EXHIBIT 10.13
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DATAWATCH CORPORATION
1996 STOCK PLAN
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1. PURPOSE. The purpose of the Datawatch Corporation 1996 Stock Plan
(the "Plan") is to encourage key employees of Datawatch Corporation (the
"Company") and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations") and other individuals who render services
to the Company or a Related Corporation, by providing opportunities to
participate in the ownership of the Company and its future growth through (a)
the grant of options which qualify as "incentive stock options" ("ISOs") under
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code");
(b) the grant of options which do not qualify as ISOs ("Non-Qualified Options");
(c) awards of stock in the Company ("Awards"); and (d) opportunities to make
direct purchases of stock in the Company ("Purchases"). Both ISOs and
Non-Qualified Options are referred to hereafter individually as an "Option" and
collectively as "Options." Options, Awards and authorizations to make Purchases
are referred to hereafter collectively as "Stock Rights." As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall (be
administered by the Board of Directors of the Company (the "Board")
or, subject to paragraph 2(D) (relating to compliance with Section
162(m) of the Code), by a committee appointed by the Board (the
"Committee"). Hereinafter, all references in this Plan to the
"Committee" shall mean the Board if no Committee has been appointed.
Subject to ratification of the grant or authorization of each Stock
Right by the Board (if so required by applicable state law), and
subject to the terms of the Plan, the Committee shall have the
authority to (i) determine to whom (from among the class of
employees eligible under paragraph 3 to receive ISOs) ISOs shall be
granted, and to whom (from among the class of individuals and
entities eligible under paragraph 3 to receive Non-Qualified Options
and Awards and to make Purchases) Non-Qualified Options, Awards and
authorizations to make Purchases may be granted; (ii) determine the
time or times at which Options or Awards shall be granted or
Purchases made; (iii) determine the purchase price of shares subject
to each Option or Purchase, which prices shall not be less than the
minimum price specified in paragraph 6; (iv) determine whether each
Option granted shall be an ISO or a Non-Qualified Option; (v)
determine (subject to paragraph 7) the time or times when each
Option shall become exercisable and the duration of the exercise
period; (vi) extend the period during which outstanding Options may
be exercised; (vii) determine whether restrictions such as
repurchase options are to be imposed on shares subject to Options,
Awards and Purchases and the nature of such restrictions, if any,
and (viii) interpret the Plan and
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prescribe and rescind rules and regulations relating to it. If the
Committee determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under Section 422 of the Code
and the regulations promulgated thereunder, to ensure that such
Option is not treated as an ISO. The interpretation and construction
by the Committee of any provisions of the Plan or of any Stock Right
granted under it shall be final unless otherwise determined by the
Board. The Committee may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem advisable. No
member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any
Stock Right granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its
members as its chairman, and shall hold meetings at such time and
places as it may determine. A majority of the Committee shall
constitute a quorum and acts of a majority of the members of the
Committee at a meeting at which a quorum is present, or acts reduced
to or approved in writing by all the members of the Committee (if
consistent with applicable state law), shall be the valid acts of
the Committee. From time to time the Board may increase the size of
the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members of
the Committee and thereafter directly administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be
granted to members of the Board. All grants of Stock Rights to
members of the Board shall in all respects be made in accordance
with the provisions of this Plan applicable to other eligible
persons. Members of the Board who either (i) are eligible to receive
grants of Stock Rights pursuant to the Plan or (ii) have been
granted Stock Rights may vote on any matters affecting the
administration of the Plan or the grant of any Stock Rights pursuant
to the Plan, except that no such member shall act upon the granting
to himself or herself of Stock Rights, but any such member may be
counted in determining the existence of a quorum at any meeting of
the Board during which action is taken with respect to the granting
to such member of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its
discretion, may take such action as may be necessary to ensure that
Stock Rights granted under the Plan qualify as "qualified
performance-based compensation" within the meaning of Section 162(m)
of the Code and applicable regulations promulgated thereunder
("Performance-Based Compensation"). Such action may include, in the
Board's discretion, some or all of the following (i) if the Board
determines that Stock Rights granted under the Plan generally shall
constitute Performance-Based Compensation, the Plan shall be
administered, to the extent required for such Stock Rights to
constitute Performance-Based Compensation, by a Committee consisting
solely of two or more "outside directors" (as defined in
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applicable regulations promulgated under Section 162(m) of the
Code), (ii) if any Non-Qualified Options with an exercise price less
than the fair market value per share of Common Stock are granted
under the Plan and the Board determines that such Options should
constitute Performance-Based Compensation, such options shall be
made exercisable only upon the attainment of a pre-established,
objective performance goal established by the Committee, and such
grant shall be submitted for, and shall be contingent upon
shareholder approval and (iii) Stock Rights granted under the Plan
may be subject to such other terms and conditions as are necessary
for compensation recognized in connection with the exercise or
disposition of such Stock Right or the disposition of Common Stock
acquired pursuant to such Stock Right, to constitute
Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Stock Rights shall be authorized but
unissued shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 1,250,0001, subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the unpurchased shares of
Common Stock subject to such Option shall again be available for grants of Stock
Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 700,000 shares of Common Stock
under the Plan during any fiscal year of the Company. If any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part or shall be repurchased by the Company, the shares subject to such Option
shall be included in the determination of the aggregate number of shares of
Common Stock deemed to have been granted to such employee under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time on or after December 10, 1996 and prior to December 10, 2006. The
date of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the
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1 An amendment increasing the number of shares from 1,000,000 to 1,250,000 was
approved by the Board of Directors pursuant to a Unanimous Written Consent of
Directors effective as of February 16, 2000 and was approved by the stockholders
at the Annual Meeting of Stockholders held on March 28, 2000.
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Stock Right; provided, however, that such date shall not be prior to the date on
which the Committee acts to approve the grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND PURCHASES.
Subject to paragraph 2(D) (relating to compliance with Section
162(m) of the Code), the exercise price per share specified in the
agreement relating to each Non-Qualified Option granted, and the
purchase price per share of stock granted in any Award or authorized
as a Purchase, under the Plan may be less than the fair market value
of the Common Stock of the Company on the date of grant; provided
that, in no event shall such exercise price or such purchase price
be less than the minimum legal consideration required therefor under
the laws of any jurisdiction in which the Company or its successors
in interest may be organized.
B. PRICE FOR ISOS. The exercise price per share specified in
the agreement relating to each ISO granted under the Plan shall not
be less than the fair market value per share of Common Stock on the
date of such grant. In the case of an ISO to be granted to an
employee owning stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company
or any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than one hundred
ten percent (110%) of the fair market value per share of Common
Stock on the date of grant. For purposes of determining stock
ownership under this paragraph, the rules of Section 424(d) of the
Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible
employee may be granted Options treated as ISOs only to the extent
that, in the aggregate under this Plan and all incentive stock
option plans of the Company and any Related Corporation, ISOs do not
become exercisable for the first time by such employee during any
calendar year with respect to stock having a fair market value
(determined at the time the ISOs were granted) in excess of
$100,000. The Company intends to designate any Options granted in
excess of such limitation as Non-Qualified Options, and the Company
shall issue separate certificates to the optionee with respect to
Options that are Non-Qualified Options and Options that are ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an
Option is granted under the Plan, the Company's Common Stock is
publicly traded, "fair market value" shall be determined as of the
date of grant or, if the prices or quotes discussed in this sentence
are unavailable for such date, the last business day for which such
prices or quotes are available prior to the date of grant and shall
mean (i) the average (on that date) of the high and low prices of
the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then traded
on a national securities exchange; or (ii) the
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last reported sale price (on that date) of the Common Stock on the
Nasdaq National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or
average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common
Stock is not reported on the Nasdaq National Market. If the Common
Stock is not publicly traded at the time an Option is granted under
the Plan, "fair market value" shall mean the fair value of the
Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock
in private transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on
the date of grant or shall become exercisable thereafter in such
installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable, it shall remain exercisable until expiration or
termination of the Option, unless otherwise specified by the
Committee.
C. PARTIAL EXERCISE. Each Option or installment may be
exercised at any time or from time to time, in whole or in part, for
up to the total number of shares with respect to which it is then
exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right
to accelerate the date that any installment of any Option becomes
exercisable; provided that the Committee shall not, without the
consent of an optionee, accelerate the permitted exercise date of
any installment of any Option granted to any employee as an ISO (and
not previously converted into a Non-Qualified Option pursuant to
paragraph 16) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in
paragraph 6(C).
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9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
as defined in paragraph 10, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate on the earlier of (a)
three months after the date of termination of his or her employment, or (b)
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. For purposes of this paragraph 9, employment shall be
considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute or by contract. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. ISOs granted
under the Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Stock Right the right to be retained in
employment or other service by the Company or any Related Corporation for any
period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her death,
any ISO owned by such optionee may be exercised, to the extent
otherwise exercisable on the date of death, by the estate, personal
representative or beneficiary who has acquired the ISO by will or by
the laws of descent and distribution, until the earlier of (i) the
specified expiration date of the ISO or (ii) 180 days from the date
of the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her
disability, such optionee shall have the right to exercise any ISO
held by him or her on the date of termination of employment, for the
number of shares for which he or she could have exercised it on that
date, until the earlier of (i) the specified expiration date of the
ISO or (ii) 180 days from the date of the termination of the
optionee's employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as defined
in Section 22(e)(3) of the Code or any successor statute.
11. ASSIGNABILITY. No ISO shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be
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exercisable only by such optionee. Stock Rights other than ISOs shall be
transferable to the extent set forth in the agreement relating to such Stock
Right.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If 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, the
number of shares of Common Stock deliverable upon the exercise of
Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or
stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger or other
reorganization in which the holders of the outstanding voting stock
of the Company immediately preceding the consummation of such event,
shall, immediately following such event, hold, as a group, less than
a majority of the voting securities of the surviving or successor
entity, or in the event of a sale of all or substantially all of the
Company's assets or otherwise (each, an "Acquisition"), the
Committee 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 (a) the
consideration payable with respect to the outstanding shares of
Common Stock in connection with the Acquisition, (b) shares of stock
of the surviving or successor corporation or (c) such other
securities as the Successor Board deems appropriate, the fair market
value of which shall not materially exceed the fair
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market value of the shares of Common Stock subject to such Options
immediately preceding the Acquisition; or (ii) upon written notice
to the optionees, provide that all Options must be exercised, to the
extent then exercisable or to be exercisable as a result of the
Acquisition, within a specified number of days of the date of such
notice, 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 (to the extent then exercisable or to be exercisable as a
result of the Acquisition) over the exercise price thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization 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, an optionee upon
exercising an Option shall be entitled to receive for the purchase
price paid upon such exercise the securities he or she would have
received if he or she had exercised such Option prior to such
recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect to
ISOs shall be made only after the Committee, 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 of the Code) or would cause any adverse tax consequences
for the holders of such ISOs. If the Committee determines that such
adjustments made with respect to ISOs would constitute a
modification of such ISOs or would cause adverse tax consequences to
the holders, it may refrain from making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will
terminate immediately prior to the consummation of such proposed
action or at such other time and subject to such other conditions as
shall be determined by the Committee.
F. 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 Options. No
adjustments shall be made for dividends paid in cash or in property
other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued
under the Plan and the optionee shall receive from the Company cash
in lieu of such fractional shares.
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H. ADJUSTMENTS. Upon the happening of any of the events
described in subparagraphs A, B or C above, the class and aggregate
number of shares set forth in paragraph 4 hereof that are subject to
Stock Rights which previously have been or subsequently may be
granted under the Plan shall also be appropriately adjusted to
reflect the events described in such subparagraphs. The Committee or
the Successor Board shall determine the specific adjustments to be
made under this paragraph 13 and, subject to paragraph 2, its
determination shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, 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, (c) at the discretion of the
Committee, by delivery of the grantee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
Federal rate, as defined in Section 1274(d) of the Code, (d) at the discretion
of the Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c), (d) or
(e) of the preceding sentence, such discretion shall be exercised in writing at
the time of the grant of the ISO in question. The holder of an Option shall not
have the rights of a shareholder with respect to the shares covered by such
Option until the date of issuance of a stock certificate to such holder for such
shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
December 10, 1996, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to December 10, 1997, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on December 9, 2006 (except as to Options outstanding on
that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan
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may not be increased (except by adjustment pursuant to paragraph 13); (b) the
provisions of paragraph 3 regarding eligibility for grants of ISOs may not be
modified; (c) the provisions of paragraph 6(B) regarding the exercise price at
which shares may be offered pursuant to ISOs may not be modified (except by
adjustment pursuant to paragraph 13); and (d) the expiration date of the Plan
may not be extended. Except as otherwise provided in this paragraph 15, in no
event may action of the Board or stockholders alter or impair the rights of a
grantee, without such grantee's consent, under any Stock Right previously
granted to such grantee.
16. MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO NON-QUALIFIED
OPTIONS. Subject to paragraph 13(D), without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such ISO (including
the means of exercising such ISO) if such alteration would constitute a
modification (within the meaning of Section 424(h)(3) of the Code). The
Committee, at the written request or with the written consent of any optionee,
may in its discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments 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
optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At the time of such conversion, the Committee (with
the consent of the optionee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Committee 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 optionee the right to have
such optionee's ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Committee takes appropriate action.
Upon the taking of such action, the Company shall issue separate certificates to
the optionee with respect to Options that are Non-Qualified Options and Options
that are ISOs.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option
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hereunder, or the making of a distribution or other payment with respect to such
stock or securities, the Company may withhold taxes in respect of amounts that
constitute compensation includible in gross income. The Committee in its
discretion may condition (i) the exercise of an Option, (ii) the transfer of a
Non-Qualified Stock Option, (iii) the grant of an Award, (iv) the making of a
Purchase of Common Stock for less than its fair market value, or (v) the vesting
or transferability of restricted stock or securities acquired by exercising an
Option, on the grantee's making satisfactory arrangement for such withholding.
Such arrangement may include payment by the grantee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
grantee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.
20. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
21. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Stock Rights shall be governed by the laws of the State
of Delaware, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
