<PAGE>
As filed with the Securities and Exchange Commission on September 25, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
PROCYTE CORPORATION
(Exact name of Registrant as specified in its charter)
Washington 91-1307460
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8511 - 154th Avenue N.E., Building A
Redmond, Washington 98052
(Address of principal executive offices, including zip code)
PROCYTE CORPORATION
1998 NONEMPLOYEE DIRECTOR STOCK PLAN
PROCYTE CORPORATION
1996 STOCK OPTION PLAN
(Full title of the plan)
JOHN F. CLIFFORD
President and Chief Executive Officer
ProCyte Corporation
8511 - 154th Avenue N.E., Building A
Redmond, Washington 98052
(425) 869-1239
(Name, address and telephone number, including area code, of agent for service)
______________________
COPY TO:
JAMES R. LISBAKKEN
PERKINS COIE LLP
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
(206) 583-8888
______________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=================================================================================================================================
NUMBER TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES REGISTERED OFFERING PRICE PER AGGREGATE AMOUNT OF
TO BE REGISTERED (1) SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value
- ---------------------------------------------------------------------------------------------------------------------------------
ProCyte Corporation 1998 184,715 $.625 $115,447 $35
Nonemployee Director Stock Plan
- ---------------------------------------------------------------------------------------------------------------------------------
ProCyte Corporation 1996 Stock 550,000 $.625 $343,750 $102
Option Plan
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL 734,715 $459,197 $137
============================================================================================================================
</TABLE>
(1) Together with an indeterminate number of additional shares which may be
necessary to adjust the number of shares reserved for issuance pursuant
to the stock plans as the result of any future stock split, stock
dividend or similar adjustment of the Registrant's outstanding Common
Stock.
(2) Estimated pursuant to Rule 457(c) solely for the purpose of calculating
the registration fee. The price per share is estimated to be $.625 based
on the average of the high ($.656) and low ($.594) sales prices for the
Common Stock on September 24, 1998 as reported by the Nasdaq National
Market.
<PAGE>
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange
Commission (the "Commission") are hereby incorporated by reference in this
Registration Statement:
(a) The Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, filed on March 31, 1998, which contains audited financial
statements for the most recent fiscal year for which such statements have been
filed;
(b) The Registrant's Amended Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1997, filed on May 28, 1998.
(c) All other reports filed by the Registrant pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), since the end of the fiscal year covered by the Annual Report on Forms
10-K and 10-K/A referred to in (a) and (b) above; and
(d) The description of the Registrant's Common Stock contained in
the Registration Statement on Form 8-A filed on December 7, 1993 under Section
12(g) of the Exchange Act, including any amendments or reports filed for the
purpose of updating such description.
All documents filed by the Registrant pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act after the date hereof and prior to the filing
of a post-effective amendment, which indicate that the securities offered hereby
have been sold or which deregister the securities covered hereby then remaining
unsold, shall also be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof commencing on the respective
dates on which such documents are filed.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Section II of the Registrant's Bylaws provides for
indemnification of the Registrant's directors, officers, employees and agents to
the maximum extent permitted by Washington law. Certain of the directors of the
Registrant, who are affiliated with principal shareholders of the Registrant,
also may be indemnified by such shareholders against liability they may incur in
their capacity as a director of the Registrant, including pursuant to a
liability insurance policy for such purpose.
Section 23B.08.320 of the Washington Business Corporation Act authorizes
a corporation to limit a director's liability to the corporation or its
shareholders for monetary damages for acts or omissions as a director, except in
certain circumstances involving intentional misconduct, self-dealing or illegal
corporate loans or distributions, or any transactions from which the director
personally receives a benefit in money, property or services to which the
director is not entitled. Article XI of the Registrant's Articles of
Incorporation contains provisions implementing, to the fullest extent permitted
by Washington law, such limitations on a director's liability to the Registrant
and its shareholders.
Officers and directors of the Registrant are covered by insurance (with
certain exceptions and certain limitations) that indemnifies them against losses
and liabilities arising from certain alleged "wrongful acts," including alleged
errors or misstatements, or certain other alleged wrongful acts or omissions
constituting neglect or breach of duty.
II-2
<PAGE>
ITEM 8. EXHIBITS
Exhibit
Number Description
- -------------- --------------------------------------------------------------
5.1 Opinion of Perkins Coie LLP regarding legality of the Common
Stock being registered
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Perkins Coie LLP (included in opinion filed as
Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 ProCyte Corporation 1998 Nonemployee Director Stock Plan
99.2 ProCyte Corporation 1996 Stock Option 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;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if 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 Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) 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, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefits plan's annual
report pursuant to Section 15(d) of the Exchange Act) 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.
II-2
<PAGE>
C. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Redmond, State of Washington, on the 25th day of
September, 1998.
PROCYTE CORPORATION
/s/ John F. Clifford
-------------------------------------------
By: John F. Clifford
President and Chief Executive Officer
Each person whose individual signature appears below hereby authorizes John
F. Clifford and Jerry P. Scott, or either of them, as attorneys-in-fact with
full power of substitution, to execute in the name and on the behalf of each
person, individually and in each capacity stated below, and to file, any and all
post-effective amendments to this Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 25th day of September, 1998.
SIGNATURE Title
--------- -----
/s/ JOHN F. CLIFFORD President, Chief Executive Officer
------------------------------- and Director (Principal Executive
John F. Clifford Officer)
/s/ JERRY P. SCOTT Vice President and Chief Financial
------------------------------- Officer (Principal Financial and
Jerry P. Scott Accounting Officer)
/s/ THOMAS E. TIERNEY Chairman of the Board
-------------------------------
Thomas E. Tierney
/s/ JULES BLAKE Director
-------------------------------
Jules Blake
/s/ SUSAN BROWNER Director
-------------------------------
Susan Browner
/s/ MATT LEAVITT Director
-------------------------------
Matt Leavitt
Director
-------------------------------
Robert E. Patterson
/s/ WILLIAM M. SULLIVAN Director
-------------------------------
William M. Sullivan
II-4
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
----------- --------------------------------------------------------
5.1 Opinion of Perkins Coie LLP regarding legality of the Common
Stock being registered
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Perkins Coie LLP (included in opinion filed as
Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 ProCyte Corporation 1998 Nonemployee Director Stock Plan
99.2 ProCyte Corporation 1996 Stock Option Plan
<PAGE>
EXHIBIT 5.1
PERKINS COIE LLP
1201 THIRD AVENUE, 40TH FLOOR, SEATTLE, WASHINGTON 98101-3099
TELEPHONE: 206 583-8888 FACSIMILE: 206 583-8500
September 25, 1998
ProCyte Corporation
8511 - 154th Avenue N.E., Building A
Redmond, WA 98052
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to you in connection with the preparation of a
Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933, as amended ("the Act"), which you are filing with the
Securities and Exchange Commission with respect to 734,715 shares of Common
Stock, $.01 par value (the "Shares"), which may be issued as follows: 184,715
shares pursuant to the ProCyte Corporation 1998 Nonemployee Director Stock Plan
and 550,000 shares pursuant to the ProCyte Corporation 1996 Stock Option Plan
(the "Plans"). We have examined the Registration Statement and such documents
and records of the Company and other documents as we have deemed necessary for
the purpose of this opinion.
Based upon and subject to the foregoing, we are of the opinion that any
original issuance Shares that may be issued pursuant to the Plans have been duly
authorized and that, upon the due execution by the Company and the registration
by its registrar of such Shares and the sale thereof by the Company in
accordance with the terms of the Plans, and the receipt of consideration
therefor in accordance with the terms of the Plans, such Shares will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ PERKINS COIE LLP
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of ProCyte Corporation on Form S-8 of our report dated March 25, 1998, appearing
in the Annual Report on Form 10-K, as amended by Form 10-K/A, of ProCyte
Corporation for the year ended December 31, 1997.
/s/ DELOITTE & TOUCHE LLP
Seattle, Washington
September 23, 1998
<PAGE>
EXHIBIT 99.1
PROCYTE CORPORATION
1998 NONEMPLOYEE DIRECTOR STOCK PLAN
SECTION 1. PURPOSES
The purposes of the ProCyte Corporation 1998 Nonemployee Director Stock
Plan (the "Plan") are to attract and retain the services of experienced and
knowledgeable nonemployee directors of ProCyte Corporation (the "Corporation")
and to provide an incentive for such directors to increase their proprietary
interests in the Corporation's long-term success and progress.
SECTION 2. DEFINITIONS
When used herein, the following terms shall have the respective meanings
set forth below:
(a) "Board" or "Board of Directors" means the Board of Directors of the
----- ------------------
Corporation.
(b) "Common Stock" means the common stock, $0.01 par value, of the
------------
Corporation.
(c) "Corporation" means ProCyte Corporation, a Washington corporation,
-----------
or any successor corporation as provided in Section 13.
(d) "Employee" means any employee of the Corporation or of any
--------
Subsidiary. Directors who are not otherwise employed by the Corporation or any
Subsidiary shall not be considered employees for purposes of the Plan.
(e) "Excess Quarterly Retainer" has the meaning set forth in Section
-------------------------
7(a).
(f) "Market Price" means the closing sales price on the National
------------
Association of Securities Dealers Automated Quotation System or the principal
exchange on which shares of such Common Stock are then traded for a specified
day.
(g) "Nonemployee Director" or "Participant" means any person who is
-------------------- -----------
elected or appointed to the Board of Directors and who is not an Employee.
(h) "Plan" means the Corporation's 1998 Nonemployee Director Stock
----
Plan as set forth herein, as it may be amended from time to time.
(i) "Plan Administrator" means the Board or a committee whose members
------------------
meet the requirements of Section 4(a), appointed from time to time by the Board
to administer the Plan.
(j) "Quarterly Retainer" means the quarterly retainer payable to all
------------------
Nonemployee Directors (exclusive of any per-meeting fees, fees for serving as
chairman of the Board or a committee, or expense reimbursements). The Quarterly
Retainer shall be prorated based on the number of calendar months (including
partial calendar months) a director has served as a Nonemployee Director during
the fiscal quarter for which the Quarterly Retainer is payable.
(k) "Stock Payment" means the fixed portion of the Quarterly Retainer
-------------
to be paid to Nonemployee Directors in shares of Common Stock rather than cash
for services rendered as a director of the
<PAGE>
Corporation as provided in Section 6 and that portion of the Quarterly Retainer
to be paid to Nonemployee Directors in shares of Common Stock resulting from the
election specified in Section 7.
(l) "Subsidiary" means any corporation that is a "subsidiary
----------
corporation" of the Corporation, as that term is defined in Section 424(f) of
the Internal Revenue Code of 1986, as amended.
SECTION 3. SHARES SUBJECT TO THE PLAN
Subject to adjustment in accordance with Section 9 hereof, the maximum
aggregate number of shares of Common Stock that may be issued under the Plan is
200,000 shares. The shares shall be shares presently authorized but unissued or
subsequently acquired by the Corporation.
SECTION 4. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board or by a committee
appointed by the Board consisting of one or more persons who are not eligible to
participate in the Plan (the "Plan Administrator"). Members of such committee
need not be members of the Board. The Corporation shall pay all costs of
administration of the Plan.
(b) Subject to the express provisions of the Plan, the Plan
Administrator has and may exercise such powers and authority as may be necessary
or appropriate for the Plan Administrator to carry out its functions under the
Plan. Without limiting the generality of the foregoing, the Plan Administrator
shall have full power and authority to (i) determine all questions of fact that
may arise under the Plan; (ii) interpret the Plan and make all other
determinations necessary or advisable for the administration of the Plan; and
(iii) prescribe, amend and rescind rules and regulations relating to the Plan,
including, without limitation, any rules the Plan Administrator determines are
necessary or appropriate to ensure that the Corporation and the Plan will be
able to comply with all applicable provisions of any federal, state or local
law, including securities laws. All interpretations, determinations and actions
by the Plan Administrator shall be final, conclusive and binding upon all
parties. Any action of the Plan Administrator with respect to the administration
of the Plan shall be taken pursuant to a majority vote at a meeting of the Plan
Administrator (at which members may participate by telephone) or by the
unanimous written consent of its members.
SECTION 5. ELIGIBILITY TO PARTICIPATE IN THE PLAN
All Nonemployee Directors shall participate in the Plan, subject to the
conditions and limitations of the Plan, so long as they remain eligible to
participate in the Plan as set forth below.
SECTION 6. DETERMINATION OF QUARTERLY RETAINERS AND STOCK PAYMENTS
(a) The Board, in its sole discretion, shall determine the Quarterly
Retainer for all Nonemployee Directors.
(b) Each Nonemployee Director in office immediately following the 1998
Annual Meeting of Shareholders and thereafter at any time during a calendar year
shall receive a Stock Payment as all or as a portion of the Quarterly Retainer
payable to such director. Stock Payments shall be made with respect to
Quarterly Retainers payable on or after July 1, 1998. The number of shares of
Common Stock to be issued to each Participant as a Stock Payment shall be
determined by dividing the average Market Price of the Common Stock for the
last 20 business days of a fiscal quarter into the first $3,000 of any
Quarterly Retainer payable to such Participant for that fiscal quarter;
provided, however, that no fractional shares shall be issued, and in lieu
thereof the number of shares in the Stock Payment shall be rounded to the
nearest whole number of shares. Certificates evidencing the shares of Common
Stock constituting Stock Payments shall be registered
-2-
<PAGE>
in the respective names of, or as directed by, the Participants and shall be
issued to each Participant. The Stock Payment shall be made as soon as possible
following a fiscal quarter end.
(c) Subject to Section 7, any portion of a Quarterly Retainer in excess
of $3,000 shall be paid to Nonemployee Directors in cash at such times and in
such manner as may be determined by the Board.
(d) Notwithstanding the foregoing, for future fiscal quarters, the Plan
Administrator may increase or decrease the portion of a Quarterly Retainer that
shall be paid in shares of Common Stock pursuant to Sections 6(b) and 6(c).
7. ELECTION TO INCREASE AMOUNT OF STOCK PAYMENT
(a) In lieu of receiving the cash portion of any Quarterly Retainer
(the "Excess Quarterly Retainer"), a Participant may make a written election to
reduce up to 100% of all Excess Quarterly Retainers to be paid during a calendar
year by a specified percentage or dollar amount and have such amount applied
toward the purchase of additional shares of Common Stock.
(b) The election shall be made on a form provided by the Plan
Administrator and must be returned to the Plan Administrator on a date the Plan
Administrator shall establish, but in any case no later than the first day of
the calendar year to which the election relates or within 60 days after the
effective date of the Plan with respect to the Excess Quarterly Retainers or
within 60 days after the Participant first becomes a Nonemployee Director. The
election form shall state the amount by which the Participant desires to reduce
the cash portion of his or her Quarterly Retainers for the calendar year, which
shall be applied toward the purchase of Common Stock in the same manner and on
the same dates that the Stock Payments are made pursuant to Section 6; provided,
however, that no fractional shares may be purchased, and in lieu thereof the
number of shares in the Stock Payment shall be rounded to the nearest whole
number of shares. No Participant shall be allowed to change or revoke any
election for the relevant calendar year, but may change his or her election for
any subsequent calendar year.
8. SHAREHOLDER RIGHTS
Nonemployee Directors shall not be deemed for any purpose to be, or have
rights as, shareholders of the Corporation with respect to any shares of Common
Stock except as and when such shares are issued and then only from the date of
the certificate therefor. No adjustment shall be made for dividends or
distributions or other rights for which the record date precedes the date of
such stock certificate.
9. ADJUSTMENT FOR CHANGES IN CAPITALIZATION
If the outstanding shares of Common Stock of the Corporation are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed with respect to such shares of Common Stock or
other securities, through merger, consolidation, sale of all or substantially
all of the property of the Corporation, reorganization or recapitalization,
reclassification, stock dividend, stock split, reverse stock split, combinations
of shares, rights offering or other distribution with respect to such shares of
Common Stock or other securities or other change in the corporate structure or
shares of Common Stock, the maximum number of shares and/or the kind of shares
that may be issued under the Plan shall be appropriately adjusted by the Plan
Administrator. Any determination by the Plan Administrator as to any such
adjustment will be final, binding and conclusive. The maximum number of shares
issuable under the Plan as a result of any such adjustment shall be rounded down
to the nearest whole share.
-3-
<PAGE>
10. CONTINUATION OF DIRECTORS IN SAME STATUS
Nothing in the Plan or in any instrument executed pursuant to the Plan,
and no action taken pursuant to the Plan, shall be construed as creating or
constituting evidence of any agreement or understanding, express or implied,
that a Nonemployee Director will have any right to continue as a director or in
any other capacity for any period of time or at a particular retainer or other
rate of compensation.
11. NONTRANSFERABILITY OF RIGHTS
No Participant shall have the right to assign the right to receive any
Stock Payment or any other right or interest under the Plan, contingent or
otherwise, or to cause or permit any encumbrance, pledge or charge of any nature
to be imposed on any such Stock Payment (prior to the issuance of stock
certificates evidencing such Stock Payment) or any such right or interest.
12. AMENDMENT AND TERMINATION OF PLAN
(a) The Board will have the power, in its discretion, to amend, suspend
or terminate the Plan at any time.
(b) No amendment, suspension or termination of the Plan will, without
the consent of the Participant, alter, terminate, impair or adversely affect any
right or obligation under any Stock Payment previously granted under the Plan to
such Participant, unless such amendment, suspension or termination is required
by applicable law.
13. SUCCESSORS
All obligations of the Corporation under the Plan shall be binding on
any successor to the Corporation, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation or otherwise, of
all or substantially all of the business and/or assets of the Corporation.
14. SEVERABILITY
In the event any provision of the Plan shall be held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining
parts of the Plan, and the Plan shall be construed and enforced as if the
illegal or invalid provision had not been included.
15. GOVERNING LAW
The Plan shall be construed in accordance with, and governed by, the
laws of the state of Washington.
16. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective as of the date it is approved by the
Corporation's shareholders. The Plan shall remain in effect, subject to the
right of the Board to terminate the Plan at any time pursuant to Section 12,
until all shares subject to the Plan have been purchased or acquired according
to the Plan's provisions.
-4-
<PAGE>
EXHIBIT 99.2
PROCYTE CORPORATION
1996 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of the ProCyte Corporation 1996 Stock Option Plan (the
"Plan") is to enhance the long-term shareholder value of ProCyte Corporation, a
Washington corporation (the "Company"), by offering opportunities to employees,
directors, officers, consultants, agents, advisors and independent contractors
of the Company and its Subsidiaries (as defined in Section 2) to participate in
the Company's growth and success, and to encourage them to remain in the service
of the Company and its Subsidiaries and to acquire and maintain stock ownership
in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below:
2.1 AWARD
"Award" means an award or grant made to a Participant pursuant to the Plan,
including awards or grants of Incentive Stock Options and Nonqualified Stock
Options or any combination of the foregoing.
2.2 BOARD
"Board" means the Board of Directors of the Company.
2.3 CAUSE
"Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure
of confidential information or trade secrets, or conviction or confession of a
crime punishable by law (except minor violations), in each case as determined by
the Plan Administrator, and its determination shall be conclusive and binding.
2.4 CODE
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.5 COMMON STOCK
"Common Stock" means the common stock of the Company.
2.6 CORPORATE TRANSACTION
"Corporate Transaction" means any of the following events:
(a) Consummation of any merger or consolidation of the Company in which
the Company is not the continuing or surviving corporation, or pursuant to which
shares of the Common Stock are converted into cash, securities or other
property, if following such merger or consolidation the holders of the
<PAGE>
Company's outstanding voting securities immediately prior to such merger or
consolidation own less than 66-2/3% of the outstanding voting securities of the
surviving corporation;
(b) Consummation of any sale, lease, exchange or other transfer in one
transaction or a series of related transactions of all or substantially all of
the Company's assets other than a transfer of the Company's assets to a
majority-owned subsidiary corporation (as the term "subsidiary corporation" is
defined in Section 8.3) of the Company;
(c) Approval by the holders of the Common Stock of any plan or proposal
for the liquidation or dissolution of the Company; or
(d) Acquisition by a person, within the meaning of Section 3(a)(9) or of
Section 13(d)(3) (as in effect on the date of adoption of the Plan) of the
Exchange Act of a majority or more of the Company's outstanding voting
securities (whether directly or indirectly, beneficially or of record).
Ownership of voting securities shall take into account and shall include
ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the
date of adoption of the Plan) pursuant to the Exchange Act.
2.7 DISABILITY
"Disability" means "disability" as that term is defined for purposes of
Section 22(e)(3) of the Code.
2.8 EXCHANGE ACT
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.9 FAIR MARKET VALUE
"Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the closing selling price for the Common Stock as reported by the Nasdaq
National Market for a single trading day or (b) if the Common Stock is listed on
the New York Stock Exchange or the American Stock Exchange, the closing selling
price for the Common Stock as such price is officially quoted in the composite
tape of transactions on such exchange for a single trading day. If there is no
such reported price for the Common Stock for the date in question, then such
price on the last preceding date for which such price exists shall be
determinative of Fair Market Value.
2.10 GOOD REASON
"Good Reason" means the occurrence of any of the following events or
conditions and the failure of the Successor Corporation to cure such event or
condition within 30 days after receipt of written notice by the Holder:
(a) a change in the Holder's status, title, position or responsibilities
(including reporting responsibilities) that, in the Holder's reasonable
judgment, represents a substantial reduction in the status, title, position or
responsibilities as in effect immediately prior thereto; the assignment to the
Holder of any duties or responsibilities that, in the Holder's reasonable
judgment, are materially inconsistent with such status, title, position or
responsibilities; or any removal of the Holder from or failure to reappoint or
reelect the Holder to any of such positions, except in connection with the
termination of the Holder's employment for Cause, for Disability or as a result
of his or her death, or by the Holder other than for Good Reason;
(b) a reduction in the Holder's annual base salary;
-2-
<PAGE>
(c) the Successor Corporation's requiring the Holder (without the
Holder's consent) to be based at any place outside a 35-mile radius of his or
her place of employment prior to a Corporate Transaction, except for reasonably
required travel on the Successor Corporation's business that is not materially
greater than such travel requirements prior to the Corporate Transaction;
(d) the Successor Corporation's failure to (i) continue in effect any
material compensation or benefit plan (or the substantial equivalent thereof) in
which the Holder was participating at the time of a Corporate Transaction,
including, but not limited to, the Plan, or (ii) provide the Holder with
compensation and benefits substantially equivalent (in terms of benefit levels
and/or reward opportunities) to those provided for under each material employee
benefit plan, program and practice as in effect immediately prior to the
Corporate Transaction;
(e) any material breach by the Successor Corporation of its obligations
to the Holder under the Plan or any substantially equivalent plan of the
Successor Corporation; or
(f) any purported termination of the Holder's employment or service for
Cause by the Successor Corporation that does not comply with the terms of the
Plan or any substantially equivalent plan of the Successor Corporation.
2.11 Grant Date
"Grant Date" means the date the Plan Administrator adopted the granting
resolution or a later date designated in a resolution of the Plan Administrator
as the date an Award is to be granted.
2.12 HOLDER
"Holder" means the Participant to whom an Award is granted or, for a Holder
who has died, the personal representative of the Holder's estate, the person(s)
to whom the Holder's rights under the Award have passed by will or the
applicable laws of descent and distribution or the beneficiary designated
pursuant to Section 10.
2.13 INCENTIVE STOCK OPTION
"Incentive Stock Option" means an Option to purchase Common Stock granted
under Section 7 with the intention that it qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
2.14 NONQUALIFIED STOCK OPTION
"Nonqualified Stock Option" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.
2.15 OPTION
"Option" means the right to purchase Common Stock granted under Section 7.
2.16 PARTICIPANT
"Participant" means an individual who is a Holder of an Award or, as the
context may require, any employee, director, officer, consultant, agent, advisor
or independent contractor of the Company or a Subsidiary who has been designated
by the Plan Administrator as eligible to participate in the Plan.
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2.17 PLAN ADMINISTRATOR
"Plan Administrator" means the Board or any committee of the Board
designated to administer the Plan under Section 3.1.
2.18 SECURITIES ACT
"Securities Act" means the Securities Act of 1933, as amended.
2.19 SUBSIDIARY
"Subsidiary," except as provided in Section 8.3 in connection with
Incentive Stock Options, means any entity that is directly or indirectly
controlled by the Company or in which the Company has a significant ownership
interest, as determined by the Plan Administrator, and any entity that may
become a direct or indirect parent of the Company.
2.20 SUCCESSOR CORPORATION
"Successor Corporation" has the meaning set forth under Section 11.2.
SECTION 3. ADMINISTRATION
3.1 PLAN ADMINISTRATOR
The Plan shall be administered by the Board or a committee or committees
(which term includes subcommittees) appointed by, and consisting of two or more
members of, the Board. If and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in
selecting the Plan Administrator and the membership of any committee acting as
Plan Administrator for any persons subject or likely to become subject to
Section 16 under the Exchange Act the provisions regarding (a) "outside
directors" as contemplated by Section 162(m) of the Code and (b) "nonemployee
directors" as contemplated by Rule 16b-3 under the Exchange Act. The Board may
delegate the responsibility for administering the Plan with respect to
designated classes of eligible Participants to different committees, subject to
such limitations as the Board deems appropriate. Committee members shall serve
for such term as the Board may determine, subject to removal by the Board at
any time.
3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR
Except for the terms and conditions explicitly set forth in the Plan, the
Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Awards under the Plan, including the selection
of individuals to be granted Awards, the type of Awards, the number of shares of
Common Stock subject to an Award, all terms, conditions, restrictions and
limitations, if any, of an Award and the terms of any instrument that evidences
the Award. The Plan Administrator shall also have exclusive authority to
interpret the Plan and may from time to time adopt, and change, rules and
regulations of general application for the Plan's administration. The Plan
Administrator's interpretation of the Plan and its rules and regulations, and
all actions taken and determinations made by the Plan Administrator pursuant to
the Plan, shall be conclusive and binding on all parties involved or affected.
The Plan Administrator may delegate administrative duties to such of the
Company's officers as it so determines.
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SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 AUTHORIZED NUMBER OF SHARES
Subject to adjustment from time to time as provided in Section 11.1, a
maximum of 550,000 shares of Common Stock shall be available for issuance under
the Plan. Shares issued under the Plan shall be drawn from authorized and
unissued shares.
4.2 LIMITATIONS
Subject to adjustment from time to time as provided in Section 11.1, not
more than 150,000 shares of Common Stock may be made subject to Awards under the
Plan to any individual Participant in the aggregate in any one fiscal year of
the Company; except that the Company may make additional one-time grants of up
to 300,000 shares to newly hired Participants. Such limitation shall be applied
in a manner consistent with the requirements of, and only to the extent required
for compliance with, the exclusion from the limitation on deductibility of
compensation under Section 162(m) of the Code.
4.3 REUSE OF SHARES
Any shares of Common Stock that have been made subject to an Award that
cease to be subject to the Award (other than by reason of exercise or payment of
the Award to the extent it is exercised for in shares), shall again be available
for issuance in connection with future grants of Awards under the Plan;
provided, however, that any such shares shall be counted in accordance with the
requirements of Section 162(m) of the Code.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to those officers, directors and key
employees of the Company and its Subsidiaries as the Plan Administrator from
time to time selects. Awards may also be made to consultants, agents, advisors
and independent contractors who provide services to the Company and its
Subsidiaries.
SECTION 6. AWARDS
6.1 FORM AND GRANT OF AWARDS
The Plan Administrator shall have the authority, in its sole discretion, to
determine the type or types of Awards to be made under the Plan. Such Awards
may consist of Incentive Stock Options and/or Nonqualified Stock Options.
Awards may be granted singly or in combination.
6.2 ACQUIRED COMPANY AWARDS
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if
the other plans are or were plans of other acquired entities ("Acquired
Entities") (or the parent of the Acquired Entity) and the new Award is
substituted, or the old award is assumed, by reason of a merger, consolidation,
acquisition of property or of stock, reorganization or liquidation (the
"Acquisition Transaction"). In the event that a written agreement pursuant to
which the Acquisition Transaction is completed is approved by the Board and said
agreement sets forth the terms and conditions of the substitution
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for or assumption of outstanding awards of the Acquired Entity, said terms and
conditions shall be deemed to be the action of the Plan Administrator without
any further action by the Plan Administrator, except as may be required for
compliance with Rule 16b-3 under the Exchange Act, and the persons holding such
Awards shall be deemed to be Participants and Holders.
SECTION 7. AWARDS OF OPTIONS
7.1 GRANT OF OPTIONS
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.
7.2 OPTION EXERCISE PRICE
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options and not less than 85% of the Fair Market Value of the
Common Stock on the Grant Date with respect to Nonqualified Stock Options.
7.3 TERM OF OPTIONS
The term of each Option shall be as established by the Plan Administrator
or, if not so established, shall be 10 years from the Grant Date.
7.4 EXERCISE OF OPTIONS
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which or the installments in which the
Option shall become exercisable, which provisions may be waived or modified by
the Plan Administrator at any time. If not so established in the instrument
evidencing the Option, the Option will become exercisable according to the
following schedule, which may be waived or modified by the Plan Administrator at
any time:
Period of Holder's Continuous Employment or Service
With the Company or Its Subsidiaries Percent of Total Option
From the Option Grant Date That Is Exercisable
- ---------------------------------------------------- -------------------------
After 1 year 1/3
After 2 years 2/3
After 3 years 100%
Unless the Plan Administrator determines otherwise, the vesting schedule of
an Option shall be adjusted proportionately to the extent the Holder works less
than "full time" as that term is defined by the Plan Administrator.
To the extent that the right to purchase shares has accrued thereunder, an
Option may be exercised from time to time by written notice to the Company, in
accordance with procedures established by the Plan Administrator, setting forth
the number of shares with respect to which the Option is being exercised and
accompanied by payment in full as described in Section 7.5. The Plan
Administrator may determine at any
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time that an Option may not be exercised as to less than 100 shares at any one
time (or the lesser number of remaining shares covered by the Option).
7.5 PAYMENT OF EXERCISE PRICE
The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or by check, or a combination of cash and/or check and one
or more of the following alternative forms: (a) tendering (either actually or,
if and so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, by attestation) Common Stock already owned by the Holder for
at least six months (or any shorter period necessary to avoid a charge to the
Company's earnings for financial reporting purposes) having a Fair Market Value
on the day prior to the exercise date equal to the aggregate Option exercise
price; (b) if and so long as the Common Stock is registered under Section 12(b)
or 12(g) of the Exchange Act, delivery of a properly executed exercise notice,
together with irrevocable instructions, to (i) a brokerage firm designated by
the Company to deliver promptly to the Company the aggregate amount of sale or
loan proceeds to pay the Option exercise price and any withholding tax
obligations that may arise in connection with the exercise and (ii) the Company
to deliver the certificates for such purchased shares directly to such brokerage
firm, all in accordance with the regulations of the Federal Reserve Board; if
permitted by the Plan Administrator, in its sole discretion, either at the time
the Option is granted or at any time before it is exercised and subject to such
limitations as the Plan Administrator may determine; (c) a promissory note
delivered pursuant to Section 9; or (d) such other consideration as the Plan
Administrator may permit.
7.6 POST-TERMINATION EXERCISES
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option will continue to be exercisable, and
the terms and conditions of such exercise, if a Holder ceases to be employed by,
or to provide services to, the Company or its Subsidiaries, which provisions may
be waived or modified by the Plan Administrator at any time. If not so
established in the instrument evidencing the Option, the Option will be
exercisable according to the following terms and conditions, which may be waived
or modified by the Plan Administrator at any time.
In case of termination of the Holder's employment or services other than by
reason of death or Cause, the Option shall be exercisable, to the extent of the
number of shares purchasable by the Holder at the date of such termination, only
(a) within three months after the date the Holder ceases to be an employee,
director, officer, consultant, agent, advisor or independent contractor of the
Company or a Subsidiary if termination of the Holder's employment or services is
for any reason other than Disability or (b) within one year if such termination
is because of Disability, but in no event later than the remaining term of the
Option. Any Option exercisable at the time of the Holder's death may be
exercised, at any time or from time to time within one year after the date of
death, but in no event later than the remaining term of the Option, to the
extent of the number of shares purchasable by the Holder at the date of the
Holder's death, by the personal representative of the Holder's estate the
person(s) to whom the Holder's rights under the Award have passed by will or the
applicable laws of descent and distribution or the beneficiary designated
pursuant to Section 10. In case of termination of the Holder's employment or
services for Cause, the Option shall automatically terminate upon first
notification to the Holder of such termination, unless the Plan Administrator
determines otherwise. If a Holder's employment or services with the Company are
suspended pending an investigation of whether the Holder shall be terminated for
Cause, all the Holder's rights under any Option likewise shall be suspended
during the period of investigation.
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A transfer of employment or services between or among the Company and its
Subsidiaries shall not be considered a termination of employment or services.
The effect of a Company-approved leave of absence on the terms and conditions of
an option shall be determined by the Plan Administrator, in its sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock Options
shall be subject to the following additional terms and conditions:
8.1 DOLLAR LIMITATION
To the extent the aggregate Fair Market Value (determined as of the Grant
Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the
event the Participant holds two or more such Options that become exercisable for
the first time in the same calendar year, such limitation shall be applied on
the basis of the order in which such Options are granted.
8.2 10% SHAREHOLDERS
If a Participant owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option term shall not exceed five
years. The determination of 10% ownership shall be made in accordance with
Section 422 of the Code.
8.3 ELIGIBLE EMPLOYEES
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.
8.4 TERM
The term of an Incentive Stock Option shall not exceed 10 years.
8.5 EXERCISABILITY
To qualify for Incentive Stock Option tax treatment, an Option designated
as an Incentive Stock Option must be exercised within three months after
termination of employment for reasons other than death, except that, in the case
of termination of employment due to total disability, such Option must be
exercised within one year after such termination. Employment shall not be
deemed to continue beyond the first 90 days of a leave of absence unless the
Participant's reemployment rights are guaranteed by statute or contract. For
purposes of this Section 8.5, "total disability" shall mean a mental or physical
impairment of the Participant which is expected to result in death or which has
lasted or is expected to last for a continuous period of 12 months or more and
which causes the Participant to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Total disability shall be deemed
to have occurred on the first day after the Company and the two independent
physicians have finished their opinion of total disability to the Plan
Administrator.
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8.6 TAXATION OF INCENTIVE STOCK OPTIONS
In order to obtain certain tax benefits afforded to Incentive Stock Options
under Section 422 of the Code, the Participant must hold the shares issued upon
the exercise of an Incentive Stock Option for two years after the Grant Date of
the Incentive Stock Option and one year from the date of exercise. A
Participant may be subject to the alternative minimum tax at the time of
exercise of an Incentive Stock Option. The Plan Administrator may require a
Participant to give the Company prompt notice of any disposition of shares
acquired by the exercise of an Incentive Stock Option prior to the expiration of
such holding periods.
8.7 PROMISSORY NOTES
The amount of any promissory note delivered pursuant to Section 9 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator but in no case less than the rate required
to avoid imputation of interest (taking into account any exceptions to the
imputed interest rules) for federal income tax purposes.
SECTION 9. LOANS, INSTALLMENT PAYMENTS AND LOAN GUARANTEES
To assist a Holder (including a Holder who is an officer or director of the
Company) in acquiring shares of Common Stock pursuant to an Award granted under
the Plan, the Plan Administrator, in its sole discretion, may authorize, either
at the Grant Date or at any time before the acquisition of Common Stock pursuant
to the Award, (a) the extension of a loan to the Holder by the Company, (b) the
payment by the Holder of the purchase price, if any, of the Common Stock in
installments, or (c) the guarantee by the Company of a loan obtained by the
grantee from a third party. The terms of any loans, installment payments or
loan guarantees, including the interest rate and terms of repayment, will be
subject to the Plan Administrator's discretion. Loans, installment payments and
loan guarantees may be granted with or without security. The maximum credit
available is the purchase price, if any, of the Common Stock acquired, plus the
maximum federal and state income and employment tax liability that may be
incurred in connection with the acquisition.
SECTION 10. ASSIGNABILITY
No Award granted under the Plan may be assigned, pledged or transferred by
the Holder other than by will or by the laws of descent and distribution, and
during the Holder's lifetime, such Awards may be exercised only by the Holder.
Notwithstanding the foregoing, and to the extent permitted by Section 422 of the
Code, the Plan Administrator, in its sole discretion, may permit such
assignment, transfer and exercisability and may permit a Holder of such Awards
to designate a beneficiary who may exercise the Award or receive compensation
under the Award after the Holder's death; provided, however, that any Award so
assigned or transferred shall be subject to all the same terms and conditions
contained in the instrument evidencing the Award.
SECTION 11. ADJUSTMENTS
11.1 ADJUSTMENT OF SHARES
In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (b) new, different or
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additional securities of the Company or of any other corporation being received
by the holders of shares of Common Stock of the Company, then the Plan
Administrator, in its sole discretion, shall make such equitable adjustments as
it shall deem appropriate in the circumstances in (i) the maximum number and
class of securities subject to the Plan as set forth in Section 4.1, (ii) the
maximum number and class of securities that may be made subject to Awards to any
individual Participant as set forth in Section 4.2, and (iii) the number and
class of securities that are subject to any outstanding Award and the per share
price of such securities, without any change in the aggregate price to be paid
therefor. The determination by the Plan Administrator as to the terms of any of
the foregoing adjustments shall be conclusive and binding.
11.2 CORPORATE TRANSACTION
Except as otherwise provided in the instrument that evidences the Award, in
the event of any Corporate Transaction, each Award that is at the time
outstanding shall automatically accelerate so that each such Award shall,
immediately prior to the specified effective date for the Corporate Transaction,
become 100% vested, except that such acceleration will not occur, if in the
opinion of the Company's accountants, it would render unavailable "pooling of
interest" accounting for a Corporate Transaction that would otherwise qualify
for such accounting treatment. Such Award shall not so accelerate, however, if
and to the extent that (a) such Award is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation or parent thereof
(the "Successor Corporation") or to be replaced with a comparable award for the
purchase of shares of the capital stock of the Successor Corporation or (b) such
Award is to be replaced with a cash incentive program of the Successor
Corporation that preserves the spread existing at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to such Award. The determination of Award
comparability under clause (a) above shall be made by the Plan Administrator,
and its determination shall be conclusive and binding. All such Awards shall
terminate and cease to remain outstanding immediately following the consummation
of the Corporate Transaction, except to the extent assumed by the Successor
Corporation. Any such Awards that are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall be accelerated in
the event the Holder's employment or services should subsequently terminate
within two years following such Corporate Transaction, unless such employment or
services are terminated by the Successor Corporation for Cause or by the Holder
voluntarily without Good Reason.
11.3 FURTHER ADJUSTMENT OF AWARDS
Subject to the preceding Section 11.2, the Plan Administrator shall have
the discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation or change in control of the Company, as defined by
the Plan Administrator, to take such further action as it determines to be
necessary or advisable, and fair and equitable to Participants, (but shall not
be limited to) establishing, amending or waiving the type, terms, conditions or
duration of, or restrictions on, Awards so as to provide for earlier, later,
extended or additional time for exercise and other modifications, and the Plan
Administrator may take such actions with respect to all Participants, to certain
categories of Participants or only to individual Participants. The Plan
Administrator may take such actions before or after granting Awards to which the
action relates and before or after any public announcement with respect to such
sale, merger, consolidation, reorganization, liquidation or change in control
that is the reason for such action.
11.4 LIMITATIONS
The grant of Awards will in no way affect the Company's right to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
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SECTION 12. WITHHOLDING
The Company may require the Holder to pay to the Company the amount of any
withholding taxes that the Company is required to withhold with respect to the
grant or exercise of any Award. In such instances, the Plan Administrator may,
in its discretion and subject to the Plan and applicable law, permit the Holder
to satisfy withholding obligations, in whole or in part, by paying cash, by
electing to have the Company withhold shares of Common Stock or by transferring
shares of Common Stock to the Company, in such amounts as are equivalent to the
Fair Market Value of the withholding obligation. The Company shall have the
right to withhold from any shares of Common Stock issuable pursuant to an Award
or from any cash amounts otherwise due or to become due from the Company to the
Participant an amount equal to such taxes. The Company may also deduct from any
Award any other amounts due from the Participant to the Company or a Subsidiary.
SECTION 13. AMENDMENT AND TERMINATION OF PLAN
13.1 AMENDMENT OF PLAN
The Plan may be amended by the shareholders of the Company. The Board may
also amend the Plan in such respects as it shall deem advisable; however, to the
extent required for compliance with Section 422 of the Code or any applicable
law or regulation, shareholder approval will be required for any amendment that
will (a) increase the aggregate number of shares as to which Options may be
granted, (b) modify the employees or class of employees eligible to receive
Incentive Stock Options, or (c) otherwise require shareholder approval under any
applicable law or regulation. Amendments made to the Plan which would
constitute "modifications" to Incentive Stock Options outstanding on the date of
such Amendments shall not be applicable to such outstanding Incentive Stock
Options but shall have prospective effect only.
13.2 TERMINATION OF PLAN
The Company's shareholders or the Board may suspend or terminate the Plan
at any time. The Plan will have no fixed expiration date; provided, however,
that no Incentive Stock Options may be granted more than 10 years after the
earlier of the Plan's adoption by the Board or approval by the shareholders.
13.3 CONSENT OF HOLDER
The amendment or termination of the Plan shall not, without the consent of
the Holder of any Award under the Plan, alter or impair any rights or
obligations under any Award theretofore granted under the Plan.
SECTION 14. GENERAL
14.1 AWARD AGREEMENTS
Awards granted under the Plan shall be evidenced by a written agreement
which shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and which are not inconsistent with the
Plan.
14.2 CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN AWARDS
None of the Plan, participation in the Plan as a Participant or any action
of the Plan Administrator taken under the Plan shall be construed as giving any
Participant or employee of the Company any right to be retained in the employ of
the Company or limit the Company's right to terminate the employment or services
of the Participant.
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14.3 REGISTRATION; CERTIFICATES FOR SHARES
The Company shall be under no obligation to any Participant to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.
Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.
14.4 NO RIGHTS AS A SHAREHOLDER
No Award shall entitle the Holder to any dividend, voting or other right of
a shareholder unless and until the date of issuance under the Plan of the shares
that are the subject of such Award, free of all applicable restrictions.
14.5 COMPLIANCE WITH LAWS AND REGULATIONS
Notwithstanding anything in the Plan to the contrary, the Board, in its
sole discretion, may bifurcate the Plan so as to restrict, limit or condition
the use of any provision of the Plan to Participants who are officers or
directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other Participants.
Additionally, in interpreting and applying the provisions of the Plan, any
Option granted as an Incentive Stock Option pursuant to the Plan shall, to the
extent permitted by law, be construed as an "incentive stock option" within the
meaning of Section 422 of the Code.
14.6 NO TRUST OR FUND
The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any moneys or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Participant, and no
Participant shall have any rights that are greater than those of a general
unsecured creditor of the Company.
14.7 SEVERABILITY
If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and any such Award shall remain
in full force and effect.
SECTION 15. EFFECTIVE DATE
The Plan's effective date is the date on which it is adopted by the Board,
so long as it is approved by the Company's shareholders at any time within 12
months of such adoption or, if earlier, and to the extent
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required for compliance with Rule 16b-3 under the Exchange Act, at the next
annual meeting of the Company's shareholders after adoption of the Plan by the
Board.
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