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EXHIBIT 99.1
NEOSE TECHNOLOGIES, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(AMENDED AND RESTATED AS OF JUNE 26, 2000)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1995 Stock Option/Stock Issuance Plan (the "Plan") is intended
to promote the interests of Neose Technologies, Inc., a Delaware corporation
(the "Corporation"), by providing eligible individuals with the opportunity
to obtain an equity interest, or otherwise increase their equity interest, in
the Corporation. This Plan shall serve as the successor equity incentive
program to the Corporation's 1992 Stock Option Plan and 1991 Stock Option
Plan.
B. The Discretionary Option Grant and Stock Issuance Programs of the
Plan became effective immediately upon the adoption of the Plan by the
Corporation's Board of Directors. Such date is hereby designated the "Plan
Effective Date." The Automatic Option Grant Program became effective upon the
execution and final pricing of the Underwriting Agreement for the initial
public offering of the Corporation's Common Stock. The execution date of such
Underwriting Agreement is hereby designated as the Automatic Option Program
Effective Date. The Director Fee Option Grant Program became effective on
March 16, 1996.
II. DEFINITIONS
A. For the purposes of this Plan, the following definitions shall be in
effect:
BOARD: the Corporation's Board of Directors.
CHANGE IN CONTROL: a change in ownership or control of the Corporation
effected through either of the following transactions:
-- the direct or indirect acquisition by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation)
of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's shareholders which the
Board does not recommend such shareholders to accept, or
-- a change in the composition of the Board over a period of thirty-six
(36) months or less such that a majority of the Board members ceases, by
reason of one or more contested elections for Board membership, to be
comprised of individuals who either (a) have been Board members continuously
since the beginning of such period or (b) have been elected or nominated for
election as Board members during such period by at least a majority of the
Board members described in clause (a) who were still in office at the time
such election or nomination was approved by the Board.
CODE: the Internal Revenue Code of 1986, as amended.
COMMITTEE: the committee of two (2) or more Board members appointed by
the Board to administer and interpret the Plan. The Committee members shall
be "outside directors" as defined under Code Section 162(m) and related
Treasury Regulations and may be "non-employee" Board members as defined under
Rule 16b-3 of the 1934 Act. However, notwithstanding anything in the Plan to
the contrary, the Board must ratify or approve any grants made under the
Discretionary Option Grant Program or Stock Issuance Program to any Board
members or
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officers of the Corporation. References in the Plan to the Committee shall
be deemed to include the Board, with respect to ratification or approval
of grants made to Board members and officers of the Corporation. In addition,
the Board may appoint a "Non-Section 16(b) Committee" solely for the purpose
of making grants under the Discretionary Option Grant Program to individuals
who are not covered by Section 16 of the 1934 Act. Such Committee shall have
no powers other than the power to make grants to such individuals. Any
reference to "Committee" herein shall also encompass the Non-Section 16(b)
Committee where appropriate.
COMMON STOCK: shares of the Corporation's common stock.
CORPORATE TRANSACTION: either of the following shareholder-approved
transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
EMPLOYEE: an individual who performs services while in the employ of
the Corporation or one or more parent or subsidiary corporations, subject to
the control and direction of the employer entity not only as to the work to
be performed but also as to the manner and method of performance.
EXERCISE DATE: the date on which the Corporation shall have written
notice of the option exercise.
FAIR MARKET VALUE: the Fair Market Value per share of Common Stock
determined in accordance with the following provisions:
-- If the Common Stock is at the time traded on the Nasdaq National
Market, the Fair Market Value shall be the closing selling price per share on
the date in question, as such price is reported by the National Association
of Securities Dealers on the Nasdaq National Market or any successor system.
If there is no reported closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
-- If the Common Stock is at the time listed or admitted to trading
on any national securities exchange, then the Fair Market Value shall be the
closing selling price per share on the date in question on the exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common Stock
on such exchange on the date in question, then the Fair Market Value shall be
the closing selling price on the exchange on the last preceding date for
which such quotation exists.
-- If the Common Stock is on the date in question neither listed nor
admitted to trading on any national securities exchange nor traded on the
Nasdaq National Market, then the Fair Market Value of the Common Stock on
such date shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
HOSTILE TAKE-OVER: a change in ownership of the Corporation effected
through the following transaction:
-- the direct or indirect acquisition by any person or related group
of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to
a tender or exchange offer made directly to the Corporation's shareholder's
which the Board does not recommend such
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shareholders to accept, AND
-- the acceptance of more than fifty percent (50%) of the securities
so acquired in such tender or exchange offer from holders other than the
officers and directors of the Corporation subject to the short-swing profit
restrictions of Section 16 of the 1934 Act.
INCENTIVE OPTION: a stock option which satisfies the requirements of
Code Section 422.
INVOLUNTARY TERMINATION: the termination of the Service of any
Optionee or Participant which occurs by reason of:
-- such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces his or her
level of responsibility, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and any non-discretionary and
objective-standard incentive payment or bonus award) by more than ten percent
(10%) in the aggregate or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the
individual's consent.
MISCONDUCT: the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such individual of confidential information or trade secrets of the
Corporation or its parent or subsidiary corporations, any failure to perform
specific lawful direction of the Corporation's Board or officers of the
Corporation, any refusal or neglect to perform such individual's duties, any
conviction of, or entering of a plea of NOLO CONTENDRE to, a crime which
constitutes a felony or any other Misconduct by such individual adversely
affecting the business or affairs of the Corporation. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation or any parent or subsidiary may consider as grounds for
the dismissal or discharge of any Optionee, Participant or other individual
in the Service of the Corporation.
1934 ACT: the Securities Exchange Act of 1934, as amended.
NON-STATUTORY OPTION: a stock option not intended to meet the
requirements of Code Section 422.
OPTIONEE: a person to whom an option is granted under the
Discretionary Option Grant Program, the Automatic Option Grant Program or the
Director Fee Option Grant Program.
PARTICIPANT: a person who is issued Common Stock under the Stock
Issuance Program.
PERMANENT DISABILITY: the inability of an individual to engage in any
substantial gainful activity, by reason of any medically determinable
physical or mental impairment which is expected to result in death or which
has lasted or can be expected to last for a period of not less than twelve
(12) months.
PLAN ADMINISTRATOR: either the Board or the Committee, to the extent
the Committee is at the time responsible for the administration of the Plan
in accordance with Section IV of Article One.
PREDECESSOR PLANS: the Corporation's 1992 Stock Option Plan and 1991
Stock Option Plan.
SERVICE: the performance of services on a periodic basis for the
Corporation (or any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the board of directors or an independent
consultant, except to the extent otherwise specifically provided in the
applicable stock option or stock issuance agreement.
SECTION 12(G) REGISTRATION DATE: the date on which the initial
registration of the Common Stock under Section 12(g) of the 1934 Act became
effective.
TAKE-OVER PRICE: the GREATER of (a) the Fair Market Value per share
of Common Stock on the date the particular option to purchase such stock is
surrendered to the Corporation in connection with a Hostile Take-Over
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or (b) the highest reported price per share of Common Stock paid by
the tender offeror in effecting such Hostile Take-Over. However, if the
canceled option is an Incentive Option, then the Take-Over Price shall not
exceed the clause (a) price per share.
10% SHAREHOLDER: the owner of stock (as determined under Code Section
424(d)) possessing ten (10%) percent or more of the total combined voting
power of all classes of stock of the Corporation or any parent or subsidiary
corporation.
B. The following provisions shall be applicable in determining the
parent and subsidiary corporations of the Corporation:
Any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation shall be considered
to be a PARENT of the Corporation, provided each such corporation in
the unbroken chain (other than the Corporation) owns, at the time of
the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes or stock in one of the
other corporations in such chain.
Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be
considered to be a SUBSIDIARY of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate components: the
Discretionary Option Grant Program specified in Article Two, the Stock
Issuance Program specified in Article Three, the Automatic Option Grant
Program specified in Article Four and the Director Fee Option Grant Program
specified in Article Five. Under the Discretionary Option Grant Program,
eligible individuals may at the discretion of the Plan Administrator be
granted options to purchase shares of Common Stock in accordance with the
provisions of Article Two at a price not less than eighty-five percent (85%)
of the Fair Market Value of such shares on the grant date. Under the Stock
Issuance Program, eligible individuals may be issued shares of Common Stock
directly, either through the immediate purchase of the shares (at Fair Market
Value or at discounts of up to 15%) or as a bonus tied to the individual's
performance of services or the Corporation's attainment of prescribed
milestones. Under the Automatic Option Grant Program, each individual serving
as a non-employee Board member on the Automatic Option Grant Program
Effective Date and each individual who first joins the Board as a
non-employee director at any time after such Effective Date shall at periodic
intervals receive option grants to purchase shares of Common Stock in
accordance with the provisions of Article Four, with the first such grants to
be made on such Effective Date. Under the Director Fee Option Grant Program,
each non-employee Board member may elect to apply all or a portion of his or
her annual retainer fee otherwise payable in cash to a special below market
option grant.
B. Unless the context clearly indicates otherwise, the provisions of
Articles One and Six shall apply to all equity programs under the Plan and
shall accordingly govern the interests of all individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Discretionary Option Grant and Stock Issuance Programs shall
be administered solely and exclusively by the Committee, subject to such
conditions and limitations as the Board may decide, to the extent permissible
under applicable securities and tax laws requirements.
B. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time.
C. The Plan Administrator shall have full power and authority
(subject to the express provisions of the Plan) to establish rules and
regulations for the proper administration of the Discretionary Option
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Grant and Stock Issuance Programs and to make such determinations
under, and issue such interpretations of, the provisions of such programs and
any outstanding option grants or stock issuances thereunder as it may deem
necessary or advisable. Decisions of the Plan Administrator shall be final
and binding on all parties who have an interest in the Discretionary Option
Grant or Stock Issuance Program or any outstanding option grant or share
issuance thereunder.
D. Administration of the Automatic Option Grant and Director Fee
Option Grant Programs shall be self-executing in accordance with the express
terms and conditions of those programs, and the Plan Administrator shall
exercise no discretionary functions with respect to option grants made
pursuant to those programs.
V. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to participate in the Discretionary Option
Grant Program under Article Two and the Stock Issuance Program under Article
Three shall be limited to the following
(i) officers and other employees of the Corporation (or any
parent or subsidiary corporation);
(ii) non-employee members of the Board or the non-employee
members of the board of directors of any parent or subsidiary
corporation; and
(iii) consultants who provide valuable services to the
Corporation (or any parent or subsidiary corporation); provided such
services are not in connection with the offer or sale of securities
in a capital-raising transaction.
B. The Plan Administrator shall have full authority to determine, (i)
with respect to the option grants made under the Discretionary Option Grant
Program, which eligible individuals are to receive option grants, the time or
times when such grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive
Option or a Non-Statutory Option, the time or times at which each granted
option is to become exercisable and the maximum term for which the option may
remain outstanding, and (ii) with respect to stock issuances under the Stock
Issuance Program, the number of shares to be issued to each Participant, the
vesting schedule (if any) to be applicable to the issued shares, and the
consideration to be paid by the Participant for such shares.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. The maximum number
of shares of Common Stock which may be issued over the term of the Plan shall
not exceed 3,156,337* shares, subject to adjustment from time to time in
accordance with the provisions of this Section VI. Such authorized share
reserve is comprised of (i) the number of shares which remained for issuance,
as of the Plan Effective Date, under the Predecessor Plans as last approved
by the Corporation's shareholders, including the shares subject to the
outstanding options incorporated into this Plan and any other shares which
would have been available for future option grant under the Predecessor Plans
as last approved by the shareholders, plus (ii) an additional increase of
333,333* shares authorized by the Board on the Plan Effective Date, (iii) an
additional increase of 600,000* shares authorized by the Board on December 6,
1995, (iv) an additional increase of 500,000 shares authorized by the Board
on March 19, 1997, (v) an additional increase of 495,000 shares authorized by
the Board on April 16, 1999 and (vi) an additional increase of 690,000 shares
authorized by the Board on April 17, 2000. As one or more outstanding options
under the Plan are exercised, the number of shares issued with respect to
each such option shall reduce, on a share-for-share
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* Reflects the 1-for-3 stock split that was effected immediately prior to the
consummation of the initial public offering of the Common Stock.
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basis, the number of shares available for issuance under this Plan.
B. In no event shall the aggregate number of shares of Common Stock
for which any one individual participating in the Plan may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances for any given year exceed fifty percent (50%) of the total number
of shares for which stock options, separately exercisable stock appreciation
rights and direct stock issuances may be granted over the term of the Plan.
C. Should one or more outstanding options under this Plan (including
options incorporated from the Predecessor Plans) expire or terminate for any
reason prior to exercise in full (including any option canceled in accordance
with the cancellation-regrant provisions of Section IV of Article Two of the
Plan), then the shares subject to the portion of each option not so exercised
shall be available for subsequent issuance under the Plan. Shares subject to
any stock appreciation rights exercised under the Plan and all share
issuances under the Plan, whether or not the shares are subsequently
repurchased by the Corporation pursuant to its repurchase rights under the
Plan, shall reduce on a share- for-share basis the number of shares of Common
Stock available for subsequent issuance under the Plan. In addition, should
the exercise price of an outstanding option under the Plan be paid with
shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an outstanding
option under the Plan or the vesting of a direct share issuance made under
the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the share issuance, and not by the
net number of shares of Common Stock actually issued to the holder of such
option or share issuance.
D. Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, (ii) the maximum
amount and/or class of securities for which any one individual participating
in the Plan may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances for any given year under the
Plan, (iii) the number and/or class of securities for which automatic option
grants are to be subsequently made per eligible non-employee Board member
under the Automatic Option Grant Program, (iv) the number and/or class of
securities and price per share in effect under each option outstanding under
the Discretionary Option Grant, Automatic Option Grant or Director Fee Option
Grant Program and (v) the number and/or class of securities and price per
share in effect under each outstanding option incorporated into this Plan
from the Predecessor Plans. Such adjustments to the outstanding options are
to be effected in a manner which shall preclude the enlargement or dilution
of rights and benefits under such options. The adjustments determined by the
Plan Administrator shall be final, binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program
shall be authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees of the Corporation or its parent
or subsidiary corporations may only be granted Non-Statutory Options. Each
granted option shall be evidenced by one or more instruments in the form
approved by the Plan Administrator; PROVIDED, HOWEVER, that each such
instrument shall comply with the terms and conditions specified below. Each
instrument evidencing an Incentive Option shall, in addition, be subject to
the applicable provisions of Section II of this Article Two.
A. EXERCISE PRICE.
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1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The exercise price per share of Common Stock subject to
an Incentive Option shall in no event be less than one hundred
percent (100%) of the Fair Market Value of such Common Stock on the
grant date.
(ii) The exercise price per share of Common Stock subject to
a Non-Statutory Option shall in no event be less than eighty-five
percent (85%) of the Fair Market Value of such Common Stock on the
grant date.
(iii) If any individual to whom an Incentive Option is
granted is a 10% Shareholder, then the exercise price per share shall
not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section I of Article Six,
be payable in one or more of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) in shares of Common Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
instructions (a) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the
Corporation by reason of such purchase and (b) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
3. Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under this Plan
shall be exercisable at such time or times and during such period as is
determined by the Plan Administrator and set forth in the instrument
evidencing the grant. No such option, however, shall have a maximum term in
excess of ten (10) years measured from the grant date.
1. During the lifetime of the Optionee, the option, together with any
related stock appreciation right, SHALL be exercisable only by the Optionee
and shall not be assignable or transferable by the Optionee, except for a
transfer of the option by will or by the laws of descent and distribution
following the Optionee's death or, with respect to options other than
Incentive Options, if permitted in any specific case by the Plan
Administrator, pursuant to a domestic relations order (as defined under the
Code or Treasury Regulations).
2. Notwithstanding the foregoing, the Plan Administrator may provide
that an Optionee may transfer Non-Statutory Options to family members or
other persons or entities according to such terms as the Plan Administrator
may determine; provided that the Optionee receives no consideration for the
transfer of an option and the transferred option shall continue to be subject
to the same terms and conditions as were applicable to the option immediately
before the transfer.
C. TERMINATION OF SERVICE.
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1. Except to the extent otherwise provided pursuant to subsection C.2
below, the following provisions shall govern the exercise period applicable
to any options held by the Optionee at the time of cessation of Service or
death:
(i) Should the Optionee cease to remain in Service for any
reason other than death, Permanent Disability or Misconduct, then the
period during which each outstanding option held by such Optionee is
to remain exercisable shall be limited to the three (3)-month period
following the date of such cessation of Service.
(ii) Should the Optionee's Service terminate by reason of
Permanent Disability, then the period during which each outstanding
option held by the Optionee is to remain exercisable shall be limited
to the twelve (12)-month period following the date of such cessation
of Service.
(iii) Should the Optionee die while holding one or more
outstanding options, then the period during which each such option is
to remain exercisable shall be limited to the twelve (12)-month
period following the date of the Optionee's death. During such
limited period, the option may be exercised by the personal
representative of the Optionee's estate or by the person or persons
to whom the option is transferred pursuant to the Optionee's will or
in accordance with the laws of descent and distribution.
(iv) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(v) Under no circumstances, however, shall any such option be
exercisable after the specified expiration date of the option term.
(vi) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number
of vested shares for which the option is exercisable on the date of
the Optionee's cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be exercisable
for any vested shares for which the option has not been exercised.
However, the option shall, immediately upon the Optionee's cessation
of Service, terminate and cease to be outstanding with respect to any
option shares for which the option is not at that time exercisable or
in which the Optionee is not otherwise at that time vested.
2. The Plan Administrator shall have complete discretion, exercisable
either at the time the option is granted or at any time while the option
remains outstanding,
- to extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service or
death from the limited period in effect under subsection C.1 of this
Section I of Article Two to such greater period of time as the Plan
Administrator shall deem appropriate; PROVIDED that in no event shall
such option be exercisable after the specified expiration date of the
option term; and/or
- to permit one or more options held by the Optionee under
this Article Two to be exercised, during the limited post-Service
exercise period applicable under this paragraph C, not only with
respect to the number of vested shares of Common Stock for which each
such option is exercisable at the time of the Optionee's cessation of
Service but also with respect to one or more subsequent installments
for which the option would otherwise have become exercisable had such
cessation of Service not occurred.
D. SHAREHOLDER RIGHTS. An Optionee shall have no shareholder rights
with respect to any shares covered by the option until such individual shall
have exercised the option and paid the exercise price for the purchased
shares.
E. UNVESTED SHARES. The Plan Administrator shall have the discretion
to authorize the
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issuance of unvested shares of Common Stock under the Plan. Should the Optionee
cease Service while holding such unvested shares, the Corporation shall have
the right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms and conditions upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall
be established by the Plan Administrator and set forth in the agreement
evidencing such repurchase right. All outstanding repurchase rights under the
Plan shall terminate automatically upon the occurrence of any Corporate
Transaction, except to the extent the repurchase rights are expressly
assigned to the successor corporation (or parent thereof) in connection with
the Corporate Transaction.
II. INCENTIVE OPTIONS
Incentive Options may only be granted to individuals who are
Employees, and the terms and conditions specified below shall be applicable
to all Incentive Options granted under the Plan. Except as modified by the
provisions of this Section II, all the provisions of Articles One, Two and
Six of the Plan shall be applicable to all Incentive Options granted
hereunder. Any Options specifically designated as Non-Statutory shall NOT be
subject to the terms and conditions of this Section II.
A. DOLLAR LIMITATION. The aggregate Fair Market Value (determined as
of the respective date or dates of grant) of the Common Stock for which one
or more options granted to any Employee under this Plan (or any other option
plan of the Corporation or its parent or subsidiary corporations) may for the
first time become exercisable as incentive stock options under the Federal
tax laws during any one calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more
such options which become exercisable for the first time in the same calendar
year, the foregoing limitation on the exercisability of such options as
incentive stock options under the Federal tax laws shall be applied on the
basis of the order in which such options are granted. Should the number of
shares of Common Stock for which any Incentive Option first becomes
exercisable in any calendar year exceed the applicable One Hundred Thousand
Dollar ($100,000) limitation, then that option may nevertheless be exercised
in that calendar year for the excess number of shares as a Non-Statutory
Option under the Federal tax laws.
B. 10% SHAREHOLDER. If any individual to whom an Incentive Option is
granted is a 10% Shareholder, then the option term shall not exceed five (5)
years measured from the grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each option which is at
the time outstanding under this Article Two shall automatically accelerate so
that each such option shall, immediately prior to the specified effective
date for such Corporate Transaction, become fully exercisable with respect to
the total number of shares of Common Stock at the time subject to such option
and may be exercised for all or any portion of such shares as fully-vested
shares. However, an outstanding option under this Article Two shall NOT so
accelerate if and to the extent: (i) such option is, in connection with such
Corporate Transaction, either to be assumed by the successor corporation or
parent thereof or to be replaced with a comparable option to purchase shares
of the capital stock of the successor corporation or parent thereof, (ii)
such option is to be replaced with a cash incentive program of the successor
corporation which preserves the option spread existing at the time of such
Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option, (iii) such option is to
be replaced by another incentive program which the Plan Administrator
determines is reasonably equivalent in value to the program contemplated by
either clause (i) or (ii) above, or (iv) the acceleration of such option is
subject to other limitations imposed by the Plan Administrator at the time of
the option grant. However, upon an Optionee's cessation of Service by reason
of an Involuntary Termination (other than for Misconduct) within eighteen
(18) months after a Corporate Transaction in which his or her outstanding
options are assumed or replaced pursuant to clause (i), (ii) or (iii) above,
each such option under clause (i) shall automatically accelerate and become
fully exercisable with respect to the total number of shares of Common Stock
at the time subject to such option and may be exercised for all or any
portion of such shares as fully-vested shares, the cash incentive program
under clause (ii) shall become fully vested and the benefits under a clause
(iii) replacement program shall become fully vested. The option as so
accelerated shall
<PAGE>
remain exercisable until the earlier of (i) the expiration of the option
term or (ii) the expiration of a ninety (90)-day period measured from
the date of such Involuntary Termination. The determination of option
comparability under clause (i) or program comparability under clause (iii)
above shall be made by the Plan Administrator, and its determination shall be
final, binding and conclusive.
B. Immediately following the consummation of a Corporate Transaction,
all outstanding options under this Article Two shall terminate and cease to
remain outstanding, except to the extent assumed by the successor corporation
or its parent company.
C. Each outstanding option under this Article Two that is assumed in
connection with a Corporate Transaction shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply and pertain to the
number and class of securities which would have been issued to the option
holder in consummation of such Corporate Transaction had such person
exercised the option immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share, PROVIDED the aggregate exercise price payable for such securities
shall remain the same. In addition, the class and number of securities
available for issuance under the Plan on both an aggregate and participant
basis following the consummation of such Corporate Transaction shall be
appropriately adjusted.
D. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one
or more outstanding options under this Article Two (and the termination of
one or more of the Corporation's outstanding repurchase rights under this
Article Two) upon the occurrence of a Change in Control. The Plan
Administrator shall also have full power and authority to condition any such
option acceleration (and the termination of any outstanding repurchase
rights) upon the Optionee's cessation of Service by reason of an Involuntary
Termination (other than for Misconduct) within a specified period following
such Change in Control.
E. Any options accelerated in connection with a Change in Control
shall remain fully exercisable until the expiration or sooner termination of
the option term or the surrender of such option in accordance with Section V
of this Article Two.
F. The grant of options under this Article Two shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
G. The portion of any Incentive Option accelerated under this Section
III in connection with a Corporate Transaction or Change in Control shall
remain exercisable as an incentive stock option under the Federal tax laws
only to the extent the dollar limitation of Section II of this Article Two is
not exceeded. To the extent such dollar limitation is exceeded, the
accelerated portion of such option shall be exercisable as a non-statutory
option under the Federal tax laws.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected Optionees, the
cancellation of any, or all outstanding options under this Article Two
(including outstanding options under the Predecessor Plans incorporated into
this Plan) and to grant in substitution new options under the Plan covering
the same or different numbers of shares of Common Stock but with an exercise
price per share not less than (i) one hundred percent (100%) of the Fair
Market Value on the new grant date in the case of a grant of an Incentive
Option, (ii) one hundred ten percent (110%) of such Fair Market Value in the
case of an Incentive Option grant to a 10% Shareholder or (iii) eighty-five
percent (85%) of such Fair Market Value in the case of all other grants.
V. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in its
discretion to implement the stock appreciation right provisions of this
Section V, one or more Optionees may be granted the right, exercisable upon
such terms and conditions as the Plan Administrator may establish, to
surrender all or part of an unexercised
<PAGE>
option under this Article Two in exchange for a distribution from the
Corporation in an amount equal to the excess of (i) the Fair Market Value (on
the option surrender date) of the number of shares in which the Optionee is
at the time vested under the surrendered option (or surrendered portion
thereof) over (ii) the aggregate exercise price payable for such vested
shares.
B. No surrender of an option shall be effective hereunder unless it
is approved by the Plan Administrator. If the surrender is so approved, then
the distribution to which the Optionee shall accordingly become entitled
under this Section V may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee
had under the surrendered option (or surrendered portion thereof) on the
option surrender date and may exercise such rights at any time prior to the
LATER of (i) five (5) business days after the receipt of the rejection notice
or (ii) the last day on which the option is otherwise exercisable in
accordance with the terms of the instrument evidencing such option, but in no
event may such rights be exercised more than ten (10) years after the date of
the option grant.
D. One or more officers of the Corporation subject to the short-swing
profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights
in tandem with their outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over at a time when the Corporation's
outstanding Common Stock is registered under Section 12(g) of the 1934 Act,
each such officer holding one or more options with such a limited stock
appreciation right in effect for at least six (6) months shall have the
unconditional right (exercisable for a thirty (30)-day period following such
Hostile Take-Over) to surrender each such option to the Corporation, to the
extent the option is at the time exercisable for fully vested shares of
Common Stock. The officer shall in return be entitled to a cash distribution
from the Corporation in an amount equal to the excess of (i) the Take-Over
Price of the vested shares of Common Stock at the time subject to each
surrendered option (or surrendered portion of such option) over (ii) the
aggregate exercise price payable for such vested shares. Such cash
distribution shall be made within five (5) days following the option
surrender date. Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option
surrender and cash distribution. Any unsurrendered portion of the option
shall continue to remain outstanding and become exercisable in accordance
with the terms of the instrument evidencing such grant.
E. The shares of Common Stock subject to any option surrendered for
an appreciation distribution pursuant to this Section V shall NOT be
available for subsequent issuance under the Plan.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate purchases without any intervening stock option
grants. The issued shares shall be evidenced by a Stock Issuance Agreement
("Issuance Agreement") that complies with the terms and conditions of this
Article Three.
A. CONSIDERATION.
1. Shares of Common Stock may be issued under the Stock Issuance
Program for one or more of the following items of consideration which the
Plan Administrator may deem appropriate in each individual instance:
(i) full payment in cash or check made payable to the
Corporation's order;
<PAGE>
(ii) a promissory note payable to the Corporation's order in
one or more installments; or
(iii) past services rendered to the Corporation or any parent
or subsidiary corporation.
2. The shares may, in the absolute discretion of the Plan
Administrator, be issued for consideration with a value less than one hundred
percent (100%) of the Fair Market Value of such shares at the time of
issuance, but in no event less than eighty-five percent (85%) of such Fair
Market Value.
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance Program
may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance (as a bonus for past services) or may vest
in one or more installments over the Participant's period of Service or the
Corporation's attainment of performance milestones. The elements of the
vesting schedule applicable to any unvested shares of Common Stock issued
under the Stock Issuance Program, namely:
(i) the Service period to be completed by the Participant or
the performance objectives to be achieved by the Corporation,
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments,
and
(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the
vesting schedule, shall be determined by the Plan Administrator and
incorporated into the Issuance Agreement executed by the Corporation
and the Participant at the time such unvested shares are issued.
2. The Participant shall have full shareholder rights with respect to
any shares of Common Stock issued to him or her under the Plan, whether or
not his or her interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any
regular cash dividends paid on such shares. Any new, additional or different
shares of stock or other property (including money paid other than as a
regular cash dividend) which the Participant may have the right to receive
with respect to his or her unvested shares by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration or by reason of any Corporate
Transaction, shall be issued subject to (i) the same vesting requirements
applicable to his or her unvested shares and (ii) such escrow arrangements as
the Plan Administrator shall deem appropriate.
3. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock under the Stock Issuance Program,
then the Corporation shall have the right to require the Participant to
surrender those shares immediately to the Corporation for cancellation, and
the Participant shall cease to have any further shareholder rights with
respect to the surrendered shares. To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participant's purchase- money promissory note), the
Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to such
surrendered shares.
4. The Plan Administrator may in its discretion elect to waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to such shares. Such waiver
shall result in the immediate vesting of the Participant's interest in the
shares of Common Stock as to which the waiver applies. Such
<PAGE>
waiver may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non- attainment of
the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under this
Article Three shall automatically terminate upon the occurrence of a
Corporate Transaction, except to the extent the Corporation's outstanding
repurchase rights are expressly assigned to the successor corporation (or
parent thereof) in connection with such Corporate Transaction. However, any
assigned repurchase rights covering the unvested shares held by a Participant
under this Article Three shall immediately terminate should there occur an
Involuntary Termination of that Participant's Service (other than for
Misconduct) within eighteen (18) months after such Corporate Transaction.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the shares are issued under this Article Three
or at any time while those shares remain outstanding, to provide for the
automatic termination of the Corporation's repurchase rights with respect to
those shares should there occur a Change in Control. The Plan Administrator
shall also have full power and authority to condition the termination of
those repurchase rights upon the Participant's cessation of Service by reason
of an Involuntary Termination (other than for Misconduct) within a specified
period following such Change in Control.
III. SHARE ESCROW/TRANSFER RESTRICTIONS
A. Unvested shares may, in the Plan Administrator's discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing such unvested shares. To the extent an
escrow arrangement is utilized, the unvested shares and any securities or
other assets distributed with respect to such shares (other than regular cash
dividends) shall be delivered in escrow to the Corporation to be held until
the Participant's interest in such (or the distributed securities or assets)
vests.
B. The Participant shall have no right to transfer any unvested
shares of Common Stock issued to him or her under the Stock Issuance Program.
For purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift or other
disposition of such shares, whether voluntary or involuntary. Upon any such
attempted transfer, the unvested shares shall immediately be canceled in
accordance with substantially the same procedure in effect under Section
I.B.3 of this Article Three, and neither the Participant nor the proposed
transferee shall have any rights with respect to such canceled shares.
However, the Participant shall have the right to make a gift of unvested
shares acquired under the Stock Issuance Program to his or her spouse or
issue, including adopted children, or to a trust established for such spouse
or issue, provided the transferee of such shares delivers to the Corporation
a written agreement to be bound by all the provisions of the Stock Issuance
Program and the Issuance Agreement applicable to the gifted shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
The individuals eligible to receive automatic option grants pursuant
to the provisions of this Article Four program shall be limited to (i) those
individuals who are serving as non-employee Board members on the Automatic
Option Grant Program Effective Date, (ii) those individuals who are first
elected or appointed as non-employee Board members on or after such Effective
Date, whether through appointment by the Board or election by the Corporation's
shareholders, and (iii) those individuals who are re-elected to serve
as non-employee Board members at one or more Annual Shareholders Meetings
held after the Section 12(g) Registration Date. In no event, however, shall a
non-employee Board member be eligible to receive an automatic option grant
pursuant to clause (i) or (ii) above if such individual has at any time been
in the prior employ of the Corporation (or any parent or subsidiary
<PAGE>
corporation), but such individual shall be eligible to receive one or
more automatic option grants pursuant to clause (iii). Each non-employee
Board member eligible to receive one or more automatic option grants pursuant
to the foregoing criteria shall be designated an "Eligible Director" for
purposes of the Plan.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION
A. GRANT DATES. Option grants shall be made under this Article Four
on the dates specified below:
1. INITIAL GRANT. Each Eligible Director who is first elected or
appointed as a non- employee Board member after the Automatic Option Grant
Program Effective Date shall automatically be granted, on the date of such
initial election or appointment (as the case may be), a Non-Statutory Option
to purchase 16,666 shares of Common Stock upon terms and conditions of this
Article Four.
2. ANNUAL GRANT. On the date of each Annual Shareholders Meeting,
beginning with the first Annual Meeting held after the Section 12(g)
Registration Date, each individual who will continue to serve as an Eligible
Director shall automatically be granted, whether or not such individual is
standing for re-election as a Board member at that Annual Meeting, a
Non-Statutory Option to purchase an additional 10,000 shares of Common Stock
upon the terms and conditions of this Article Four, provided he or she has
served as a non-employee Board member for at least six (6) months prior to
the date of such Annual Meeting.
3. NO LIMITATION. There shall be no limit on the number of shares for
which any one Eligible Director may be granted stock options under this
Article Four over his or her period of Board service.
B. EXERCISE PRICE. The exercise price per share of Common Stock
subject to each automatic option grant made under this Article Four shall be
equal to one hundred percent (100%) of the Fair Market Value per share of
Common Stock, on the automatic grant date.
C. PAYMENT. The exercise price shall be payable in one of the
alternative forms specified below. To the extent the option is exercised for
any unvested shares, the Optionee must execute and deliver to the Corporation
a stock purchase agreement for those unvested shares which provides the
Corporation with the right to repurchase, at the exercise price paid per
share, any unvested shares held by the Optionee at the time of cessation of
Board service and which precludes the sale, transfer or other disposition of
the purchased shares at any time while those shares remain subject to the
Corporation's repurchase right.
(i) full payment in cash or check drawn to the Corporation's
order;
(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date;
(iii) full payment in a combination of shares of Common Stock
held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at
Fair Market Value on the Exercise Date and cash or check drawn to the
Corporation's order; or
(iv) to the extent the option is exercised for vested shares,
full payment through a sale and remittance procedure pursuant to
which the Optionee shall provide irrevocable written instructions to
(a) a Corporation designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out of the
sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares
and (b) the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
Except to the extent the sale and remittance procedure specified
above is used for the exercise of the option for vested shares, payment of
the exercise price for the purchased shares must accompany the exercise
notice.
<PAGE>
D. OPTION TERM. Each automatic grant under this Article Four shall
have a maximum term of ten (10) years measured from the automatic grant date.
E. EXERCISABILITY/VESTING. Each automatic grant shall be immediately
exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the Corporation,
at the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares in accordance with the applicable
schedule below:
INITIAL GRANT. Each initial 16,666-share automatic grant
shall vest, and the Corporation's repurchase right shall lapse, in a
series of four successive and equal annual installments over the
Optionee's period of continued service as a Board member, with the
first such installment to vest upon Optionee's completion of one (1)
year of Board service measured from the automatic grant date.
ANNUAL GRANT. Each additional 10,000-share automatic grant
shall vest, and the Corporation's repurchase right shall lapse, upon
the Optionee's completion of one (1) year of Board service measured
from the automatic grant date.
Vesting of the option shares shall be subject to acceleration, as
provided in Section II.G.3 and Section III of this Article Four. In no event
shall any additional option shares vest after the Optionee's cessation of
Board service, except as otherwise provided in Section II.G.3 of this Article
Four.
F. NON-TRANSFERABILITY.
1. During the lifetime of the Optionee, each automatic option grant,
together with the limited stock appreciation right pertaining to that option,
shall be exercisable only by the Optionee and shall not be assignable or
transferable by the Optionee, except for a transfer of the option by will or
by the laws of descent and distribution following Optionee's death or, with
respect to options other than Incentive Options, if permitted in any specific
case by the Plan Administrator, pursuant to a domestic relations order (as
defined under the Code or Treasury Regulations).
2. Notwithstanding the foregoing, the Plan Administrator may provide
that an Optionee may transfer Non-Statutory Options to family members or
other persons or entities according to such terms as the Plan Administrator
may determine; provided that the Optionee receives no consideration for the
transfer of an option and the transferred option shall continue to be subject
to the same terms and conditions as were applicable to the option immediately
before the transfer.
G. EFFECT OF TERMINATION OF BOARD SERVICE.
1. Should the Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability) while holding one or more
automatic option grants under this Article Four, then such individual shall
have a six (6)-month period following the date of such cessation of Board
service in which to exercise each such option for any or all of the shares of
Common Stock in which the Optionee is vested at the time of such cessation of
Board service. However, each such option shall immediately terminate and
cease to be outstanding at the time of such cessation of Board service, with
respect to any shares in which the Optionee is not otherwise at that time
vested under that option.
2. Should the Optionee die within six (6) months after cessation of
Board service, then any automatic option grant held by the Optionee at the
time of death may subsequently be exercised. for any or all of the shares of
Common Stock in which the Optionee is vested at the time of his or her
cessation of Board service (less any option shares subsequently purchased by
the Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the laws of
descent and distribution. The right to exercise such option shall lapse upon
the expiration of a twelve (12)- month period measured from the date of the
Optionee's death.
<PAGE>
3. Should the Optionee die or become Permanently Disabled while
serving as a Board member, then the shares of Common Stock at the time
subject to each automatic option grant held by such Optionee under this
Article Four which are vested may be purchased by the Optionee (or the
representative of the Optionee's estate or the person or persons to whom the
option is transferred upon the Optionee's death) pursuant to the option for a
twelve (12)- month period following the date of the Optionee's cessation of
Board service.
4. In no event shall any automatic grant under this Article Four
remain exercisable after the expiration date of the ten (10)-year option
term. Upon the expiration of the applicable post-service exercise period
under subparagraphs 1 through 3 above or (if earlier) upon the expiration of
the ten (10)-year option term, the automatic grant shall terminate and cease
to be outstanding for any option shares in which the Optionee was vested at
the time of his or her cessation of Board service but for which such option
was not subsequently exercised.
H. SHAREHOLDER RIGHTS. The holder of an automatic option grant under
this Article Four shall have none of the rights of a shareholder with respect
to any shares subject to such option until such individual shall have
exercised the option and paid the exercise price for the purchased shares.
I. REMAINING TERMS. The remaining terms and conditions of each
automatic option grant shall be as set forth in the form of Automatic Stock
Option Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option under this Article Four
but not otherwise vested shall automatically vest in full so that each such
option shall, immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable for all of the shares of
Common Stock at the time subject to that option and may be exercised for all
or any portion of those shares as fully-vested shares. Immediately following
the consummation of the Corporate Transaction, all automatic option grants
under this Article Four shall terminate and cease to be outstanding, except
to the extent one or more of those grants are assumed by the acquiring entity
or its parent corporation.
B. In connection with any Change in Control of the Corporation, the
shares of Common Stock at the time subject to each outstanding option under
this Article Four but not otherwise vested shall automatically vest in full
so that each such option shall, immediately prior to the specified effective
date for the Change in Control, become fully exercisable for all of the
shares of Common Stock at the time subject to that option and may be
exercised for all or any portion of those shares as fully-vested shares. Each
such option shall remain so exercisable for all the option shares following
the Change in Control, until the expiration or sooner termination of the
option term.
C. Should a Hostile Take-Over occur at any time following the Section
12(g) Registration Date, then the Optionee shall have a thirty (30)-day
period in which to surrender to the Corporation each option held by him or
her under this Article Four for a period of at least six (6) months. The
optionee shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to the surrendered option
(whether or not those shares are otherwise at the time fully vested) over
(ii) the aggregate exercise price payable for such shares. The cash
distribution shall be paid within five (5) days following the surrender of
the option to the Corporation. Neither the approval of the Plan Administrator
nor the consent of the Board shall be required in connection with such option
surrender and cash distribution. The shares of Common Stock subject to each
option surrendered in connection with the Hostile Take-Over shall not be
available for subsequent issuance under the Plan.
D. The automatic option grants outstanding under this Article Four
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
ARTICLE FIVE
DIRECTOR FEE OPTION GRANT PROGRAM
<PAGE>
I. OPTION GRANTS
Each non-employee Board member may elect to apply all or any portion
of the annual retainer fee otherwise payable in cash for his or her service
on the Board to the acquisition of a special option grant under this Director
Fee Option Grant Program. Such election must be filed with the Corporation's
Chief Financial Officer prior to first day of July in the calendar year
immediately preceding the calendar year for which the annual retainer fee
which is the subject of that election is otherwise payable. Each non-employee
Board member who files such a timely election shall automatically be granted
an option under this Director Fee Option Grant Program on the first trading
day in January in the calendar year for which the annual retainer fee which
is the subject of that election would otherwise be payable.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three and one-third
percent (33-1/3%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedures specified thereunder is utilized, payment
of the exercise price for the purchased shares must be made on the Exercise
Date.
B. NUMBER OF OPTION SHARES: The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x 66-2/3 %), where
X is the number of option shares,
A is the portion of the annual retainer fee subject to the
non-employee Board member's election, and
B is the Fair Market Value per share of Common Stock
on the option grant date.
C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable
in a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Board service in the calendar
year for which the annual retainer fee which is the subject of his or her
election under this Article Five would otherwise be payable. Each option
shall have a maximum term of ten (10) years measured from the option grant
date.
D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease Board
service for any reason (other than death or Permanent Disability) while
holding one or more options under this Article Five, then each such option
shall remain exercisable, for any or all of the shares for which the option
is exercisable at the time of such cessation of Board service, until the
EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of such
cessation of Board service. However, each option held by the Optionee under
this Article Five at the time of his or her cessation of Board service shall
immediately terminate and cease to remain outstanding with respect to any and
all shares of Common Stock for which the option is not otherwise at that time
exercisable.
E. DEATH OR PERMANENT DISABILITY. Should the Optionee's service as a
Board member cease by reason of death or Permanent Disability, then each
option held by such Optionee under this Article Five shall
<PAGE>
immediately become exercisable for all the shares of Common Stock at
the time subject to that option, and the option may, during the three
(3)-year period following such cessation of Board service, be exercised for
any or all of those shares as fully-vested shares.
Should the Optionee die while holding one or more options under this
Article Five, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the Optionee's
cessation of Board service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of descent and
distribution. Such right of exercise shall lapse, and the option shall
terminate, upon the EARLIER of (i) the expiration of the ten (10)-year option
term or (ii) the three (3)-year period measured from the date of the
Optionee's cessation of Board service.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee
remains a Board member, each outstanding option held by such Optionee under
this Director Fee Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the
Corporate Transaction, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may
be exercised for any or all of those shares as fully-vested shares of Common
Stock. Each such outstanding option shall be assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and shall remain
exercisable for the fully-vested shares until the EARLIER of (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the
three (3)-year period measured from the date of the Optionee's cessation of
Board service.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Director
Fee Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may
be exercised for any or all of those shares as fully-vested shares of Common
Stock. The option shall remain so exercisable until the EARLIER or (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the
three (3)-year period measured from the date of the Optionee's cessation of
Service.
C. The grant of options under the Director Fee Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director Fee
Option Grant Program shall be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.
ARTICLE SIX
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any Optionee
or Participant (including an Optionee or Participant who is an officer of the
Corporation) in the exercise of one or more options granted to such Optionee
under the Discretionary Option Grant and Automatic Option Grant Programs or
the purchase of one or more shares issued to such Participant under the Stock
Issuance Program, including the satisfaction of any Federal, state and local
income and employment tax obligations arising therefrom, by:
(i) authorizing the extension of a loan from the Corporation
to such Optionee or Participant, or
<PAGE>
(ii) permitting the Optionee or Participant to pay the
exercise price or purchase price for the purchased Common Stock in
installments over a period of years.
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be upon such terms as the
Plan Administrator specifies in the applicable option or issuance agreement
or otherwise deems appropriate at the time such exercise price or purchase
price becomes due and payable. Loans or installment payments may be
authorized with or without security or collateral. In all events, the maximum
credit available to the Optionee or Participant may not exceed the option or
purchase price of the acquired shares (less the par value of such shares)
plus any Federal, state and local income and employment tax liability
incurred by the Optionee or Participant in connection with the acquisition of
such shares.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this Section I shall be subject to
forgiveness by the Corporation in whole or in part upon such terms and
conditions as the Plan Administrator may in its discretion deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to amend
or modify the Plan (or any component thereof) in any or all respects
whatsoever. However, (i) no such amendment or modification shall adversely
affect rights and obligations with respect to options at the time outstanding
under the Plan, nor adversely affect the rights of any Participant with
respect to Common Stock issued under the Stock Issuance Program prior to such
action, unless the Optionee or Participant consents to such amendment. In
addition, the Board may not, without the approval of the Corporation's
shareholders, amend the Plan to (i) increase the maximum number of shares
issuable under the Plan or the maximum amount of shares for which any one
individual participating in the Plan may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances for any
given year under the Plan, except for permissible adjustments under Article
One, (ii) materially modify the eligibility requirements for Plan
participation, or (iii) otherwise materially increase the benefits accruing
to Plan participants.
B. (i) Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program and (ii) shares of Common Stock
may be issued under the Stock Issuance Program, which are in both instances
in excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under the Discretionary Option
Grant or the Stock Issuance Programs are held in escrow until shareholder
approval is obtained for a sufficient increase in the number of shares
available for issuance under the Plan. If such shareholder approval is not
obtained within twelve (12) months after the date the first such excess
option grants or excess share issuances are made, then (i) any unexercised
excess options shall terminate and cease to be exercisable and (ii) the
Corporation shall promptly refund the purchase price paid for any excess
shares actually issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the
shares were held in escrow.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of any stock options granted under Article Two or upon the
issuance of any shares under Article Three shall be subject to the
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements.
B. The Plan Administrator may, in its discretion and in accordance
with the provisions of this Section III of Article Six and such supplemental
rules as the Plan Administrator may from time to time adopt (including the
applicable safe-harbor provisions of Rule 16b-3 of the Securities and
Exchange Commission), provide any or all holders of Non-Statutory Options or
unvested shares under the Plan with the right to use shares of Common Stock
in satisfaction of all or part of the Federal, state and local income and
employment tax liabilities incurred by such holders in connection with the
exercise of their options or the vesting of their shares (the "Taxes"). Such
right may be provided to any such holder in either or both of the following
formats:
---- The holder of the Non-Statutory Option or unvested
shares may be provided with the
<PAGE>
election to have the Corporation withhold, from the shares of Common
Stock otherwise issuable upon the exercise of such Non-Statutory
Option or the vesting of such shares, a portion of those shares with
an aggregate Fair Market Value equal to the percentage of the
applicable Taxes (not to exceed one hundred percent (100%))
designated by the holder.
---- The Plan Administrator may, in its discretion, provide
the holder of the Non-Statutory Option or the unvested shares with
the election to deliver to the Corporation, at the time the
Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such individual (other
than in connection with the option exercise or share vesting
triggering the Taxes) with an aggregate Fair Market Value equal to
the percentage of the Taxes incurred in connection with such option
exercise or share vesting (not to exceed one hundred percent (100%))
designated by the holder.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. The Discretionary Option Grant and Stock Issuance Programs of this
Plan became effective immediately upon adoption of the Plan by the Board on
March 23, 1995 (the "Plan Effective Date"). The Plan was approved by the
Corporation's shareholders on April 12, 1995. On December 9, 1995, the Board
approved an increase of 600,000 shares (which number reflects the 1-for-3
reverse stock split that was effected immediately prior to the consummation
of the initial public offering of the Common Stock) in the aggregate number
of shares issuable under the Plan; such increase was approved by the
Corporation's shareholders on December 19, 1995. The Automatic Option Grant
Program of this Plan became effective on the Automatic Option Grant Program
Effective Date. The Plan was amended by the Board on March 16, 1996 to
implement the Director Fee Option Grant Program, which amendment was approved
by the Corporation's shareholders at the 1996 Annual Stockholders Meeting. On
March 19, 1997, the Board approved an increase of 500,000 shares in the
aggregate number of shares issuable under the Plan, and on April 23, 1997,
the Board approved a change in the aggregate number of shares of Common Stock
for which any one individual participating in the Plan may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances, from a limitation of 250,000 shares over the term of the Plan, to
an annual limitation not in excess of 50% of the total number of shares for
which stock options, separately exercisable stock appreciation rights and
direct stock issuances may be granted over the term of the Plan. Both of such
amendments became effective on April 23, 1997, and were approved by the
Corporation's shareholders at the 1997 Annual Stockholders Meeting. On April
16, 1999, the Board approved an increase of 495,000 shares in the aggregate
number of shares issuable under the Plan and an increase in the number of
shares issuable to Eligible Directors under the annual grant provisions of
the Automatic Option Grant Program from 3,333 to 10,000 shares, subject to
shareholder approval at the 1999 Annual Stockholders Meeting.
B. Each stock option grant outstanding under the Predecessor Plans
immediately prior to the Plan Effective Date shall be incorporated into this
Plan and treated as an outstanding option under this Plan, but each such
option shall continue to be governed solely by the terms and conditions of
the instrument evidencing such grant, and nothing in this Plan shall be
deemed to affect or otherwise modify the rights or obligations of the holders
of such options with respect to their acquisition of shares of Common Stock
thereunder. However, the Plan Administrator shall have complete discretion to
extend, under such circumstances as it may deem appropriate, one or more
provisions of this Plan to any or all of the stock options which are
incorporated into this Plan from the Predecessor Plans but which do not
otherwise contain such provisions.
C. No further option grants or stock issuances shall be made under
the Predecessor Plans from and after the Plan Effective Date.
D. The Plan shall terminate upon the earlier of (i) February 28, 2005
or (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options or stock
appreciation rights granted under the Plan or the issuance of shares (whether
vested or unvested) under the Stock Issuance Program. If the date of
termination is determined under clause (i) above, then all option grants and
unvested share issuances outstanding on such date shall thereafter continue
to have force and effect in accordance with the provisions of the instruments
evidencing such option grants or share issuances.
V. NO EMPLOYMENT/SERVICE RIGHTS
<PAGE>
Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of
the Plan shall be construed so as to grant any individual the right to remain
in the employ or service of the Corporation (or any parent or subsidiary
corporation) for any period of specific duration, and the Corporation (or any
parent or subsidiary corporation retaining the services of such individual)
may terminate such individual's employment or service at any time and for any
reason, with or without cause.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or share issuances under the Plan shall be used for
general corporate purposes.
VII. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option under the
Plan, the issuance of any shares under the Stock Issuance Program, and the
issuance of Common Stock upon the exercise or surrender of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
VIII. CHANGE OF CONTROL/CORPORATE TRANSACTION
Notwithstanding any other provision of the Plan to the contrary, in
the event of a Corporate Transaction or a Change in Control, the Plan
Administrator shall not have the right to take any actions described in the
Plan, nor shall any provisions of the Plan be operative, if such actions or
provisions would make the Corporate Transaction or Change in Control
ineligible for pooling of interests accounting treatment or would make the
Corporate Transaction or Change in Control ineligible for desired tax
treatment if, in the absence of such actions or provisions, the Corporate
Transaction or Change in Control would qualify for such treatment and the
Corporation intends to use such treatment with respect to the Corporate
Transaction or Change in Control.
IX. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the Plan
may not be assigned, encumbered or otherwise transferred by any Optionee or
Participant.
B. The provisions of the Plan relating to the exercise of options and
the vesting of shares shall be governed by the laws of the Commonwealth of
Pennsylvania as such laws are applied to contracts entered into and performed
in such Commonwealth.
C. The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
