<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _____________________
Commission file number 0-16752
MEDSTONE INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 66-0439440
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
100 COLUMBIA, SUITE 100, ALISO VIEJO, CALIFORNIA 92718
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 448-7700
------------------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed,
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of the Common Stock of the registrant outstanding as of
August 4, 1997 was 5,612,280.
<PAGE> 2
This Form 10-Q/A, Amendment No. 1 adds Item 4. Submission of Matters to a Vote
of Security Holders and Item 6. Exhibits and Reports on Form 8-K (Exhibit 10.29
- - 1997 Stock Incentive Plan) to the previously filed Form 10-Q for the quarter
ended June 30, 1997.
-2-
<PAGE> 3
MEDSTONE INTERNATIONAL, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders of the Company was held on
May 1, 1997.
(b) The election of four board of directors of the Company was held.
The number of shares cast for each of the individuals listed
below to serve until the next Annual Meeting of stockholders and
until their successors are elected and have qualified was as
follows:
<TABLE>
<CAPTION>
NAME FOR WITHHELD
---- --- --------
<S> <C> <C>
David V. Radlinski 4,938,820 247,847
Frank R. Pope 4,939,020 247,647
Donald John Regan 4,939,320 247,347
Michael C.Tibbitts 4,939,020 247,647
</TABLE>
The approval of the proposed 1997 stock incentive plan. (See
Item 6. Exhibit 10.29)
<TABLE>
<S> <C>
For 1,873,991
Against 759,266
Abstain 24,499
</TABLE>
The ratification of the appointment of Ernst & Young, LLP as
independent accountants of the Company for the year ending
December 31, 1997.
<TABLE>
<S> <C>
For 5,098,117
Against 2,700
Abstain 15,850
</TABLE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
<TABLE>
<S> <C>
10.29 1997 Stock Incentive Plan
11.1* Computation of Per Share Information
27* Financial Data Schedule
</TABLE>
-------
* Previously filed.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
-3-
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MEDSTONE INTERNATIONAL, INC.
A Delaware Corporation
Date: August 21, 1997 /s/ Mark Selawski
---------------------------------------
Mark Selawski
Chief Financial Officer
(Principal financial and
accounting officer)
-4-
<PAGE> 1
EXHIBIT 10.29
MEDSTONE INTERNATIONAL, INC.
1997 STOCK INCENTIVE PLAN
1. GENERAL
This Plan is intended to secure for the Company and its stockholders the
benefits derived from capital stock ownership or from realization of capital
stock appreciation by officers and key employees of the Company and its
Subsidiaries and by other selected persons who contribute to the growth and
success of the Company. This Plan will provide further incentives to such
persons and encourage them to remain in the service of the Company or its
Subsidiaries, and will enhance the ability of the Company and its Subsidiaries
to attract and motivate high quality personnel. This Plan is intended to satisfy
the requirements of Section 422 with respect to Incentive Options and of Rule
16b-3 with respect to transactions by officers, directors of the Company, and
shall be construed accordingly.
2. DEFINITIONS
As used in this Plan, the following capitalized terms shall have the
meanings indicated:
(a) Award: An Option, an SAR or Restricted Stock issued or granted
to an Eligible Grantee under this Plan.
(b) Board: The Board of Directors of the Company.
(c) Code: The Internal Revenue Code of 1986, as amended.
(d) Committee: The Committee established to grant Awards and
administer this Plan, as provided in Section 3.
(e) Company: Medstone International, Inc, a Delaware corporation.
(f) Corresponding Option: An Option with respect to which a Tandem
SAR is granted under Section 8(a).
(g) Date of Exercise: The date on which an executive officer of the
Company, at the Company's corporate offices, receives the
written notification and any payment required under this Plan
for the exercise of all or a portion of an Option or an SAR,
except that the Date of Exercise may be a later date specified
by the Grantee within the applicable exercise period.
(h) Date of Grant: The date on which the Committee authorizes the
granting of an Award to a specified Grantee, except that the
Date of Grant may be a later date specified by the Committee.
(i) Eligible Grantee: Subject to Section 7(c), any person who is an
officer, director or key employee of the Company or a Subsidiary
on the Date of Grant or any consultant or individual whose
participation in the Plan the Committee determines is in the
Company's best interests. However, if necessary for securities
issuances under this Plan to qualify for registration under the
Securities Exchange Act of 1933, as amended, on Form S-8 (or
another similar form covering employee benefit plan issuances),
Awards may only be issued to individuals who are not employees,
officers or directors of the Company or its Subsidiaries if such
individuals are consultants or
16
<PAGE> 2
advisors to such entities who render bona fide services not in
connection with the offer or sale of securities in
capital-raising transactions.
(j) Fair Market Value: (i) If the Stock is listed or admitted to
trade on a securities exchange, the closing price of a share of
the Stock on the composite tape of the principal securities
exchange on which the Stock is so listed or admitted to trade;
or, (ii) if the Stock is not listed or admitted to trade on a
securities exchange, the reported closing price or, if such
prices are not reported, the mean between the last reported bid
and asked prices, for a share of the Stock as furnished by the
National Association of Securities Dealers, Inc. through NASDAQ
or a similar organization if NASDAQ is no longer reporting such
information; or (iii) if the Stock is not listed or admitted to
trade on a securities exchange and if prices for the Stock are
not so furnished through NASDAQ or a similar organization, the
fair market value of a share of the Stock determined by the
Committee. The Fair Market Value as of any date under (i) or
(ii) shall be determined by the trading price on that date, or
if there was no trading price on that date, on the next
preceding date on which the Stock was traded. With respect to an
Incentive Option, the foregoing determination of the Fair Market
Value shall be modified as required to satisfy the applicable
Treasury Regulations issued under Section 422.
(k) Freestanding SAR: An SAR which is not a Tandem SAR.
(l) Grantee: The person to whom an Award is granted under this Plan.
(m) Incentive Option: An Option that qualifies as an incentive stock
option under Section 422.
(n) Option: A stock option granted to an Eligible Grantee under this
Plan.
(o) Plan: This Medstone International, Inc. 1997 Stock Incentive
Option Plan, as set forth herein and as amended from time to
time.
(p) Restricted Stock: Shares of Stock issued to an Eligible Grantee
under Section 10.
(q) Rule 16b-3: Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as the Rule may be
amended from time to time, and any successor rule.
(r) SAR: A stock appreciation right granted to an Eligible Grantee
under Section 9.
(s) Section 422: Section 422 of the Code, as amended, and any
successor provision.
(t) Stock: Shares of the Common Stock of the Company, and such other
securities as may be substituted therefor as provided in Section
15.
(u) Subsidiary: Any subsidiary of the Company, as defined in Section
424(f) of the Code, as amended, whether now existing or
organized in the future.
(v) Tandem SAR: An SAR which is granted in tandem with a
Corresponding Option, so that its payment will reduce the number
of shares of Stock issuable upon exercise of the Corresponding
Option.
(w) 10% Shareholder: An individual who for purposes of Section
422(b)(6) of the Code, as amended, owns Stock possessing more
than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of its parent or subsidiary
corporation.
17
<PAGE> 3
3. ADMINISTRATION
(a) The Committee
This Plan shall be administered by a Committee consisting of two
(2) or more persons appointed by the Board. The Board may from time to
time appoint members to the Committee and may fill vacancies, however
caused, in the Committee. The Committee, in its discretion, may delegate
the granting of Awards and other administration of the Plan to officers
of the Company or other persons, subject to any limitations on such
delegating under applicable laws. The Board itself may carry out any or
all of the functions of the Committee.
(b) Award Grants and Plan Interpretation
Subject to the provisions of this Plan and any Board approval
requirements or other limitations under applicable laws, the Committee
shall have authority to grant and determine the terms of Awards and
shall interpret this Plan and prescribe rules and regulations relating
to it. Any interpretation or construction by the Committee of any
provision of this Plan or of any Award shall be binding and conclusive.
An Eligible Grantee who has been granted an Award may be granted
additional Awards or Awards in substitution for previously granted or
exercised Awards, if the Committee shall so determine. At the
Committee's discretion, Award grants may be made singly, in combination
or in tandem (subject to any applicable limitations on tandem grants
under the Code with respect to Incentive Options).
(c) Committee Actions
The Committee shall hold its meetings at such times and places
as it may determine. A majority of its members shall constitute a
quorum. All determinations of the Committee at which a quorum is present
shall be made by a majority of its members which are present. Any
decision or determination reduced to writing and signed by all the
members shall be as fully effective as if it had been made by a majority
vote at a meeting duly called and held. No member of the Committee shall
be liable, in the absence of gross negligence or wilful misconduct, for
any act or omission with respect to his service on the Committee.
Service on the Committee by a member of the Board shall constitute
service as a director of the Company so that the member shall be
entitled to indemnification and reimbursement as a director of the
Company.
4. STOCK ISSUABLE UNDER PLAN
Subject to Section 15, the aggregate number of shares of Stock which may
be issued under this Plan shall be 800,000 shares of Common Stock, increased on
January 1 of each year this Plan is in effect by a number of shares equal to one
percent (1%) of the total number of outstanding shares of Common Stock on that
date. Shares subject to outstanding Awards of Options or SARs will be reserved
for issuance. Any shares of Common Stock issued under this Plan may consist in
whole or in part of authorized and unissued shares or treasury shares. Shares of
Stock subject to the unexercised portions of any Options granted under this Plan
which expire, terminate or are canceled, and shares of Restricted Stock which
are reacquired by the Company or canceled pursuant to the terms of the
Restricted Stock Awards, shall again become available for issuance under this
Plan. Any shares of Stock surrendered to the Company under Section 6(b) to pay
the exercise prices upon exercises of Options or to satisfy withholding tax
requirements under Section 13 will not be added to the number of shares of stock
available for issuance under the Plan. If the number of shares to be issued
pursuant to an Award is reduced to pay the exercise price under Section 6(b) or
to satisfy tax withholding requirements under Section 13, the number of shares
issuable under this Plan will be reduced by such reduction. The total number of
shares of Stock which may subsequently be issued under this Plan shall be
reduced, (a) upon the
18
<PAGE> 4
exercise of a Tandem SAR (but without duplication for shares issued upon such
exercise), by the number of shares of Stock covered by the portion of the
Corresponding Option which is surrendered upon such exercise, and, (b) upon the
exercise of a portion of a Freestanding SAR, by the same portion of the total
number of shares of Stock with respect to which the Freestanding SAR was
originally granted, as specified by the Committee at the time of its grant.
The maximum number of shares of Stock that may be delivered upon
exercises of Options qualified as Incentive Options granted under this Plan is
800,000 Shares. Such maximum number of Incentive Option shares shall be subject,
as appropriate, to adjustments under this Section 15 in the same manner as the
total number of shares of Stock issuable under this Plan, but such maximum
number shall not be altered by the annual increases provided for in the first
sentence of this Section 4.
5. TERMINATION OF THE PLAN
Awards may be granted as provided in this Plan at such time or times as
may be determined by the Committee, but any such grants must be made prior to
the termination of this Plan by the Board. Any Options or SARs outstanding on
the termination date may thereafter by exercised in accordance with their
respective terms.
6. OPTION PROVISIONS
(a) Each Option granted under this Plan shall specify whether or not
it is intended to be an Incentive Option. Unless otherwise approved by the
Committee and agreed in writing by the Company and the Grantee in the Award
agreement or otherwise, each such Option shall be subject to the following
conditions:
(i) Minimum Exercise Price
The exercise price per share of the Stock subject to the
Option shall not be less than 100 percent (100%) of the Fair
Market Value on the Date of Grant of the Option.
(ii) Term of Option
The option may not be exercised in whole or in part more
than ten (10) years after its Date of Grant. If the Grantee dies
less than one (1) year before the expiration date of his Option,
the expiration date will be extended to one (1) year after the
date of his death.
(iii) Termination of Employment or Services
If the Grantee for any reason ceases to be employed or
retrained as an employee or service provider (which shall
include serving as a director) by the Company or another
corporation specified in Section 422(a)(2) of the Code, as
amended, other than because of his death or total disability,
any portion or all of the Grantee's Option which has not been
previously exercised shall expire, subject to earlier expiration
pursuant to other sections of this Plan or the terms of the
Option, three (3) months following the date he ceases to be so
employed or retained and shall only be exercisable to the extent
exercisable on the date of termination. If the Grantee ceases to
be so employed or retained because of his death or total
disability, his Option shall expire, subject to earlier
expiration pursuant to other sections of this Plan or the terms
of the Option, one (1) year following the date he ceases to be
so employed or retained and shall only be exercisable to the
extent exercisable on the date of termination. "Total
disability," as used in this paragraph and in Section 7(c),
shall have the meaning applicable for purposes of Section 422
or, with respect to the paragraph, as otherwise determined by
the Committee.
19
<PAGE> 5
(iv) Exercise of Options
Once exercisable, an Option shall remain exercisable
until the expiration or earlier termination of the Option. Only
whole shares of stock shall be issued upon the exercise of an
Option and fractional share interests shall be disregarded,
although the Committee may determine that cash, other securities
or other property will be paid or transferred in lieu of any
fractional share interests.
(v) The Option shall not be transferable by the Grantee
except by will or the laws of descent and distribution, and
shall be exercisable during the Grantee's lifetime only by him.
(b) Payments
Payment for Stock purchased upon any exercise of an Option shall
be made in full in cash concurrently with such exercise, except that, if
the Committee shall have authorized it and the Company is not then
legally prohibited from receiving such consideration, the purchase may
be made in whole or in part: (i) by forgiveness of indebtedness owed by
the Company to the purchaser; (ii) by transfer or surrender to the
Company (which may be effected, if permitted by the Committee, without
actual delivery of the certificates representing such shares)
concurrently with such exercise of shares of Stock valued on the basis
of the Fair Market Value of the Stock on the Date of Exercise; (iii) by
reducing the number of shares of Stock to be delivered to the Grantee
upon exercise of the Option, with the reduction valued on the basis of
the aggregate Fair Market Value on the Date of Exercise of the
additional shares of Stock that would otherwise have been delivered to
the Grantee upon the Option exercise; (iv) by the delivery, concurrently
with such exercise and in accordance with Regulation T promulgated under
the Securities Exchange Act of 1934, or any successor rule or
regulation, of a properly executed exercise notice for the Option and
irrevocable instructions to a broker promptly to deliver to the Company
to pay the exercise price a specified amount of the proceeds of a sale
of the Option shares or loan secured by the Option shares; and/or (v) by
other means determined by the Committee to be consistent with this
Plan's purposes. Subject to any Board approval requirements or other
limitations under applicable laws, the Committee may also assist any
Grantee (including an officer or director) in the exercise of his Option
by authorizing a loan from the Company, permitting the Grantee to pay
the exercise price in installments or authorizing a guarantee by the
Company of a third party loan to the Grantee, and the terms and
conditions of any such loan, installment sale or guarantee will be
determined by the Committee.
(c) Shareholder's Rights
A Grantee shall have none of the rights of a shareholder with
respect to the shares subject to his Option until such shares have been
duly issued to the Grantee pursuant to his exercise of the Option.
7. INCENTIVE OPTION LIMITATIONS
Each Incentive Option issued under the Plan shall be subject to the
following limitations, if and to the extent required to satisfy then applicable
requirements under Section 422 of the Code or any successor provision:
(a) Term of Option
No Incentive Option may be exercised in whole or in part more
than ten (10) years after its Date of Grant, except that the maximum
term for any Incentive Option granted to a 10% Shareholder shall be five
(5) years after its Date of Grant.
20
<PAGE> 6
(b) Maximum Grant
The aggregate fair market value (determined as of the time any
Incentive Option is granted) of the Stock with respect to which
Incentive Options are exercisable for the first time by any Grantee
during any calendar year under this Plan, and under any other plans of
the Company and its parent and subsidiary corporations, shall not exceed
One Hundred Thousand Dollars ($100,000.00).
(c) Termination of Employment
An Incentive Option may not be granted to a Grantee who is not
on the Date of Grant employed by either the Company or another
corporation specified in Section 422(a)(2) of the Code, as amended. If a
Grantee ceases to be so employed for any reason, other than because of
his death or total disability, any portion or all of the Grantee's
Incentive Option which has not been previously exercised shall expire,
subject to earlier expiration pursuant to other sections of this Plan or
the terms of the Option, three (3) months following the date his
employment is terminated and shall only be exercisable to the extent
exercisable on the date of termination. If a Grantee ceases to be
employed by either the Company or another corporation specified in
Section 422(a)(2) of the Code, as amended, because of his total
disability, his Incentive Option shall expire, subject to earlier
expiration pursuant to other sections of this Plan or the terms of the
Option, one (1) year after the date his employment is terminated and
shall only be exercisable to the extent exercisable on the date of
termination.
d) Minimum Exercise Price
The exercise price per share of the Stock subject to each
Incentive Option shall be determined by the Committee, but shall not be
less than 100 percent (100%) of the Fair Market Value on the Date of
Grant of the Incentive Option. In the case of an Incentive Option
granted to a 10% Shareholder, the exercise price per share may not be
less than one hundred ten percent (110%) of the Fair Market Value on the
Date of Grant.
(e) Date of Grant
No Incentive Option may be granted more than ten (10) years
after the effective date of this Plan.
(f) Adjustments Upon Changes in Capitalization
Any adjustment under Section 13(a) with respect to an Incentive
Option shall be made in such manner as not to constitute a modification
as defined in Section 424(h)(3) of the Code, as amended, and only to the
extent permitted (to preserve the applicability to the Incentive Option
of Section 421(a) of the Code) by Sections 422 and 424 of the Code, as
amended.
(g) Nontransferability
An Incentive Option granted under this Plan shall not be
transferable by the Grantee except by will or the laws of descent and
distribution, and shall be exercisable during the Grantee's lifetime
only by him.
8. STOCK APPRECIATION RIGHTS
(a) Tandem SARs
At the Committee's discretion, an Eligible Grantee may be issued
a Tandem SAR (stock
21
<PAGE> 7
appreciation right) to receive upon its exercise an amount equal to some
or all of the excess of the Fair Market Value as of the Date of Exercise
of the shares subject to unexercised portions of the Corresponding
Option over the aggregate exercise price for such shares under the
Corresponding Option. No Tandem SAR may be exercised in whole or in part
other than in connection with the contemporaneous surrender without
exercise of its Corresponding Option, or the portion thereof that
corresponds to the portion of the Tandem SAR being exercised, or except
to the extent that the Corresponding Option or such portion thereof is
exercisable on the Date of Exercise of the Tandem SAR. A Tandem SAR may
be granted at the time the Corresponding Option is granted or at any
time thereafter during the term of the Corresponding Option. With
respect to any Tandem SAR, the Committee, in its discretion, may place
an upper limit on the amount payable on exercise of the SAR, may limit
the exercise of the SAR to specified time periods or to a portion of the
shares subject to the Corresponding Option, may require a portion of the
shares subject to the Corresponding Option to be purchased as a
condition to exercise of the SAR, may add any restrictions necessary to
provide for incentive stock option treatment of the Corresponding Option
and may provide such other provisions or limitations as are consistent
with this Plan and applicable laws and regulatory requirements.
(b) Freestanding SARs
At the Committee's discretion, an Eligible Grantee may be issued
a Freestanding SAR (stock appreciation right) to receive upon its
exercise an amount equal to some or all of the excess of the Fair Market
Value of a number of shares of Common Stock specified by the Committee
at the time of the Freestanding SAR's grant over a base value (which may
or may not equal the Fair Market Value of the same number of shares at
the Date of Grant) determined by the Committee. The Committee, in its
discretion, may place an upper limit on the amount payable on exercise
of the Freestanding SAR, may limit the exercise periods and may provide
such other provisions or limitations as are consistent with this Plan
and applicable laws and regulatory requirements.
(c) SAR Payments
As determined or agreed to by the Committee, the amount payable
upon exercise of an SAR may be paid in cash, in shares of Stock (valued
on the basis of their Fair Market Value on the exercise date and rounded
down to the highest number of whole shares, unless payment for a
fractional share equivalent shall be agreed to by the Committee) or in a
combination of cash and such shares so valued. The Committee may permit
a Grantee to defer payments payable to him under this Section 8 under
such rules and procedures as the Committee may establish, including
(without limitation) the crediting of interest on deferred amounts
denominated in cash and of dividend equivalents on deferred amounts
denominated in Stock.
9. EXERCISE OF OPTIONS AND SARS
(a) Exercise Procedure
Unless consideration other than services to the Company or its
affiliated entity is given for such Award, no Option or SAR shall be
exercisable until at least six months after its Date of Grant. A Grantee
shall exercise his Option or SAR by delivering to an executive officer
of the Company, at the Company's corporate offices: (i) a notice in
writing of his intention to exercise his Option or SAR, specifying the
number of shares as to which he desires to exercise the Option or SAR
and the date on which he desires to complete his exercise (which must be
within the applicable exercise period); (ii) any representations of the
Grantee required under Section 16; (iii) cash and/or other consideration
required for full payment of the purchase price of the shares as to
which an Option is being exercised; and (iv) any other documentation
reasonably required by the executive officer. Any person other than the
Grantee who exercises an Option or SAR shall first provide the Company
with satisfactory evidence of his right to do so.
22
<PAGE> 8
(b) Other Limitations
The Committee shall in its discretion subject to the
requirements of this Plan and applicable laws and regulatory
requirements, prescribe the terms and conditions upon which Options and
SARs may be exercised, which need not be the same in each case. Such
terms and conditions may include (without limitation) vesting and
acceleration provisions and provisions requiring termination of Options
and SARs following termination of employment or other occurrences. At
any time, the Committee and the Option or SAR holder may agree to
accelerate the exercise date or dates for any outstanding Option or SAR
or portion thereof.
(c) Death of Employee
If a Grantee shall die, the executor, administrator or personal
representative of his estate, or another person to whom rights to
exercise his Option or SAR shall pass under his will or the laws of
descent and distribution, may exercise his Option or SAR, to the extent
it is otherwise exercisable under the terms of this Plan.
10. RESTRICTED STOCK
The Committee may issue shares of Restricted Stock under this Plan to
any Eligible Grantee in such amounts and for such lawful consideration as the
Committee shall determine is beneficial to the Company. The Committee shall
determine the terms and conditions applicable to any such Restricted Stock
issuance including, without limitation, rights of the Company or its assignees
to acquire all or a portion of the shares upon termination of the Grantee's
employment by the Company or until other specified dates or events, restrictions
on transfers of the shares, possession of share certificates and voting and
dividend rights with respect to shares which are restricted, and the effects of
changes in the Company's control. The Committee may also agree to issue
Restricted Stock to an Eligible Grantee on a deferred basis at a future date or
future dates, and may provide that until the issuance of deferred shares the
Grantee may receive payments from the Company as additional compensation equal
to dividends that would have been paid on the deferred shares if they had been
outstanding on the record date for the dividend payments. This paragraph shall
not restrict the Company from issuing its shares outside this Plan in any lawful
manner.
11. NO TRANSFERABILITY EXCEPT FOR LIMITED EXCEPTIONS
Unless otherwise provided in this Section 11, in the Award agreement
between the Grantee and the Company, as each may be amended, or by applicable
law, an Option or SAR granted under this Plan shall not be transferable (whether
by sale, assignment, pledge or otherwise) by the Grantee and shall be
exercisable during the Grantee's lifetime only by him, and amounts payable or
shares issuable pursuant to such an Award shall be delivered only to or for the
account of the Grantee. Any attempted transfer in violation of this paragraph
shall be void and unenforceable. Subject to Sections 7(g) and 16 of this Plan
and any limitations set forth in the Award agreements, the foregoing
restrictions shall not apply to: (a) transfers to the Company; (b) the
designation of a beneficiary to receive benefits in the event of the Grantee's
death or, if the Grantee has died, transfers to or exercise by the Grantee's
beneficiary, or, in the absence of a validly designated beneficiary, transfers
by will or the laws of descent and distribution; (c) transfers pursuant to a
domestic relations order (as defined in Section 414(p) of the Code) relating to
the Grantee; (d) if the Grantee has suffered a disability, permitted transfers
or exercises on behalf of the Grantee by his or her legal representative; or (e)
the authorization by the Committee of "cashless exercise" procedures with third
parties who provide financing for the purpose of (or who otherwise facilitate)
the exercise of Awards consistent with applicable laws and the authorization of
the Committee. Subject to Sections 7(g) and 16 of this Plan, the Committee also
may permit an Award to be exercised by and paid to certain persons or entities
related to the Grantee, including but not limited to members of the Grantee's
family, charitable institutions or trusts, or other entities whose beneficiaries
or beneficial owners are members of the Grantee's family and/or charitable
23
<PAGE> 9
institutions, pursuant to such conditions and procedures as the Committee may
establish. Any transfer permitted by the preceding sentence shall be subject to
the condition that the Committee receive evidence satisfactory to it that the
transfer is being made for estate, tax planning and/or charitable giving
purposes on a gratuitous or donative basis and without consideration (other than
nominal consideration).
12. AMENDMENT OF PLAN
The Board shall have complete power and authority to alter, amend,
suspend or terminate this Plan, provided that no such action shall deprive a
Grantee, without his consent, of any Award, or of any rights thereunder,
previously granted to him pursuant to this Plan and no action by the Board will
cause Incentive Options granted under this Plan not to comply with Section 422
of the Code unless the Board specifically declares such action to be made for
that purpose. Unless approved by the shareholders of the Company, the Board may
not make any amendment to this Plan to increase the total number of shares or
other securities of the Company that may be issued under the Plan.
13. WITHHOLDING TAXES
Upon any exercise, vesting, payment or other event related to an award
issued under this Plan, the Company or any Subsidiary employing the Grantee
shall have the right to deduct from the Grantee's compensation or require the
Grantee to remit to the employer corporation an amount sufficient to satisfy
federal state and local withholding tax requirements applicable to such event.
If such payment is legally permissible and is approved by the Committee and the
employer corporation, such amount may be paid by surrender or retention of the
Grantee's shares of Stock valued at their current Fair Market Value.
14. AWARD AGREEMENTS AND AMENDMENTS
Each Award granted under this Plan shall be evidenced by an agreement
between the Company and the Grantee, which shall be approved by the Committee or
an executive officer of the Company. The agreement shall comply with the
provisions of this Plan and the terms of the Award's grant by the Committee.
Subject to the terms and limitations set forth in this Plan, an officer of the
Company, with the Committee's approval, and the Grantee may without shareholder
approval modify, extend, renew or terminate any outstanding Award or agreement
evidencing an Award.
15. ADJUSTMENTS OR TERMINATION UPON CHANGES IN CAPITALIZATION OR
REORGANIZATIONS
(a) Changes in Capitalization
If the number of outstanding shares of Stock is increased or
decreased by a stock dividend payable in shares of Stock or a
subdivision, split, combination or reverse split of outstanding shares
of Stock, or if the outstanding shares of Stock are changed into or
exchanged for a different number or kind of securities of the Company
through a reorganization, merger, recapitalization or reclassification,
an appropriate and proportionate adjustment shall be made in the number
and kind of securities as to which Awards may be granted under this
Plan. A corresponding adjustment changing the number and kind of
securities allocated to, and the exercise price per share of Options,
SARs or portions thereof outstanding at the time of such change shall
likewise be made. Any such adjustment of an outstanding Option shall be
made without changing the total exercise price for the unexercised
portion of the Option.
(b) Reorganizations
At least fifteen (15) days prior notice of such on shall be
given by the Company to holders of outstanding Awards in the event of
(i) the dissolution or liquidation of the Company, (ii) a
reorganization,
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merger or consolidation as a result of which the Company is not the
surviving corporation or as a result of which the outstanding shares of
Stock are changed into or exchanged for cash, property or securities not
of the Company's issue, except for a merger or consolidation with a
wholly-owned subsidiary of the Company or a transaction effected
primarily to change the state of the Company's incorporation, or (iii) a
sale or other transfer in one or a series of transactions of all or
substantially all of the assets of the Company to any person or entity
or to persons or entities which are affiliated or acting in concert with
respect to such sale or transfer. Any Option or SAR granted under this
Plan shall automatically terminate upon the closing of and, subject to
the last sentence of Section 9(b), each outstanding Option or SAR shall
become fully exercisable with respect to all the unissued shares subject
to the Option or the full remaining SAR payment at a time prior to the
closing of such dissolution, liquidation, reorganization, merger,
consolidation or sale of assets. The preceding sentence shall be subject
to any limitations on its applicability imposed by the Committee and
shall not be applicable with respect to an Option or SAR if provision
shall be made in connection with such a reorganization, merger,
consolidation or sale of assets for the assumption of the Option or SAR
by, or the substitution for such Option or SAR of a new option or stock
appreciation right covering the stock of the surviving, successor or
purchasing corporation or a parent or subsidiary thereof with
appropriate adjustments as to the number and kind of shares or other
property to be issued upon exercise of the option or SAR and the
exercise price, provided that with respect to an Incentive Option such
assumption or substitution is permitted (to preserve the applicability
to the Incentive Option of Section 421(a) of the Code) by Sections 422
and 424 of the Code, as amended. This paragraph shall not restrict the
Committee from permitting or requiring other accelerations of Option or
SAR exercises upon transactions described in this paragraph or any other
acquisitions of the Company's shares or business or changes in control
of the Company.
(c) Related Provisions
Any adjustments under this Section 15 shall be made by the
Committee, and its determination shall be conclusive. Subject to rights
of holders of outstanding shares under Section 155 of the Delaware
General Corporation Law or any successor provision, no fractional shares
of Stock shall be issued under this Plan, and no payment shall be made
with respect to fractional shares, on account of any such adjustment
unless approved by the Committee in its discretion. The grant of an
Award pursuant to this Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital structure, to merge,
consolidate or dissolve, or to liquidate, sell or transfer all or any
part of its business or assets.
(d) Foreign Grantees
In order to fulfill this Plan's purposes and without amending
this Plan, Awards may be granted to Eligible Grantees who are foreign
nationals employed outside the United States or both on such terms and
conditions different from those otherwise specified in this Plan as may,
in the judgment of the Committee, be necessary or desirable to recognize
differences in applicable foreign laws, tax policy or customs.
16. COMPLIANCE WITH SECURITIES LAWS
No Award shall be granted under this Plan, and no shares or cash shall
be issued upon the exercise, surrender or cancellation of any such Award, unless
and until any then applicable securities laws or requirements of any regulatory
agencies having jurisdiction and of any exchanges upon which securities of the
Company may be listed shall have been complied with. The Company shall
diligently endeavor to comply with all applicable securities laws before any
Awards are granted or any Stock is issued under this Plan. The Company shall be
entitled to utilize applicable exemptions from the registration requirements
under state and federal securities laws, even though such exemptions entail
restrictions on the transferability of shares issued under this Plan. At the
time
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of the exercise of any Option or SAR, the Committee, in its discretion, may
require investment representations or other assurances or representations
satisfactory to them from the person exercising the Option or SAR appropriate to
satisfy the requirements for exemptions from registration and qualification
requirements under applicable state and federal securities laws.
17. EMPLOYMENT RIGHTS
Nothing contained in this Plan shall be deemed to give any Grantee a
right to the continuation of his employment by the Company to which he is not
otherwise entitled nor shall the Company be under any obligation by virtue of
this Plan to retain any Grantee as an employee for any period.
18. INFORMATION TO OPTIONEES
The Company shall make available to each holder of an outstanding Award
a copy of any annual or other report generally distributed by the Company to its
shareholders.
19. SEVERABILITY
If any provision of this Plan shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions shall
continue in effect.
20. NON-EXCLUSIVITY OF PLAN
Nothing in this Plan shall limit or be deemed to limit the authority of
the Board to grant awards or authorize other compensation, with or without
reference to the Stock, under any other plan or otherwise outside of this Plan.
21. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall also
include the plural form, the masculine gender shall include the feminine gender,
and vice versa, as the context requires.
22. DELAWARE LAW
To the extent that federal laws (such as the Code, or the Employee
Retirement Income Security Act of 1974) do not otherwise control, this Plan
shall be governed by the laws of Delaware and shall be construed accordingly.
23. EFFECTIVE DATE OF PLAN
This Plan was adopted by resolution of the Board to be effective as of
May 1, 1997 and was approved by the Company's shareholders on that date.
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