock
already held by such individual with an aggregate fair market value equal to the
designated percentage (up to 100% as specified by the option holder) of the
Withholding Taxes incurred by such individual in connection with such option
exercise.
Any such stock delivery election shall be subject to the following terms
and conditions:
(i) The election must be made on or before the date the amount of the
Federal and State income and employment tax liability incurred by the
option holder in connection with the exercise of the option is determined
(the "Tax Determination Date").
(ii) The election shall be irrevocable.
(iii) The election shall be subject to the approval of the Plan
Administrator, and none of the delivered shares of Common Stock shall be
accepted in satisfaction of the Withholding Taxes incurred in connection
with the option exercise except to the extent the election is approved by
the Plan Administrator.
(iv) The shares of Common Stock delivered in satisfaction of such
Withholding Taxes shall be valued at fair market value on the Tax
Determination Date in accordance with the valuation procedures of the Plan.
(v) In no event may the number of delivered shares exceed in value the
dollar amount of Withholding Taxes incurred by the option holder in
connection with the exercise of the non-qualified option.
Any stock delivery election made by an individual who is at the time a
Section 16 Insider shall NOT be subject to any of the special limitations which
would otherwise be applicable to such individual in connection with the exercise
of the stock withholding election specified above.
XII. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and authority to amend or
modify the Plan in any or all respects whatsoever; provided, however, that no
such amendment or modification shall, without the consent of the holders,
adversely affect rights and obligations with respect to options at the time
outstanding under the Plan. In addition, the Board shall not, without the
approval of the Company's stockholders, (i) increase the maximum number of
shares issuable under the Plan, except for permissible adjustments under
paragraph IV(d), (ii) materially modify the eligibility requirements for the
grant of options under the Plan or (iii) otherwise materially increase the
benefits accruing to participants under the Plan.
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XIII. EFFECTIVE DATE AND TERM OF PLAN
(a) The restated Plan was adopted by the Board in August 1987, and approved
by the Company's stockholders in February 1988, as a consolidation of the
Company's 1982 Incentive Stock Option Plan and 1982 Supplemental Stock Option
Plan. The Plan was further restated in October 1988, and amended in November
1990 and November 1991, to increase the number of shares issuable under the Plan
by 750,000, 1,000,000 and 1,400,000 shares, respectively. The October 1988
restatement and November 1990 and November 1991 amendments were approved by the
Company's stockholders in February, 1989, February, 1991, and February, 1992,
respectively.
(b) The Plan Administrator may, within the scope of its administrative
functions under the Plan, grant stock options and stock appreciation rights
under the Plan at any time after the date the Plan was initially adopted and
prior to the date the Plan is to terminate in accordance with paragraph (f)
below.
(c) The Plan was restated by the Board effective July 30, 1992 to bring the
Plan in compliance with the applicable requirements of revised SEC Rule 16b-3,
as amended May 1, 1991, under the Securities Exchange Act of 1934. Such
restatement shall apply only to options granted under the Plan from and after
the July 30, 1992 effective date. Each option (together with any related stock
appreciation right) issued and outstanding under the Plan immediately prior to
such effective date shall continue to be governed by the terms and conditions of
the Plan (and the instrument evidencing such option) as in effect on the date
such option was previously granted, and nothing in the July 30, 1992 restatement
shall be deemed to affect or otherwise modify the rights or obligations of the
holders of such options with respect to the acquisition of shares thereunder or
the exercise of their outstanding stock appreciation rights.
(d) The sale and remittance procedure authorized for the exercise of
outstanding options shall be available for all options granted under the Plan
from and after July 30, 1992 and for all non-qualified options exercised under
the Plan on or after May 1, 1991. The Primary Committee may also allow such
procedure to be utilized in connection with one or more disqualifying
dispositions of incentive stock option shares effected on or after May 1, 1991.
(e) The Plan was amended and restated on January 18, 1994 to (i) increase
the number of shares of Common Stock issuable under the Plan by 1,000,000 shares
and (ii) limit the number of shares of Common Stock for which any one individual
participating in the Plan may be granted stock options after December 31, 1993.
Such restatement was approved by the Company's stockholders at the 1994 Annual
Stockholders Meeting.
(f) The Plan was subsequently amended and restated in February 1996 to
increase the number of shares of Common Stock available for issuance under the
Plan by an additional 1,400,000 shares. The 1,400,000-share increase is subject
to stockholder approval at the 1996 Annual Stockholders Meeting, and no options
granted on the basis of that increase shall become exercisable in whole or in
part, unless and until such stockholder approval is obtained. If such
stockholder approval is not obtained at the 1996 Annual Meeting, then all
options granted on the basis of such increase shall terminate and cease to be
outstanding, and no further options shall be granted in reliance upon such
increase.
(g) Unless sooner terminated in accordance with Article VII, the Plan shall
terminate upon the earlier of (i) November 30, 2000 or (ii) the date on which
all shares available for issuance under the restated Plan shall have been issued
or cancelled pursuant to the exercise, surrender or cancellation of the options
granted hereunder. If the date of termination is determined under clause (i)
above, then any options outstanding on such date (together with any stock
appreciation rights pertaining to such options) shall not be affected by the
termination of the Plan and shall continue to have force and effect in
accordance with the provisions of the instruments evidencing such options (or
related stock appreciation rights).
(h) Options may be granted under this Plan to purchase shares of Common
Stock in excess of the number of shares then available for issuance under the
Plan, provided (i) an amendment to increase the maximum number of shares
issuable under the Plan is adopted by the Board prior to the initial grant of
any such option and is thereafter submitted to the Company's stockholders for
approval and (ii) each option so
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granted is not to become exercisable, in whole or in part, at any time prior to
the obtaining of such stockholder approval.
XIV. USE OF PROCEEDS
Any cash proceeds received by the Company from the sale of shares pursuant
to options granted under the Plan shall be used for general corporate purposes.
XV. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option hereunder, and
the issuance of Common Stock upon the exercise or surrender of any such option
shall be subject to the Company's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
options granted under it and the Common Stock issued pursuant to it.
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SEEQ TECHNOLOGY INCORPORATED
1989 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
AS AMENDED FEBRUARY 1, 1996
ARTICLE I
GENERAL PROVISIONS
PURPOSES OF THE PLAN
This 1989 Non-Employee Director Stock Option Plan (the "Plan") is intended
to promote the interests of SEEQ Technology Incorporated, a Delaware corporation
(the "Corporation"), by offering non-employee members of the Board of Directors
the opportunity to participate in a special stock option program designed to
provide them with significant incentives to remain in the service of the
Corporation.
ELIGIBILITY
A. Each non-employee member of the Corporation's Board of Directors (the
"Board") shall be eligible to receive automatic option grants pursuant to the
provisions of Article II below.
B. Except for the automatic option grants to be made pursuant to the
provisions of Article II below, non-employee Board members shall not be eligible
to receive any additional option grants or stock issuances under this Plan or
any other stock plan of the Corporation or its Parent or Subsidiary
corporations.
STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of the Corporation's
common stock ("Common Stock"). Such shares may be made available from authorized
but unissued shares of Common Stock or shares of Common Stock reacquired by the
Corporation. The aggregate number of issuable shares shall not exceed 200,000
shares, subject to adjustment from time to time in accordance with subparagraph
D below.
B. Should an option expire or terminate for any reason prior to exercise in
full, the shares subject to the portion of the option not so exercised shall be
available for subsequent option grants under this Plan. Shares subject to any
option cancelled in accordance with the automatic cancellation provisions of the
Plan and all share issuances under the Plan, whether or not the shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent option grants under the Plan. In addition,
should the exercise price of any outstanding option under the Plan be paid
through the delivery of existing shares of Common Stock, then the number of
shares of Common Stock available for subsequent option grants under the Plan
shall be reduced by the gross number of shares of Common Stock for which the
option is exercised, and not by the net number of shares actually issued to the
option holder.
C. Should the total number of shares at the time available for grant under
the Plan not be sufficient for the automatic grants to be made at that
particular time to the non-employee Board members, then the available shares
shall be allocated proportionately among all the automatic grants to be made at
that time.
D. In the event any change is made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without receipt of consideration, then appropriate adjustments will be
made to (i) the aggregate number and/or class of shares of Common Stock
available for issuance under the Plan, (ii) the number of shares of Common Stock
to be made the subject of each subsequent automatic grant and (iii) the number
and/or class of shares of Common Stock purchasable under each outstanding option
and the exercise price payable per share in order to prevent the dilution or
enlargement of benefits thereunder.
<PAGE> 15
VALUATION
For purposes of establishing the option price and for all other valuation
purposes under the Plan, the Fair Market Value per share of the Common Stock on
any relevant date shall be determined in accordance with the following rules:
A. If the Common Stock is not at the time listed or admitted to trading on
any national securities exchange but is traded on the Nasdaq National Market,
then the fair market value shall be the closing selling price per share of
Common Stock on the date in question, as such price is reported by the National
Association of Securities Dealers, Inc. on the Nasdaq National Market. If there
is no reported closing selling price for the Common Stock on the date in
question, then the closing selling price on the last preceding date for which
such quotation exists shall be determinative of fair market value.
B. If the Common Stock is at the time listed or admitted to trading on any
national securities exchange, then the fair market value shall be the closing
selling price per share of Common Stock on the date in question on the
securities exchange serving as the primary market for the Common Stock, as such
price is officially quoted on such exchange. If there is no reported sale of
Common Stock on such exchange on the date in question, then the fair market
value shall be the closing selling price on the exchange on the last preceding
date for which such quotation exists.
PARENT AND SUBSIDIARY CORPORATIONS
A. A corporation shall be deemed to be a Parent of the Corporation if it is
one of the corporations (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each such corporation (other
than the Corporation) owns, at the time of determination, stock possessing fifty
(50) percent or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
B. A corporation shall be deemed to be a Subsidiary of the Corporation if
it is one of the corporations (other than the Corporation) in an unbroken chain
of corporations beginning with the Corporation, provided each such corporation
(other than the last corporation in the unbroken chain) owns, at the time of
determination, stock possessing fifty (50) percent or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain. For purposes of the Corporate Transaction provisions of the Plan, the
term "Subsidiary" shall also include any partnership, joint venture or other
business entity of which the Corporation owns, directly or indirectly through
another subsidiary corporation, more than a fifty percent (50%) interest in
voting power, capital or profits.
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ARTICLE II
AUTOMATIC GRANT PROGRAM
GRANT DATES
A. Each individual who was serving as a non-employee member of the Board on
November 8, 1989 shall be automatically awarded, on such date, a nonstatutory
option to purchase 20,000 shares of Common Stock. Commencing with the 1991
Annual Meeting and continuing in effect for each subsequent Annual Meeting of
the Corporation's stockholders, each individual who is at the time reelected as
a non-employee member of the Board shall receive an additional grant under the
Plan for 10,000 shares. An individual who is first elected or appointed as a
non-employee Board member at any time after the 1990 Annual Meeting shall
receive his/her initial automatic grant for 20,000 shares at the time of his/her
initial election or appointment to the Board and shall be eligible for
subsequent 10,000 share grants commencing with the second Annual Meeting
following the date of his/her initial election or appointment as a non-employee
Board member.
B. In no event shall any non-employee Board member be eligible to receive
an initial 20,000-share option grant or any 10,000-share annual option grants
under the Director Plan if such individual has been appointed or elected to the
Board pursuant to any contractual or other right or arrangement.
TERMS AND CONDITIONS OF GRANT
A. Each option granted in accordance with the automatic grant provisions of
this Article II shall be evidenced by an instrument in the form of the prototype
non-qualified stock option agreement and restricted stock purchase agreement
attached to the Plan as Exhibits A and B. Accordingly, each such automatic grant
shall be subject to the following terms and conditions:
1. Option Price.
The option price per share shall be one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the automatic grant date.
2. Term and Exercisability of Options.
a. Each option shall become exercisable for any or all of the option
shares upon the earlier of (i) six (6) months after the automatic grant
date or (ii) the date of the optionee's cessation of Board service by
reason of death or disability. The option shall thereafter remain so
exercisable until the expiration or sooner termination of the option term.
b. For all relevant purposes under this Article II, disability shall
mean the optionee's inability, by reason of any physical or mental injury
or illness expected to result in death or to be of continuous duration of
twelve (12) consecutive months or more, to perform his/her normal and usual
duties as a Board member.
c. Each granted option shall have a maximum term of ten (10) years
measured from the automatic grant date.
3. Exercise of Option.
Upon exercise of the option, the option price for the purchased shares
shall become immediately payable in one of the alternative forms specified
below:
a. cash or cash equivalents (such as a personal check payable to the
Corporation's order); or
b. shares of Common Stock held by the optionee for the requisite
period necessary to avoid a charge to the Corporation's reported earnings
and valued at Fair Market Value on the date of exercise; or
c. any combination of the foregoing so long as the total payment
equals the aggregate option price for the purchased shares; or
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<PAGE> 17
d. to the extent the option is exercised for vested shares of Common
Stock, full payment through a special sale and remittance procedure
pursuant to which the optionee is to provide irrevocable written
instructions (I) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date, an amount sufficient to
cover the aggregate option price payable for the purchased shares and (II)
to the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale transaction.
4. Repurchase Rights.
Any unvested shares of Common Stock purchased upon the exercise of an
automatic grant shall be subject to repurchase by the Corporation, at the
original option price, upon the optionee's cessation of Board membership for any
reason other than death or disability. The optionee shall vest in the shares
purchased under the initial grant made to him/her under the Plan, and the
Corporation's repurchase rights accordingly shall lapse, in two successive equal
annual installments upon his/her completion of each year of Board service over
the two (2)-year measured from the automatic grant date. The optionee shall vest
in the shares purchased under each subsequent grant made to him/her under the
Plan, and the Corporation's repurchase rights accordingly shall lapse, upon
his/her completion of two (2) years of Board service measured from the automatic
grant date.
5. Non-Transferability.
During the lifetime of the optionee, the option, together with any stock
appreciation right pertaining to such option, shall be exercisable only by the
optionee and shall not be assignable or transferable by the optionee other than
a transfer of the option by will or by the laws of descent and distribution
following the optionee's death.
6. Effect of Termination of Board Membership.
a. Should an optionee cease to be a member of the Board for any reason
(other than death) prior to the expiration of one or more automatic grants
under this Article II, then each such grant shall remain exercisable, for
any shares of Common Stock in which the optionee is vested at the time of
cessation of Board membership, for a three (3) month period following the
date of such cessation of Board membership.
b. Should an optionee cease to be a member of the Board by reason of
optionee's death, then any outstanding automatic grant held by the optionee
at the time of death may be subsequently exercised, for any or all of the
option shares, by the personal representative of the optionee's estate or
by the person or persons to whom the option is transferred pursuant to the
optionee's will or in accordance with the laws of descent and distribution.
Any such exercise must, however, occur within twelve (12) months after the
date of the optionee's death.
c. In no event shall any automatic option grant remain exercisable
after the specified expiration date of the ten (10)-year option term. Upon
the expiration of the applicable exercise period specified in subparagraphs
a and b above or (if earlier) upon the expiration of the ten (10) year
option term, the option shall terminate and cease to be exercisable.
7. Stockholder Rights.
An option holder shall have none of the rights of a stockholder with
respect to any shares covered by the automatic grant until such individual shall
have exercised the option, paid the option price and been issued a stock
certificate for the purchased shares.
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CORPORATE TRANSACTION
A. In the event of one or more of the following transactions ("Corporate
Transaction"):
1. a merger or acquisition in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State of the Corporation's incorporation;
2. the sale, transfer or other disposition of all or substantially all
of the assets of the Corporation to any entity other than a Subsidiary of
the Corporation; or
3. any reverse merger in which the Corporation is the surviving entity
but in which fifty percent (50%) or more of the Corporation's outstanding
voting stock is transferred to holders different from those who held the
stock immediately prior to such merger;
then each automatic option grant at the time outstanding under this
Article II Program and not otherwise at the time fully exercisable shall
automatically accelerate and become exercisable for any or all of the
shares subject to the option immediately prior to the specified effective
date for the Corporate Transaction. Immediately following the consummation
of such Corporate Transaction, all outstanding options under this Article
II shall terminate and cease to be exercisable, except to the extent
assumed by the successor corporation (or its parent company).
B. Upon the occurrence of such Corporate Transaction, all of the
Corporation's outstanding repurchase rights under this Article II shall
terminate in their entirety, and all shares of Common Stock purchased under this
Article II or subject to outstanding options under this Article II shall vest
immediately.
C. The automatic grants in effect under this Article II shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
CHANGE IN CONTROL/HOSTILE TAKE-OVERS
A. In the event there should occur a Change in Control (as defined below),
then each automatic option grant at the time outstanding under the Plan and not
otherwise at the time fully exercisable shall automatically accelerate and
become exercisable for any or all of the shares at the time subject to such
option, and all of the Corporation's repurchase rights with respect to any
shares at the time purchasable under such option or previously purchased under
such option will terminate. A Change in Control shall be deemed to occur should
(i) a person or related group of persons, other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under common
control with the Corporation, acquire twenty-five percent (25%) or more of the
outstanding Common Stock pursuant to a tender or exchange offer which the Board
does not recommend the stockholders to accept or should (ii) a change in the
composition of the Board occur such that the individuals elected to the Board at
the last stockholder meeting at which there is not a contested election
subsequently cease to comprise a majority of the Board by reason of a contested
election for Board membership.
B. Each option granted under the Plan prior to July 30, 1992 shall include
the following limited stock appreciation right, exercisable in the event of a
Change in Control:
Each automatic option grant which has been outstanding under the
Plan for at least six (6) months shall be automatically cancelled, on
the tenth (10th) business day following the Change in Control, for a
cash payment from the Corporation in an amount equal to the excess of
(i) the Change in Control Price of the shares of Common Stock
purchasable under the surrendered option, whether or not such shares
are otherwise at the time vested, over (ii) the aggregate option price
payable for such shares. The Change in Control Price per share of
Common Stock subject to the cancelled option shall be deemed to be
equal to the greater of (i) the Fair Market Value per share on the
date of the option cancellation, as determined in accordance with the
normal valuation provisions of Article I of the Plan, or (ii) the
highest reported price per share paid by the tender offeror in
effecting the Change in Control.
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C. Each option granted under the Plan on or after July 30, 1992 shall
include the following limited stock appreciation right, exercisable in the event
of a Hostile Take-Over:
Upon the occurrence of a Hostile Take-Over, each option granted
to the non-employee director under this Plan on or after July 30, 1992
and held by him for at least six (6) months shall automatically be
cancelled, and such individual shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of
(i) the Take-Over Price of the shares of Common Stock which are at the
time subject to the cancelled option, whether or not those shares are
otherwise at the time vested, over (ii) the aggregate exercise price
payable for such shares. The cash distribution shall be paid within
five (5) days following the consummation of the Hostile Take-Over. For
purposes of such option cancellation and cash-out, the following
definitional provisions shall be in effect:
A Hostile Take-Over shall be deemed to occur in the event (i) any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of twenty-five percent
(25%) or more of Corporation's outstanding voting stock pursuant to a
tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept and (ii) more than fifty percent (50%) of the securities so
acquired in such tender or exchange offer are accepted from holders
other than officers and directors of the Corporation participating in
this Plan or the Corporation's Restated 1982 Stock Option Plan.
The Take-Over Price per share shall be deemed to be equal to the
greater of (i) the Fair Market Value per share on the date of the
option cancellation, as determined pursuant to the normal valuation
provisions of Article I of the Plan, or (ii) the highest reported
price per share paid by the acquiring entity in effecting such Hostile
Take-Over.
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ARTICLE III
MISCELLANEOUS PROVISIONS
AMENDMENT OF THE PLAN
Amendments to the Plan may not be made at intervals more frequently than
once every six (6) months, except to the extent necessary to comply with
applicable requirements of the Federal tax laws and regulations. In no event
shall any amendments be made to the Plan which (i) increase the maximum number
of shares issuable under the Plan, except for permissible adjustments under
Article I, (ii) materially modify the eligibility requirements for the grant of
options under the Plan or (iii) materially increase the benefits accruing to
optionees under the Plan, unless such amendments are approved by the
Corporation's stockholders.
EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective on the date of its adoption by the
Board; provided, however, that no automatic grants made under the Plan shall
become exercisable until the Plan shall have been approved by the stockholders
at the 1990 Annual Meeting.
D. The Plan shall terminate upon the earliest to occur of (i) November 7,
1999 (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the automatic grants made
hereunder or (iii) the date on which all outstanding options are cashed-out in
connection with the Change in Control provisions of the Plan. If the date of
termination is determined under clause (i) or (ii) above, then any option grants
or unvested shares outstanding on such date shall not be affected by the
termination of the Plan and shall continue to have force and effect in
accordance with the provisions of the instruments evidencing such grants or
issuances.
CASH PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to the automatic grants made under the Plan shall be used for general
corporate purposes.
REGULATORY APPROVALS
The implementation of the Plan, the granting of any option hereunder, and
the issuance of Common Stock upon the exercise of any such option shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the options granted
under it and the Common Stock issued pursuant to it.
NO IMPAIRMENT OF RIGHTS
Nothing in this Plan or any automatic grant made pursuant to the Plan shall
be construed or interpreted so as to affect adversely or otherwise impair the
Corporation's right to remove any optionee from service on the Board at any time
in accordance with the provisions of applicable law.
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ARTICLE IV
SPECIAL ONE-TIME OPTION GRANTS
SPECIAL GRANTS
On the date of the 1996 Annual Stockholders Meeting, a special one-time
option grant shall be made to the following non-employee Board members: an
option grant for 40,000 shares of Common Stock to the Company's Chairman of the
Board, Mr. Alan V. Gregory, and an option for 10,000 shares of Common Stock to
the other eligible non-employee Board member who has not been appointed to the
Board pursuant to any contractual or other right or arrangement, Mr. Charles C.
Harwood. These special one-time grants, however, shall be subject to stockholder
approval at the 1996 Annual Meeting, and neither option grant shall be made
unless such stockholder approval is obtained. If such stockholder approval is
obtained, then Messrs. Gregory and Harwood will, on the date of the 1996 Annual
Stockholders Meeting, receive not only the special one-time option grants
provided under this Article IV, but each of them will also receive an additional
10,000-share automatic option grant pursuant to Article II upon their
re-election to the Board as non-employee Board members.
TERMS AND CONDITIONS OF SPECIAL GRANT
Each option granted in accordance with the provisions of this Article IV
shall be subject to the following terms and conditions and shall be evidenced by
a stock option agreement incorporating such terms and conditions:
1. Option Price.
The option price per share shall be one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the grant date.
2. Term and Exercisability of Options.
a. Each option shall become exercisable for any or all of the option
shares upon the optionee's completion of six (6) months of Board service
measured from the grant date.
b. Each option shall have a maximum term of ten (10) years measured
from the grant date.
3. Repurchase Rights.
Any unvested shares of Common Stock purchased upon the exercise of an
Article IV grant shall be subject to repurchase by the Corporation, at the
original option price paid per share, upon the optionee's cessation of Board
membership for any reason other than death or disability prior to his completion
of one (1) year of Board service measured from the grant date.
4. Non-Transferability.
During the lifetime of the optionee, the option, together with any stock
appreciation right pertaining to such option, shall be exercisable only by the
optionee and shall not be assignable or transferable by the optionee other than
a transfer of the option by will or by the laws of descent and distribution
following the optionee's death.
5. Remaining Terms and Provisions
All the remaining terms and provisions of the special one-time option
grants to be made pursuant to this Article IV shall be the same as those in
effect for the automatic option grants made pursuant to the Article II Program.
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