<PAGE>
As filed with the Securities and Exchange Commission on December 10, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
--------------------
THE ARISTOTLE CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 06-1165854
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
78 OLIVE STREET
NEW HAVEN, CONNECTICUT 06511
(203) 867-4090
(Address of Principal Executive Offices)
THE ARISTOTLE CORPORATION 1997
EMPLOYEE AND DIRECTOR STOCK PLAN
JOHN J. CRAWFORD
PRESIDENT AND CHAIRMAN OF THE BOARD
THE ARISTOTLE CORPORATION
78 OLIVE STREET
NEW HAVEN, CONNECTICUT 06511
(203) 867-4090
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================
Proposed Proposed
Title of Amount to be maximum maximum Amount of
securities to be registered registered(1) offering price aggregate registration fee
per share(2) offering price(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 84,000 $4.80 $403,200 $118.95
66,000 $4.844 $319,704 $ 94.31
------- -------
150,000 $213.26
==============================================================================================================
</TABLE>
(1) The number of shares of common stock, par value $.01 per share ("Common
Stock"), stated above consists of the aggregate number of shares which may
be sold upon the exercise of options or the acceptance of stock grants which
have been granted and/or may hereafter be granted under The Aristotle
Corporation 1997 Employee and Director Stock Plan, (the "Plan"). The
maximum number of shares which may be sold upon the exercise of such options
or the acceptance of such stock grants granted under the Plan is subject to
adjustment in accordance with certain anti-dilution and other provisions of
the Plan. Accordingly, pursuant to Rule 416 under the Securities Act of
1933, as amended (the "Securities Act"), this Registration Statement covers,
in addition to the number of shares stated above, an indeterminate number of
shares which may be subject to grant or otherwise issuable after the
operation of any such anti-dilution and other provisions.
(2) This calculation is made solely for the purpose of determining the
registration fee pursuant to the provisions of Rule 457(h) under the
Securities Act as follows: (i) in the case of shares of Common Stock which
may be purchased upon exercise of outstanding options, the fee is calculated
on the basis of the price at which options may be exercised; and (ii) in the
case of shares of Common Stock for which options have not yet been granted
and the option price of which is therefore unknown, the fee is calculated on
the basis of the average of the high and low sale prices per share of the
Common Stock on the Nasdaq SmallCap Market as of a date (December 4, 1997)
within 5 business days prior to filing this Registration Statement.
================================================================================
<PAGE>
EXPLANATORY NOTE
----------------
In accordance with the instructional Note to Part I of Form S-8 as
promulgated by the Securities and Exchange Commission, the information specified
by Part I of Form S-8 has been omitted from this Registration Statement on Form
S-8 for offers of Common Stock pursuant to the Plan.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference.
- --------------------------------------------------------
The following documents filed by the Registrant with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1997 (File Number -14669).
(b) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1997 (File Number -14669).
(c) The description of the Common Stock contained in the Registrant's
Registration Statement on Form 8-A (File No. 0-14669) filed under the Securities
Exchange Act of 1934, including any amendment or report filed for the purpose of
updating such description.
All reports and other documents filed by the Registrant after the date
hereof pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934 prior to the filing of a post-effective amendment which
indicates that all securities offered hereby have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be part hereof from the date of filing of such reports
and documents.
Item 4. Description of Securities.
- ----------------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
- -----------------------------------------------
Not applicable.
Item 6. Indemnification of Directors and Officers.
- --------------------------------------------------
The General Corporation Law of the State of Delaware and the Registrant's
Amended and Restated By-Laws provide for indemnification of the Registrant's
directors and officers for liabilities and expenses that they may incur in such
capacities. In general, directors and officers are indemnified with respect to
actions taken in good faith in a manner reasonably believed to be in, or not
opposed to, the best interests of the Registrant, and with respect to any
criminal action or proceeding, actions that the indemnitee had no reasonable
cause to believe were unlawful. Reference is made to the Registrant's Amended
and Restated By-Laws incorporated herein by reference to Exhibit 3.2 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1997.
II-1
<PAGE>
Item 7. Exemption from Registration Claimed.
- --------------------------------------------
Not applicable.
Item 8. Exhibits.
- -----------------
4.1 Restated Certificate of Incorporation of The Aristotle Corporation
incorporated herein by reference to Exhibit 3.1 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1997 (File Number 0-14669)
4.2 Certificate of Designation, Preferences and Rights of Series A, B, C
and D Preferred Stock of the Registrant, incorporated herein by
reference to Exhibit 4.3 to the Current Report on Form 8-K dated April
14, 1994, as amended (the "1994 Current Report") (File Number 0-14669)
4.3 Certificate of Powers, Designations, Preferences and Relative.
Participating, Optional and Other Special Rights of the Series E
Preferred Stock of the Registrant, incorporated herein by reference to
Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1997 (File Number 0-14669)
4.4 Amended and Restated Bylaws of the Registrant, incorporated herein
by reference to Exhibit 3.2 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1997 (File Number 0-
14669)
4.5 Amended and Restated Certificate of Incorporation of Aristotle
Sub, Inc. incorporated herein by reference to Exhibit 4.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1996 (File Number 0-14669)
4.6 Form of Stock Purchase Warrant Series A of the Registrant dated as
of April 11, 1994, incorporated herein by reference to Exhibit 2.10 of
the 1994 Current Report (File Number 0-14669)
4.7 Form of Stock Purchase Warrant Series B of the Registrant dated as
of April 11, 1994, incorporated herein by reference to Exhibit 2.11 of
the 1994 Current Report (File Number 0-14669)
4.8 Registration Rights Agreement dated as of April 11, 1994 between
the Registrant and the shareholders listed on Exhibit A thereto,
incorporated herein by reference to Exhibit 4.8 to the Registrant's
Registration Statement on Form if S-3 filed with the Securities and
Exchange Commission on December 10, 1997 (File Number 0-14669)
(5) Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. as to
the legality of shares being registered
(23.1) Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in opinion of counsel filed as Exhibit 5)
II-2
<PAGE>
(23.2) Consent of Arthur Andersen LLP
(24) Power of Attorney to file future amendments (set forth on the
signature page of this Registration Statement)
(99.1) The Aristotle Corporation 1997 Employee and Director Stock Plan
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:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) (Section
230.424(b) of this chapter) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement.
(iii) 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;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the Registration Statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, 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.
II-3
<PAGE>
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, 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
this 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 Securities Act
of 1933 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 Securities and
Exchange 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.
II-4
<PAGE>
SIGNATURES
The Registrant. 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 New Haven, Connecticut on December 8, 1997.
THE ARISTOTLE CORPORATION
By /s/ John J. Crawford
-------------------------
John J. Crawford
President, Chief Executive Officer and
Chairman of the Board
Each person whose signature appears below constitutes and appoints John J.
Crawford and Paul McDonald, and each of them, his/her true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution in each
of them, for him and in his name, place and stead, and in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement on Form S-8 of The Aristotle Corporation, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in or
about the premises, as full to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them or their or his/her substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
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.
Signature Title Date
- --------- ----- ----
/s/ John J. Crawford President, Chief Executive December 8, 1997
- ------------------------- Officer, Chairman of the
John J. Crawford Board and Director
(principal executive officer)
/s/ Paul McDonald Chief Financial Officer and December 8, 1997
- ------------------------- Secretary (principal financial
Paul McDonald and accounting officer)
II-5
<PAGE>
/s/ Barry R. Banducci Director December 8, 1997
- -----------------------
Barry R. Banducci
/s/ Robert L. Fiscus Director December 8, 1997
- -----------------------
Robert L. Fiscus
- -----------------------
Betsy Henley-Cohn Director December __, 1997
/s/ Alfred A. Kniberg Director December 8, 1997
- -----------------------
Alfred A. Kniberg
/s/ Daniel J. Miglio Director December 8, 1997
- -----------------------
Daniel J. Miglio
/s/ Sharon M. Oster Director December 8, 1997
- -----------------------
Sharon M. Oster
/s/ John C. Warfel Director December 8, 1997
- -----------------------
John C. Warfel
II-6
<PAGE>
THE ARISTOTLE CORPORATION
INDEX TO EXHIBITS FILED WITH
FORM S-8 REGISTRATION STATEMENT
Exhibit
Number Description
(4.1) Restated Certificate of Incorporation of The Aristotle Corporation
incorporated herein by reference to Exhibit 3.1 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1997 (File Number 0-14669)
(4.2) Certificate of Designation, Preferences and Rights of Series A,
B, C and D Preferred Stock of the Registrant, incorporated herein
by reference to Exhibit 4.3 to the Current Report on Form 8-K dated
April 14, 1994, as amended (the "1994 Current Report") (File Number
0-14669)
(4.3) Certificate of Powers, Designations, Preferences and Relative.
Participating, Optional and Other Special Rights of the Series E
Preferred Stock of the Registrant, incorporated herein by reference
to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1997
(File Number 0-14669)
(4.4) Amended and Restated Bylaws of the Registrant, incorporated herein
by reference to Exhibit 3.2 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1997 (File Number
0-14669)
(4.5) Amended and Restated Certificate of Incorporation of Aristotle Sub,
Inc. incorporated herein by reference to Exhibit 4.1 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996 (File Number 0-14669)
(4.6) Form of Stock Purchase Warrant Series A of the Registrant dated as
of April 11, 1994, incorporated herein by reference to Exhibit 2.10
of the 1994 Current Report (File Number 0-14669)
(4.7) Form of Stock Purchase Warrant Series B of the Registrant dated as
of April 11, 1994, incorporated herein by reference to Exhibit 2.11
of the 1994 Current Report (File Number 0-14669)
II-7
<PAGE>
(4.8) Registration Rights Agreement dated as of April 11, 1994 between
the Registrant and the shareholders listed on Exhibit A thereto,
incorporated herein by reference to the Registrant's Registration
Statement on Form S-3 filed with the Securities and Exchange
Commission on December 10, 1997 (File Number 0-14669)
(5) Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. as
to the legality of shares being registered
(23.1) Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in opinion of counsel filed as Exhibit 5)
(23.2) Consent of Arthur Andersen LLP
(24) Power of Attorney to file future amendments (set forth on the
signature page of this Registration Statement)
(99.1) The Aristotle Corporation 1997 Employee and Director Stock Plan
II-8
<PAGE>
EXHIBIT 5
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
701 Pennsylvania Avenue, N.W. Telephone: 617/542-6000
Washington, D.C. 20004 Fax: 617/542-2241
Telephone: 202/434-7300 www.Mintz.com
Fax: 202/434-7400
Direct Dial Number
December 8, 1997
The Aristotle Corporation
78 Olive Street
New Haven, Connecticut 06511
Gentlemen:
We have acted as counsel to The Aristotle Corporation, a Delaware corporation
(the "Company"), in connection with the preparation and filing with the
Securities and Exchange Commission of a Registration Statement on Form S-8 (the
"Registration Statement"), pursuant to which the Company is registering the
issuance under the Securities Act of 1933, as amended, of a total of 150,000
shares (the "Shares") of its common stock, $.01 par value per share (the "Common
Stock"). This opinion is being rendered in connection with the filing of the
Registration Statement. All capitalized terms used herein and not otherwise
defined shall have the respective meanings given to them in the Registration
Statement.
In connection with this opinion, we have examined the Company's Restated
Certificate of Incorporation, and Amended and Restated Bylaws, both as currently
in effect; such other records of the corporate proceedings of the Company and
certificates of the Company's officers as we have deemed relevant; and the
Registration Statement and the exhibits thereto.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such copies.
Based upon the foregoing, we are of the opinion that (i) the Shares have been
duly and validly authorized by the Company and (ii) the Shares, when sold, will
have been duly and validly issued, fully paid and non-assessable shares of the
Common Stock, free of preemptive rights.
Our opinion is limited to the General Corporation Laws of the State of
Delaware, and we express no opinion with respect to the laws of any other
jurisdiction. No opinion is expressed herein with respect to the qualification
of the Shares under the securities or blue sky laws of any state or any foreign
jurisdiction.
<PAGE>
We understand that you wish to file this opinion as an exhibit to the
Registration Statement, and we hereby consent thereto.
Very truly yours,
/s/ Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
-------------------------------------------------------
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated September 23, 1997
included in The Aristotle Corporation's Form 10-K for the year ended June 30,
1997 and to all references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
December 8, 1997
<PAGE>
EXHIBIT 99.1
THE ARISTOTLE CORPORATION
1997 EMPLOYEE AND DIRECTOR STOCK PLAN
1. DEFINITIONS.
Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in this The Aristotle Corporation 1997 Employee
and Director Stock Plan, have the following meanings:
Administrator means the Board of Directors, unless it has delegated
-------------
power to act on its behalf to the Committee, in which case the
Administrator means the Committee.
Affiliate means a corporation which, for purposes of Section 424 of
---------
the Code, is a parent or subsidiary of the Company, direct or
indirect.
Board of Directors means the Board of Directors of the Company.
------------------
Code means the United States Internal Revenue Code of 1986, as
----
amended.
Committee means the committee of the Board of Directors to which the
---------
Board of Directors has delegated power to act under or pursuant to
the provisions of the Plan.
Common Stock means shares of the Company's common stock, $.01 par
------------
value per share.
Company means The Aristotle Corporation, a Delaware corporation.
-------
Disability or Disabled means permanent and total disability as
---------- --------
defined in Section 22(e)(3) of the Code.
Fair Market Value of a Share of Common Stock means:
-----------------
(1) If the Common Stock is listed on a national securities exchange
or traded in the over-the-counter market and sales prices are
regularly reported for the Common Stock, the closing or last price
of the Common Stock on the Composite
<PAGE>
Tape or other comparable reporting system for the trading day
immediately preceding the applicable date;
(2) If the Common Stock is not traded on a national securities
exchange but is traded on the over-the-counter market, if sales
prices are not regularly reported for the Common Stock for the
trading day referred to in clause (1), and if bid and asked prices
for the Common Stock are regularly reported, the mean between the
bid and the asked price for the Common Stock at the close of trading
in the over-the-counter market for the trading day on which Common
Stock was traded immediately preceding the applicable date; and
(3) If the Common Stock is neither listed on a national securities
exchange nor traded in the over-the-counter market, such value as
the Administrator, in good faith, shall determine.
ISO means an option meant to qualify as an incentive stock option
---
under Section 422 of the Code.
Key Employee means an employee of the Company or of an Affiliate
------------
(including, without limitation, an employee who is also serving as
an officer or director of the Company or of an Affiliate),
designated by the Administrator to be eligible to be granted one or
more Stock Rights under the Plan.
Non-Qualified Option means an option which is not intended to
--------------------
qualify as an ISO.
Option means an ISO or Non-Qualified Option granted under the Plan.
------
Option Agreement means an agreement between the Company and a
----------------
Participant delivered pursuant to the Plan, in such form as the
Administrator shall approve.
Participant means a Key Employee or director to whom one or more
-----------
Stock Rights are granted under the Plan. As used herein,
"Participant" shall include "Participant's Survivors" where the
context requires.
Plan means this The Aristotle Corporation 1997 Employee and Director
----
Stock Plan.
Shares means shares of the Common Stock as to which Stock Rights
------
have been or may be granted under the Plan or any shares of capital
stock into which the Shares are changed or for which they are
exchanged within the provisions of Paragraph 3 of the Plan. The
Shares issued under the Plan may be authorized and unissued shares
or shares held by the Company in its treasury, or both.
Stock Grant means a grant by the Company of Shares under the Plan.
-----------
2
<PAGE>
Stock Grant Agreement means an agreement between the Company and a
---------------------
Participant delivered pursuant to the Plan, in such form as the
Administrator shall approve.
Stock Right means a right to Shares of the Company granted pursuant
-----------
to the Plan -- an ISO, a Non-Qualified Option or a Stock Grant.
Survivors means a deceased Participant's legal representatives
---------
and/or any person or persons who acquired the Participant's rights
to a Stock Right by will or by the laws of descent and distribution.
2. PURPOSES OF THE PLAN.
---------------------
The Plan is intended to encourage ownership of Shares by Key Employees and
directors of the Company in order to attract such people, to induce them to work
for the benefit of the Company or of an Affiliate and to provide additional
incentive for them to promote the success of the Company or of an Affiliate. The
Plan provides for the granting of ISOs, Non-Qualified Options and Stock Grants.
3. SHARES SUBJECT TO THE PLAN.
---------------------------
The number of Shares which may be issued from time to time pursuant to this
Plan shall be 150,000 or the equivalent of such number of Shares after the
Administrator, in its sole discretion, has interpreted the effect of any stock
split, stock dividend, combination, recapitalization or similar transaction in
accordance with Paragraph 23 of the Plan.
If an Option ceases to be "outstanding", in whole or in part, or if the
Company shall reacquire any Shares issued pursuant to a Stock Grant, the Shares
which were subject to such Option and any Shares so reacquired by the Company
shall be available for the granting of other Stock Rights under the Plan. Any
Option shall be treated as "outstanding" until such Option is exercised in full,
or terminates or expires under the provisions of the Plan, or by agreement of
the parties to the pertinent Option Agreement.
4. ADMINISTRATION OF THE PLAN.
---------------------------
The Administrator of the Plan will be the Board of Directors, except to the
extent the Board of Directors delegates its authority to the Committee, in which
case the Committee shall be the Administrator. Subject to the provisions of the
Plan, the Administrator is authorized to:
a. Interpret the provisions of the Plan or of any Option or Stock Grant
and to make all rules and determinations which it deems necessary or
advisable for the administration of the Plan;
3
<PAGE>
b. Determine which employees of the Company or of an Affiliate shall be
designated as Key Employees and which of the Key Employees and
directors shall be granted Stock Rights;
c. Determine the number of Shares for which a Stock Right or Stock Rights
shall be granted, provided, however, that in no event shall Stock
Rights with respect to more than 30,000 shares be granted to any
Participant in any fiscal year; and
d. Specify the terms and conditions upon which a Stock Right or Stock
Rights may be granted;
provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Section 422 of the Code of those Options which are designated as
ISOs. Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Stock Right granted under
it shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is the Committee.
5. ELIGIBILITY FOR PARTICIPATION.
------------------------------
The Administrator will, in its sole discretion, name the Participants in
the Plan, provided, however, that each Participant must be a Key Employee or
director of the Company or of an Affiliate at the time a Stock Right is granted.
Notwithstanding the foregoing, the Administrator may authorize the grant of a
Stock Right to a person not then an employee or director of the Company or of an
Affiliate; provided, however, that the actual grant of such Stock Right shall be
conditioned upon such person becoming eligible to become a Participant at or
prior to the time of the delivery of the Agreement evidencing such Stock Right.
ISOs may be granted only to Key Employees. Non-Qualified Options and Stock
Grants may be granted to any Key Employee or director of the Company or an
Affiliate. The granting of any Stock Right to any individual shall neither
entitle that individual to, nor disqualify him or her from, participation in any
other grant of Stock Rights.
6. TERMS AND CONDITIONS OF OPTIONS.
--------------------------------
Each Option shall be set forth in writing in an Option Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant. The Administrator may provide that Options be
granted subject to such conditions as the Administrator may deem appropriate
including, without limitation, subsequent approval by the shareholders of the
Company of this Plan or any amendments thereto. The Option Agreements shall be
subject to at least the following terms and conditions:
4
<PAGE>
A. Non-Qualified Options: Each Option intended to be a Non-Qualified Option
---------------------
shall be subject to the terms and conditions which the Administrator
determines to be appropriate and in the best interest of the Company,
subject to the following minimum standards for any such Non-Qualified
Option:
a. Option Price: Each Option Agreement shall state the option price (per
share) of the Shares covered by each Option, which option price shall be
determined by the Administrator but shall not be less than the par value
per share of Common Stock.
b. Each Option Agreement shall state the number of Shares to which it
pertains;
c. Each Option Agreement shall state the date or dates on which it first is
exercisable and the date after which it may no longer be exercised, and
may provide that the Option rights accrue or become exercisable in
installments over a period of months or years, or upon the occurrence of
certain conditions or the attainment of stated goals or events; and
d. Exercise of any Option may be conditioned upon the Participant's
execution of a Share purchase agreement in form satisfactory to the
Administrator providing for certain protections for the Company and its
other shareholders, including requirements that:
i. The Participant's or the Participant's Survivors' right to sell or
transfer the Shares may be restricted; and
ii. The Participant or the Participant'sSurvivors may be required to
execute letters of investment intent and must also acknowledge that
the Shares will bear legends noting any applicable restrictions.
e. Directors' Options: Each director of the Company who is not an employee
-------------------
of or consultant to the Company or any Affiliate, upon first being
elected to the Board of Directors, shall be granted a Non-Qualified
Option to purchase 2,500 Shares. Each such Option shall (i) have an
exercise price equal to the Fair Market Value (per share) of the Shares
on the date of grant of the Option, (ii) have a term of ten years, and
(iii) become exercisable in full upon completion of one full year of
service on the Board of Directors after the date of grant.
Any director serving on the Board of Directors on October 30, 1997, who
is not an employee of or consultant to the Company or any Affiliate,
shall be granted a Non-Qualified Option to purchase 2,500 shares as of
such date. Each such Option shall (i) have an exercise price equal to
the Fair
5
<PAGE>
Market Value (per share) of the Shares on the date of grant of
the Option, (ii) have a term of ten years, and (iii) be immediately
exercisable in full.
On the date of each reelection to the Board of Directors, provided that
on such dates the director has been in the continued and uninterrupted
service as a director of the Company since his or her initial election
or appointment and is not an employee of or consultant to the Company or
any Affiliate, each director will be granted a Non-Qualified Option to
purchase 1,000 Shares. Each such Option shall (i) have an exercise price
equal to the Fair Market Value (per share) of the Shares on the date of
grant of the Option, (ii) have a term of ten years, and (iii) become
exercisable in full upon completion of one full year of service on the
Board of Directors after the date of grant.
Any director entitled to receive an Option under this subparagraph may
elect to decline the Option.
Except as otherwise provided in the pertinent Option Agreement, if a director
who receives Options pursuant to this subparagraph:
a. ceases to be a member of the Board of Directors for any reason
other than death or Disability, any then unexercised Options
granted to such director may be exercised by the director within a
period of ninety (90) days after the date the director ceases to be
a member of the Board of Directors, but only to the extent of the
number of Shares with respect to which the Options are exercisable
on the date the director ceases to be a member of the Board of
Directors, and in no event later than the expiration date of the
Option; or
b. ceases to be a member of the Board of Directors by reason of his or
her death or Disability, any then unexercised Options granted to
such director may be exercised by the director (or by the
director's personal representative, or the director's Survivors)
within a period of one hundred eighty (180) days after the date the
director ceases to be a member of the Board of Directors, but only
to the extent of the number of Shares with respect to which the
Options are exercisable on the date the director ceases to be a
member of the Board of Directors, and in no event later than the
expiration date of the Option.
B. ISOs: Each Option intended to be an ISO shall be issued only to a Key
----
Employee and be subject to at least the following terms and conditions,
with such additional restrictions or changes as the Administrator
determines are appropriate but not in
6
<PAGE>
conflict with Section 422 of the Code
and relevant regulations and rulings of the Internal Revenue Service:
a. Minimum standards: The ISO shall meet the minimum standards required of
Non-Qualified Options, as described in Paragraph 6(A) above, except
clauses (a) and (e) thereunder.
b. Option Price: Immediately before the Option is granted, if the
Participant owns, directly or by reason of the applicable attribution
rules in Section 424(d) of the Code:
i. Ten percent (10%) or less of the total combined voting power of
-------
all classes of stock of the Company or an Affiliate, the Option
price per share of the Shares covered by each Option shall not be
less than one hundred percent (100%) of the Fair Market Value per
share of the Shares on the date of the grant of the Option.
ii. More than ten percent (10%) of the total combined voting power of
all classes of stock of the Company an Affiliate, the Option
price per share of the Shares covered by each Option shall not be
less than one hundred ten percent (110%) of the said Fair Market
Value on the date of grant.
c. Term of Option: For Participants who own
i. Ten percent (10%) or less of the total combined voting power of
-------
all classes of stock of the Company or an Affiliate, each Option
shall terminate not more than ten (10) years from the date of the
grant or at such earlier time as the Option Agreement may
provide.
ii. More than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or an Affiliate, each Option
shall terminate not more than five (5) years from the date of the
grant or at such earlier time as the Option Agreement may
provide.
d. Limitation on Yearly Exercise: The Option Agreements shall restrict the
amount of Options which may be exercisable in any calendar year (under
this or any other ISO plan of the Company or an Affiliate) so that the
aggregate Fair Market Value (determined at the time each ISO is
granted) of the stock with respect to which ISOs are exercisable for
the first time by the Participant in any calendar year does not exceed
one hundred thousand dollars ($100,000), provided that this
subparagraph (d) shall have no force or effect if its inclusion in the
Plan is not necessary for Options issued as ISOs to qualify as ISOs
pursuant to Section 422(d) of the Code.
7
<PAGE>
7. TERMS AND CONDITIONS OF STOCK GRANTS.
-------------------------------------
Each offer of a Stock Grant to a Participant shall state the date prior to
which the Stock Grant must be accepted by the Participant, and the principal
terms of each Stock Grant shall be set forth in a Stock Grant Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant. The Stock Grant Agreement shall be in a form
approved by the Administrator and shall contain terms and conditions which the
Administrator determines to be appropriate and in the best interest of the
Company, subject to the following minimum standards:
(a) Each Stock Grant Agreement shall state the purchase price (per share),
if any, of the Shares covered by each Stock Grant, which purchase price
shall be determined by the Administrator but shall not be less than the
minimum consideration required by the Delaware General Corporation Law
on the date of the grant of the Stock Grant;
(b) Each Stock Grant Agreement shall state the number of Shares to which
the Stock Grant pertains; and
(c) Each Stock Grant Agreement shall include the terms of any right of the
Company to reacquire the Shares subject to the Stock Grant, including
the time and events upon which such rights shall accrue and the
purchase price therefor, if any.
8. EXERCISE OF OPTIONS AND ISSUE OF SHARES.
----------------------------------------
An Option (or any part or installment thereof) shall be exercised by giving
written notice to the Company at its principal executive office address,
together with provision for payment of the full purchase price in accordance
with this Paragraph for the Shares as to which the Option is being exercised,
and upon compliance with any other condition(s) set forth in the Option
Agreement. Such written notice shall be signed by the person exercising the
Option, shall state the number of Shares with respect to which the Option is
being exercised and shall contain any representation required by the Plan or the
Option Agreement. Payment of the purchase price for the Shares as to which such
Option is being exercised shall be made (a) in United States dollars in cash or
by check, or (b) at the discretion of the Administrator, through delivery of
shares of Common Stock having a Fair Market Value equal as of the date of the
exercise to the cash exercise price of the Option, or (c) at the discretion of
the Administrator, by having the Company retain from the shares otherwise
issuable upon exercise of the Option, a number of shares having a Fair Market
Value equal as of the date of exercise to the exercise price of the Option, or
(d) at the discretion of the Administrator, by delivery of the grantee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the applicable Federal rate, as defined in Section 1274(d) of
the Code, or (e) at the discretion of the Administrator, in accordance with a
cashless exercise program established with a securities brokerage firm, and
approved by the Administrator, or (f) at the discretion of the
8
<PAGE>
Administrator, by any combination of (a), (b), (c), (d) and (e) above.
Notwithstanding the foregoing, the Administrator shall accept only such payment
on exercise of an ISO as is permitted by Section 422 of the Code.
The Company shall then reasonably promptly deliver the Shares as to which
such Option was exercised to the Participant (or to the Participant's Survivors,
as the case may be). In determining what constitutes "reasonably promptly," it
is expressly understood that the issuance and delivery of the Shares may be
delayed by the Company in order to comply with any law or regulation (including,
without limitation, state securities or "blue sky" laws) which requires the
Company to take any action with respect to the Shares prior to their issuance.
The Shares shall, upon delivery, be evidenced by an appropriate certificate or
certificates for fully paid, non-assessable Shares.
The Administrator shall have the right to accelerate the date of exercise
of any installment of any Option; provided that the Administrator shall not
accelerate the exercise date of any installment of any Option granted to any Key
Employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Paragraph 26) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in Paragraph
6.B.d.
The Administrator may, in its discretion, amend any term or condition of an
outstanding Option provided (i) such term or condition as amended is permitted
by the Plan, (ii) any such amendment shall be made only with the consent of the
Participant to whom the Option was granted, or in the event of the death of the
Participant, the Participant's Survivors, if the amendment is adverse to the
Participant, and (iii) any such amendment of any ISO shall be made only after
the Administrator, after consulting the counsel for the Company, determines
whether such amendment would constitute a "modification" of any Option which is
an ISO (as that term is defined in Section 424(h) of the Code) or would cause
any adverse tax consequences for the holder of such ISO.
9. ACCEPTANCE OF STOCK GRANT AND ISSUE OF SHARES.
----------------------------------------------
A Stock Grant (or any part or installment thereof) shall be accepted by
executing the Stock Grant Agreement and delivering it to the Company at its
principal office address, together with provision for payment of the full
purchase price, if any, in accordance with this Paragraph for the Shares as to
which such Stock Grant is being accepted, and upon compliance with any other
conditions set forth in the Stock Grant Agreement. Payment of the purchase price
for the Shares as to which such Stock Grant is being accepted shall be made (a)
in United States dollars in cash or by check, or (b) at the discretion of the
Administrator, through delivery of shares of Common Stock having a fair market
value equal as of the date of acceptance of the Stock Grant to the purchase
price of the Stock Grant determined in good faith by the Administrator, or (c)
at the discretion of the Administrator, by delivery of the grantee's personal
recourse note bearing interest payable not less than annually at no less than
100% of the applicable Federal rate, as defined in
9
<PAGE>
Section 1274(d) of the Code,or (d) at the discretion of the Administrator, by
any combination of (a), (b) and (c) above.
The Company shall then reasonably promptly deliver the Shares as to which
such Stock Grant was accepted to the Participant (or to the Participant's
Survivors, as the case may be), subject to any escrow provision set forth in the
Stock Grant Agreement. In determining what constitutes "reasonably promptly," it
is expressly understood that the issuance and delivery of the Shares may be
delayed by the Company in order to comply with any law or regulation (including,
without limitation, state securities or "blue sky" laws) which requires the
Company to take any action with respect to the Shares prior to their issuance.
The Administrator may, in its discretion, amend any term or condition of an
outstanding Stock Grant or Stock Grant Agreement provided (i) such term or
condition as amended is permitted by the Plan, and (ii) any such amendment shall
be made only with the consent of the Participant to whom the Stock Grant was
made, if the amendment is adverse to the Participant.
10. RIGHTS AS A SHAREHOLDER.
------------------------
No Participant to whom a Stock Right has been granted shall have rights as
a shareholder with respect to any Shares covered by such Stock Right, except
after due exercise of the Option or acceptance of the Stock Grant and tender of
the full purchase price, if any, for the Shares being purchased pursuant to such
exercise or acceptance and registration of the Shares in the Company's share
register in the name of the Participant.
11. ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS.
--------------------------------------------------
By its terms, a Stock Right granted to a Participant shall not be
transferable by the Participant other than (i) by will or by the laws of descent
and distribution, or (ii) as otherwise determined by the Administrator and set
forth in the applicable Option Agreement or Stock Grant Agreement. The
designation of a beneficiary of a Stock Right by a Participant shall not be
deemed a transfer prohibited by this Paragraph. Except as provided above, a
Stock Right shall only be exercisable or may only be accepted, during the
Participant's lifetime, by such Participant (or by his or her legal
representative) and shall not be assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of any Stock Right or of any rights
granted thereunder contrary to the provisions of this Plan, or the levy of any
attachment or similar process upon a Stock Right, shall be null and void.
10
<PAGE>
12. EFFECT ON OPTIONS OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE" OR DEATH
---------------------------------------------------------------------------
OR DISABILITY.
--------------
Except as otherwise provided in the pertinent Option Agreement in the event
of a termination of service (whether as an employee or director ) with the
Company or an Affiliate before the Participant has exercised an Option, the
following rules apply:
a. A Participant who ceases to be an employee or director of the Company
or of an Affiliate (for any reason other than termination "for cause",
Disability, or death for which events there are special rules in
Paragraphs 13, 14, and 15, respectively), may exercise any Option
granted to him or her to the extent that the Option is exercisable on
the date of such termination of service, but only within such term as
the Administrator has designated in the pertinent Option Agreement.
b. Except as provided in subparagraph (c) below, or Paragraph 14 or 15, in
no event may an Option Agreement provide, if an Option is intended to
be an ISO, that the time for exercise be later than three (3) months
after the Participant's termination of employment.
c. The provisions of this Paragraph, and not the provisions of Paragraph
14 or 15, shall apply to a Participant who subsequently becomes
Disabled or dies after the termination of employment or director
status, provided, however, in the case of a Participant's Disability or
death within three (3) months after the termination of employment or
director status, the Participant or the Participant's Survivors may
exercise the Option within one (1) year after the date of the
Participant's termination of employment, but in no event after the date
of expiration of the term of the Option.
d. Notwithstanding anything herein to the contrary, if subsequent to a
Participant's termination of employment or termination of director
status, but prior to the exercise of an Option, the Board of Directors
determines that, either prior or subsequent to the Participant's
termination, the Participant engaged in conduct which would constitute
"cause", then such Participant shall forthwith cease to have any right
to exercise any Option.
e. A Participant to whom an Option has been granted under the Plan who is
absent from work with the Company or with an Affiliate because of
temporary disability (any disability other than a permanent and total
Disability as defined in Paragraph 1 hereof), or who is on leave of
absence for any purpose, shall not, during the period of any such
absence, be deemed, by virtue of such absence alone, to have terminated
such Participant's employment or director status with the Company or
with an Affiliate, except as the Administrator may otherwise expressly
provide.
f. Except as required by law or as set forth in the pertinent Option
Agreement, Options granted under the Plan shall not be affected by any
change of a
11
<PAGE>
Participant's status within or among the Company and any
Affiliates, so long as the Participant continues to be an employee or
director of the Company or any Affiliate.
13. EFFECT ON OPTIONS OF TERMINATION OF SERVICE "FOR CAUSE".
--------------------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, the
following rules apply if the Participant's service (whether as an employee or
director ) with the Company or an Affiliate is terminated "for cause" prior to
the time that all his or her outstanding Options have been exercised:
a. All outstanding and unexercised Options as of the time the Participant
is notified his or her service is terminated "for cause" will
immediately be forfeited.
b. For purposes of this Plan, "cause" shall include (and is not limited
to) dishonesty with respect to the Company or any Affiliate,
insubordination, substantial malfeasance or non-feasance of duty,
unauthorized disclosure of confidential information, and conduct
substantially prejudicial to the business of the Company or any
Affiliate. The determination of the Administrator as to the existence
of "cause" will be conclusive on the Participant and the Company.
c. "Cause" is not limited to events which have occurred prior to a
Participant's termination of service, nor is it necessary that the
Administrator's finding of "cause" occur prior to termination. If the
Administrator determines, subsequent to a Participant's termination of
service but prior to the exercise of an Option, that either prior or
subsequent to the Participant's termination the Participant engaged in
conduct which would constitute "cause", then the right to exercise any
Option is forfeited.
d. Any definition in an agreement between the Participant and the Company
or an Affiliate, which contains a conflicting definition of "cause"
for termination and which is in effect at the time of such
termination, shall supersede the definition in this Plan with respect
to such Participant.
14. EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR DISABILITY.
-----------------------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, a
Participant who ceases to be an employee or director of the Company or of an
Affiliate by reason of Disability may exercise any Option granted to such
Participant:
a. To the extent exercisable but not exercised on the date of Disability;
and
12
<PAGE>
b. In the event rights to exercise the Option accrue periodically, to the
extent of a pro rata portion of any additional rights as would have
accrued had the Participant not become Disabled prior to the end of
the accrual period which next ends following the date of Disability.
The proration shall be based upon the number of days of such accrual
period prior to the date of Disability.
A Disabled Participant may exercise such rights only within a period of not
more than one (1) year after the date of the Participant's termination of
employment or directorship, as the case may be, notwithstanding that the
Participant might have been able to exercise the Option as to some or all of the
Shares on a later date if the Participant had not become disabled and had
continued to be an employee or director or, if earlier, within the originally
prescribed term of the Option.
The Administrator shall make the determination both of whether Disability
has occurred and the date of its occurrence (unless a procedure for such
determination is set forth in another agreement between the Company and such
Participant, in which case such procedure shall be used for such determination).
If requested, the Participant shall be examined by a physician selected or
approved by the Administrator, the cost of which examination shall be paid for
by the Company.
15. EFFECT ON OPTIONS OF DEATH WHILE AN EMPLOYEE OR DIRECTOR.
---------------------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, in the
event of the death of a Participant while the Participant is an employee or
director of the Company or of an Affiliate, such Option may be exercised by the
Participant's Survivors:
a. To the extent exercisable but not exercised on the date of death; and
b. In the event rights to exercise the Option accrue periodically, to the
extent of a pro rata portion of any additional rights which would have
accrued had the Participant not died prior to the end of the accrual
period which next ends following the date of death. The proration
shall be based upon the number of days of such accrual period prior to
the Participant's death.
If the Participant's Survivors wish to exercise the Option, they must take
all necessary steps to exercise the Option within one (1) year after the date of
death of such Participant, notwithstanding that the decedent might have been
able to exercise the Option as to some or all of the Shares on a later date if
he or she had not died and had continued to be an employee or director or, if
earlier, within the originally prescribed term of the Option.
13
<PAGE>
16. EFFECT OF TERMINATION OF SERVICE ON STOCK GRANTS.
-------------------------------------------------
In the event of a termination of service (whether as an employee or
director) with the Company or an Affiliate for any reason before the Participant
has accepted a Stock Grant, such offer shall terminate.
For purposes of this Paragraph 16 and Paragraph 17 below, a Participant to
whom a Stock Grant has been offered under the Plan who is absent from work with
the Company or with an Affiliate because of temporary disability (any disability
other than a permanent and total Disability as defined in Paragraph 1 hereof),
or who is on leave of absence for any purpose, shall not, during the period of
any such absence, be deemed, by virtue of such absence alone, to have terminated
such Participant's employment or director status with the Company or with an
Affiliate, except as the Administrator may otherwise expressly provide.
In addition, for purposes of this Paragraph 16 and Paragraph 17 below, any
change of employment or other service within or among the Company and any
Affiliates shall not be treated as a termination of employment or director
status so long as the Participant continues to be an employee or director of the
Company or any Affiliate.
17. EFFECT ON STOCK GRANTS OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE" OR
--------------------------------------------------------------------------
DEATH OR DISABILITY.
--------------------
Except as otherwise provided in the pertinent Stock Grant Agreement, in the
event of a termination of service (whether as an employee or director), other
than termination "for cause," Disability, or death for which events there are
special rules in Paragraphs 18, 19, and 20, respectively, before all Company
rights of repurchase shall have lapsed, then the Company shall have the right to
repurchase that number of Shares subject to a Stock Grant as to which the
Company's repurchase rights have not lapsed.
18. EFFECT ON STOCK GRANTS OF TERMINATION OF SERVICE "FOR CAUSE".
-------------------------------------------------------------
Except as otherwise provided in the pertinent Stock Grant Agreement, the
following rules apply if the Participant's service (whether as an employee or
director) with the Company or an Affiliate is terminated "for cause":
a. All Shares subject to any Stock Grant shall be immediately subject to
repurchase by the Company at the purchase price, if any, thereof.
b. For purposes of this Plan, "cause" shall include (and is not limited
to) dishonesty with respect to the employer, insubordination,
substantial malfeasance or
14
<PAGE>
non-feasance of duty, unauthorized disclosure of confidential
information, and conduct substantially prejudicial to the business of
the Company or any Affiliate. The determination of the Administrator
as to the existence of "cause" will be conclusive on the Participant
and the Company.
c. "Cause" is not limited to events which have occurred prior to a
Participant's termination of service, nor is it necessary that the
Administrator's finding of "cause" occur prior to termination. If the
Administrator determines, subsequent to a Participant's termination of
service, that either prior or subsequent to the Participant's
termination the Participant engaged in conduct which would constitute
"cause," then the Company's right to repurchase all of such
Participant's Shares shall apply.
d. Any definition in an agreement between the Participant and the Company
or an Affiliate, which contains a conflicting definition of "cause"
for termination and which is in effect at the time of such
termination, shall supersede the definition in this Plan with respect
to such Participant.
19. EFFECT ON STOCK GRANTS OF TERMINATION OF SERVICE FOR DISABILITY.
----------------------------------------------------------------
Except as otherwise provided in the pertinent Stock Grant Agreement, the
following rules apply if a Participant ceases to be an employee or director of
the Company or of an Affiliate by reason of Disability: to the extent the
Company's rights of repurchase have not lapsed on the date of Disability, they
shall be exercisable; provided, however, that in the event such rights of
repurchase lapse periodically, such rights shall lapse to the extent of a pro
rata portion of the Shares subject to such Stock Grant as would have lapsed had
the Participant not become Disabled prior to the end of the vesting period which
next ends following the date of Disability. The proration shall be based upon
the number of days of such vesting period prior to the date of Disability.
The Administrator shall make the determination both of whether Disability
has occurred and the date of its occurrence (unless a procedure for such
determination is set forth in another agreement between the Company and such
Participant, in which case such procedure shall be used for such determination).
If requested, the Participant shall be examined by a physician selected or
approved by the Administrator, the cost of which examination shall be paid for
by the Company.
20. EFFECT ON STOCK GRANTS OF DEATH WHILE AN EMPLOYEE OR DIRECTOR.
--------------------------------------------------------------
Except as otherwise provided in the pertinent Stock Grant Agreement, the
following rules apply in the event of the death of a Participant while the
Participant is an employee or director of the Company or of an Affiliate: to the
extent the Company's rights of repurchase have not lapsed on the date of death,
they shall be exercisable; provided, however, that in the event such rights of
repurchase lapse periodically, such rights shall lapse to the extent of a pro
rata portion of the
15
<PAGE>
Shares subject to such Stock Grant as would have lapsed had the Participant not
died prior to the end of the vesting period which next ends following the date
of death. The proration shall be based upon the number of days of such vesting
period prior to the Participant's death.
21. PURCHASE FOR INVESTMENT.
------------------------
Unless the offering and sale of the Shares to be issued upon the particular
exercise or acceptance of a Stock Right shall have been effectively registered
under the Securities Act of 1933, as now in force or hereafter amended (the
"1933 Act"), the Company shall be under no obligation to issue the Shares
covered by such exercise unless and until the following conditions have been
fulfilled:
a. The person(s) who exercise(s) or accept(s) such Stock Right shall
warrant to the Company, prior to the receipt of such Shares, that such
person(s) are acquiring such Shares for their own respective accounts,
for investment, and not with a view to, or for sale in connection
with, the distribution of any such Shares, in which event the
person(s) acquiring such Shares shall be bound by the provisions of
the following legend which shall be endorsed upon the certificate(s)
evidencing their Shares issued pursuant to such exercise or such
grant:
"The shares represented by this certificate have
been taken for investment and they may not be
sold or otherwise transferred by any person,
including a pledgee, unless (1) either (a) a
Registration Statement with respect to such
shares shall be effective under the Securities
Act of 1933, as amended, or (b) the Company shall
have received an opinion of counsel satisfactory
to it that an exemption from registration under
such Act is then available, and (2) there shall
have been compliance with all applicable state
securities laws."
b. At the discretion of the Administrator, the Company shall have
received an opinion of its counsel that the Shares may be issued upon
such particular exercise or acceptance in compliance with the 1933 Act
without registration thereunder.
22. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
------------------------------------------
Upon the dissolution or liquidation of the Company, all Options granted
under this Plan which as of such date shall not have been exercised and all
Stock Grants which have not been accepted will terminate and become null and
void; provided, however, that if the rights of a Participant or a Participant's
Survivors have not otherwise terminated and expired, the Participant or the
Participant's Survivors will have the right immediately prior to such
dissolution or liquidation to exercise or accept any Stock Right to the extent
that the Stock Right is exercisable or subject to acceptance as of the date
immediately prior to such dissolution or liquidation.
16
<PAGE>
23. ADJUSTMENTS.
------------
Upon the occurrence of any of the following events, a Participant's rights
with respect to any Stock Right granted to him or her hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
pertinent Option Agreement or Stock Grant Agreement:
A. Stock Dividends and Stock Splits. If (i) the shares of Common Stock
--------------------------------
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, or (ii) additional shares or new or different shares
or other securities of the Company or other non-cash assets are distributed with
respect to such shares of Common Stock, the number of shares of Common Stock
deliverable upon the exercise or acceptance of such Stock Right may be
appropriately increased or decreased proportionately, and appropriate
adjustments may be made in the purchase price per share to reflect such events.
The number of Shares subject to Options to be granted to directors pursuant to
Paragraph 6(A)(e) shall also be proportionately adjusted upon the occurrence of
such events.
B. Consolidations or Mergers. If the Company is to be consolidated with or
-------------------------
acquired by another entity in a merger, sale of all or substantially all of the
Company's assets or otherwise (an "Acquisition"), the Administrator or the board
of directors of any entity assuming the obligations of the Company hereunder
(the "Successor Board"), shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by substituting on an
equitable basis for the Shares then subject to such Options either the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition or securities of any successor or acquiring
entity; or (ii) upon written notice to the Participants, provide that all
Options must be exercised (either to the extent then exercisable or, at the
discretion of the Administrator, all Options being made fully exercisable for
purposes of this Subparagraph) at the end of which period the Options shall
terminate; or (iii) terminate all Options in exchange for a cash payment equal
to the excess of the Fair Market Value of the Shares subject to such Options
(either to the extent then exercisable or, at the discretion of the
Administrator, all Options being made fully exercisable for purposes of this
Subparagraph) over the exercise price thereof.
With respect to outstanding Stock Grants, the Administrator or the
Successor Board, shall either (i) make appropriate provisions for the
continuation of such Stock Grants by substituting on an equitable basis for the
Shares then subject to such Stock Grants either the consideration payable with
respect to the outstanding Shares of Common Stock in connection with the
Acquisition or securities of any successor or acquiring entity; or (ii) upon
written notice to the Participants, provide that all Stock Grants must be
accepted (to the extent then subject to acceptance) within a specified number of
days of the date of such notice, at the end of which period the offer of the
Stock Grants shall terminate; or (iii) terminate all Stock Grants in exchange
for a cash payment equal to the excess of the Fair Market Value of the Shares
subject to such Stock Grants over the purchase price thereof, if any. In
addition, in the event of an Acquisition,
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the Administrator may waive any or all Company repurchase rights with respect to
outstanding Stock Grants.
C. Recapitalization or Reorganization. In the event of a recapitalization
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or reorganization of the Company (other than a transaction described in
Subparagraph B above) pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock, a
Participant upon exercising or accepting a Stock Right shall be entitled to
receive for the purchase price, if any, paid upon such exercise or acceptance
the securities which would have been received if such Stock Right had been
exercised or accepted prior to such recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any
--------------------
adjustments made pursuant to Subparagraph A, B or C with respect to ISOs shall
be made only after the Administrator, after consulting with counsel for the
Company, determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424(h) of the Code) or would
cause any adverse tax consequences for the holders of such ISOs. If the
Administrator determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs, it may refrain from making such
adjustments, unless the holder of an ISO specifically requests in writing that
such adjustment be made and such writing indicates that the holder has full
knowledge of the consequences of such "modification" on his or her income tax
treatment with respect to the ISO.
24. ISSUANCES OF SECURITIES.
------------------------
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Stock Rights. Except as
expressly provided herein, no adjustments shall be made for dividends paid in
cash or in property (including without limitation, securities) of the Company
prior to any issuance of Shares pursuant to a Stock Right.
25. FRACTIONAL SHARES.
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No fractional shares shall be issued under the Plan and the person
exercising a Stock Right shall receive from the Company cash in lieu of such
fractional shares equal to the Fair Market Value thereof.
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26. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.
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The Administrator, at the written request of any Participant, may in its
discretion take such actions as may be necessary to convert such Participant's
ISOs (or any portions thereof) that have not been exercised on the date of
conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the Participant is an employee of the Company
or an Affiliate at the time of such conversion. Such actions may include, but
not be limited to, extending the exercise period or reducing the exercise price
of the appropriate installments of such Options. At the time of such conversion,
the Administrator (with the consent of the Participant) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the
Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any Participant the right to have such Participant's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action. The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such conversion.
27. WITHHOLDING.
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In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other
amounts are required by applicable law or governmental regulation to be withheld
from the Participant's salary, wages or other remuneration in connection with
the exercise or acceptance of a Stock Right or in connection with a
Disqualifying Disposition (as defined in Paragraph 28) or upon the lapsing of
any right of repurchase, the Company may withhold from the Participant's
compensation, if any, or may require that the Participant advance in cash to the
Company, or to any Affiliate of the Company which employs or employed the
Participant, the amount of such withholdings unless a different withholding
arrangement, including the use of shares of the Company's Common Stock or a
promissory note, is authorized by the Administrator (and permitted by law). For
purposes hereof, the fair market value of the shares withheld for purposes of
payroll withholding shall be determined in the manner provided in Paragraph 1
above, as of the most recent practicable date prior to the date of exercise. If
the fair market value of the shares withheld is less than the amount of payroll
withholdings required, the Participant may be required to advance the difference
in cash to the Company or the Affiliate employer. The Administrator in its
discretion may condition the exercise of an Option for less than the then Fair
Market Value on the Participant's payment of such additional withholding.
28. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
-----------------------------------------------
Each Key Employee who receives an ISO must agree to notify the Company in
writing immediately after the Key Employee makes a Disqualifying Disposition of
any shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any
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sale) of such shares before the later of (a) two years after the date the Key
Employee was granted the ISO, or (b) one year after the date the Key Employee
acquired Shares by exercising the ISO. If the Key Employee has died before such
stock is sold, these holding period requirements do not apply and no
Disqualifying Disposition can occur thereafter.
29. TERMINATION OF THE PLAN.
------------------------
The Plan will terminate on August 27, 2007, the date which is ten (10)
years from the earlier of the date of its adoption and the date of its approval
by the shareholders of the Company. The Plan may be terminated at an earlier
-------
date by vote of the shareholders of the Company; provided, however, that any
such earlier termination shall not affect any Option Agreements or Stock Grant
Agreements executed prior to the effective date of such termination.
30. AMENDMENT OF THE PLAN AND AGREEMENTS.
-------------------------------------
The Plan may be amended by the shareholders of the Company. The Plan may
also be amended by the Administrator, including, without limitation, to the
extent necessary to qualify any or all outstanding Stock Rights granted under
the Plan or Stock Rights to be granted under the Plan for favorable federal
income tax treatment (including deferral of taxation upon exercise) as may be
afforded incentive stock options under Section 422 of the Code, and to the
extent necessary to qualify the shares issuable upon exercise or acceptance of
any outstanding Stock Rights granted, or Stock Rights to be granted, under the
Plan for listing on any national securities exchange or quotation in any
national automated quotation system of securities dealers. Any amendment
approved by the Administrator which the Administrator determines is of a scope
that requires shareholder approval shall be subject to obtaining such
shareholder approval. Any modification or amendment of the Plan shall not,
without the consent of a Participant, adversely affect his or her rights under a
Stock Right previously granted to him or her. With the consent of the
Participant affected, the Administrator may amend outstanding Option Agreements
and Stock Grant Agreements in a manner which may be adverse to the Participant
but which is not inconsistent with the Plan. In the discretion of the
Administrator, outstanding Option Agreements and Stock Grant Agreements may be
amended by the Administrator in a manner which is not adverse to the
Participant.
31. EMPLOYMENT OR OTHER RELATIONSHIP.
---------------------------------
Nothing in this Plan or any Option Agreement or Stock Grant Agreement shall
be deemed to prevent the Company or an Affiliate from terminating the employment
or director status of a Participant, nor to prevent a Participant from
terminating his or her own employment, consultancy or director status or to give
any Participant a right to be retained in employment or other service by the
Company or any Affiliate for any period of time.
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32. GOVERNING LAW.
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This Plan shall be construed and enforced in accordance with the law of the
State of Delaware.
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