As filed with the Securities and Exchange Commission on June 5, 1996
REGISTRATION NO. 333 -
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
under the
SECURITIES ACT OF 1933
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TELOR OPHTHALMIC PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3464527
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
790 Turnpike Street, Suite 202
North Andover, MA 01845
(508) 681-1062
(Address of Principal Executive Offices)
TELOR OPHTHALMIC PHARMACEUTICALS, INC. 1993 STOCK PLAN
(Full title of the plan)
JOHN K. HERDKLOTZ, PH.D., ACTING PRESIDENT AND CHIEF EXECUTIVE OFFICER
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
790 Turnpike Street, Suite 202
North Andover, MA 01845
(508) 681-1062
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
Proposed Proposed
maximum maximum
Title of Amount to be offering price aggregate Amount of
securities to be registered registered(1) per share(2) offering price(2) registration fee
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<S> <C> <C> <C> <C>
Common Stock, $.001 par value 185,000 $3.8125 $705,312.50 $243.21
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</TABLE>
(1) The number of shares of common stock, par value $.001 per share ("Common
Stock"), stated above consists of the aggregate number of shares which may
be sold upon the exercise of options which may hereafter be granted under
the Telor Ophthalmic Pharmaceuticals, Inc. 1993 Stock Plan (the "Plan").
The maximum number of shares which may be sold upon the exercise of such
options granted under the Plan is subject to adjustment in accordance with
certain anti-dilution and other provisions of said Plan. Accordingly,
pursuant to Rule 416 under the Securities Act of 1933, as amended (the
"1993 Act"), this Registration Statement covers, in addition to the number
of shares stated above, an indeterminate number of shares which may be
subject to grant or otherwise issuable after the operation of any such
anti-dilution and other provisions.
(2) This calculation is made solely for the purpose of determining the
registration fee pursuant to the provisions of Rule 457(h) under the 1933
Act, based on the average of the high and low sale prices per share of the
Common Stock on the Nasdaq National Market (Nasdaq) as of a date (May 31,
1996) within 5 business days prior to filing this Registration Statement.
<PAGE>
EXPLANATORY NOTE
In accordance with the instructional Note to Part I of Form S-8 as
promulgated by the Securities and Exchange Commission, the information specified
by Part I of Form S-8 has been omitted from this Registration Statement on Form
S-8 for offers of Common Stock pursuant to the Plan.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference.
The following documents filed by the Registrant with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as amended by Amendment No. 1 on Form 10-K/A dated April 18,
1996.
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, as amended by Amendment No. 1 on Form 10-Q/A dated May 24, 1996.
(c) The description of the Common Stock contained in the Registrant's
Registration Statement on Form 8-A (File No. 0-21428) filed under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), including any amendment or
report filed for the purpose of updating such description.
All reports and other documents filed by the Registrant after the date
hereof pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference herein and to be part
hereof from the date of filing of such reports and documents.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
Incorporated herein by reference from Registration Statement on Form S-1,
No. 33-60030.
Item 7. Exemption from Registration Claimed.
Not applicable.
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<PAGE>
Item 8. Exhibits.
(4.1) Form of Common Stock Certificate (Filed as Exhibit 4.2 to
Registration Statement on Form S-1, as amended, No. 33-60030,
and incorporated herein by reference).
(4.2) Article 4 of Restated Certificate of Incorporation (Filed as
Exhibit 3 to Form 8-A/A, Amendment No. 1 to Registration
Statement on Form 8-A, File No. 0-21428, and incorporated herein
by reference).
(4.3) Restated By-Laws (Filed as Exhibit 4 to Registrant's Form 8-A/A,
Amendment No. 1 to Registrant's Registration Statement on Form
8-A, File No. 0-21428, and incorporated herein by reference).
(5) Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
as to the legality of shares being registered.
(10.1) Telor Ophthalmic Pharmaceuticals, Inc. 1993 Stock Plan, as
amended.
(23.1) Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in opinion of counsel filed as Exhibit 5).
(23.2) Consent of Arthur Andersen & Co.
(24) Power of Attorney to file future amendments (set forth on the
signature page of this Registration Statement.)
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
1933 Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) (ss.
230.424(b) of this chapter) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
II-2
<PAGE>
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the 1934 Act
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
1933 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 of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 that is incorporated by reference in
this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Boston, Massachusetts on June 5, 1996.
TELOR OPHTHALMIC
PHARMACEUTICALS, INC.
By: /s/ John K. Herdklotz, Ph.D.
-----------------------------------------
John K. Herdklotz, Ph.D.
Acting President, Chief Executive Officer
and Secretary
Each person whose signature appears below constitutes and appoints John K.
Herdklotz, Ph.D. and Craig C. Taylor, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
in each of them, for him and in his name, place and stead, and in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement on Form S-8 of Telor Ophthalmic Pharmaceuticals,
Inc. and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
or about the premises, as full to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them or their or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
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<S> <C> <C>
/s/ John K. Herdklotz, Ph.D. Acting President, Chief June 5, 1996
- --------------------------------------- Executive Officer and Secretary
John K. Herdklotz, Ph.D.
/s/ Mark J. Gabrielson Treasurer and Director June 5, 1996
- ---------------------------------------
Mark J. Gabrielson
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John F. Chappell Director June 5, 1996
- ---------------------------------------
John F. Chappell
/s/ Charles L. Dimmler, III Director June 5, 1996
- ---------------------------------------
Charles L. Dimmler, III
/s/ Patrick F. Latterell Director June 5, 1996
- ---------------------------------------
Patrick F. Latterell
/s/ Jane E. Rady Director June 5, 1996
- ---------------------------------------
Jane E. Rady
/s/ Craig C. Taylor Director June 5, 1996
- ---------------------------------------
Craig C. Taylor
</TABLE>
II-5
<PAGE>
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
INDEX TO EXHIBITS FILED WITH
FORM S-8 REGISTRATION STATEMENT
Exhibit
Number Description
(4.1) Form of Common Stock Certificate (Filed as Exhibit 4.2 to
Registration Statement on Form S-1, as amended, No. 33-60030,
and incorporated herein by reference).
(4.2) Article of Restated Certificate of Incorporation (Filed as Exhibit
3 to Form 8-A/A, Amendment No. 1 to Registration Statement
on Form 8-A, File No. 0-21428 and incorporated herein by
reference).
(4.3) Restated By-Laws (Filed as Exhibit 4 to Registrant's Form
8-A/A, Amendment No. 1 to Registrant's Registration Statement
on Form 8-A File No. 0-21428, and incorporated herein by
reference).
(5) Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. as to the legality of shares being registered.
(10.1) Telor Ophthalmic Pharmaceuticals, Inc. 1993 Stock Plan, as amended.
(23.1) Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. (included in opinion of counsel filed as Exhibit 5).
(23.2) Consent of Arthur Andersen & Co.
(24) Power of Attorney to file future amendments (set forth on the
signature page of this Registration Statement.)
II-6
<PAGE>
Exhibit 23.1
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
701 Pennsylvania Avenue, N.W. Telephone: 617/542-6000
Washington, D.C. 20004 Fax: 617/542-2241
Telephone: 202/434-7300
Fax: 202/434-7400
June 5, 1996
Telor Ophthalmic Pharmaceuticals, Inc.
790 Turnpike Street, Suite 202
North Andover, MA 01845
Gentlemen:
This opinion is furnished to you in connection with the filing by Telor
Ophthalmic Pharmaceuticals, Inc., a Delaware corporation (the "Company"), with
the Securities and Exchange Commission of a Registration Statement on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended. You
have requested our opinion concerning the status under Delaware law of the
185,000 shares (the "Shares") of the Company's common stock, par value $.001 per
share ("Common Stock"), which are being registered under the Registration
Statement for issuance by the Company pursuant to the terms of the Telor
Ophthalmic Pharmaceuticals, Inc. 1993 Stock Plan, as amended to date (the
"Plan").
We have acted as counsel to the Company in connection with the Registration
Statement. In that connection we have examined and are familiar with originals
or copies, certified or otherwise identified to our satisfaction, of:
1. The Restated Certificate of Incorporation of the Company as
presently in effect;
2. The Restated By-Laws of the Company as presently in effect;
3. Certain resolutions adopted by the Company's Board of Directors and
Stockholders; and
4. The Plan.
In our examination we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such copies. We have also assumed that: (i) all of the Shares will
be issued for the consideration permitted under the Plan as currently in effect,
and none of
<PAGE>
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Telor Ophthalmic Pharmaceuticals, Inc.
June 5, 1996
Page 8
such Shares will be issued for less than $.001; (ii) all actions required to be
taken under the Plan by the Compensation Committee and the Board of Directors of
the Company will be taken by the Compensation Committee and the Board of
Directors of the Company, respectively; and (iii) at the time of the exercise of
the options under the Plan, the Company shall continue to have sufficient
authorized and unissued shares of Common Stock reserved for issuance thereunder.
Based upon and subject to the foregoing, we are of the opinion that, upon
the issuance of the Shares under the Plan as provided therein, each such Share
will be duly authorized, validly issued, fully paid and nonassessable.
Our opinion is limited to the General Corporation Law of the State of
Delaware and we express no opinion with respect to the laws of any other
jurisdiction.
We understand that you wish to file this opinion as an exhibit to the
Registration Statement, and we consent thereto. We further consent to the
reference to us under the caption "Legal Matters" in the Registration Statement.
Very truly yours,
MINTZ, LEVIN, COHN, FERRIS,
GLOVSKY AND POPEO, P.C.
II-8
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of Telor Ophthalmic Pharmaceuticals,
Inc. on Form S-3 of our report dated , 1996 included in Telor
Ophthalmic Pharmaceuticals Inc.'s 1995 Annual Report on Form 10-K and Form
10-K/A, and to all references to our Firm included in this registration
statement.
Boston, Massachusetts
June 5, 1996
EXHIBIT 10
As amended through June 5, 1996
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
1993 STOCK PLAN
1. DEFINITIONS.
Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in this Telor Ophthalmic Pharmaceuticals, Inc.
1993 Stock Plan, have the following meanings:
Administrator means the Board of Directors, unless it has delegated
power to act on its behalf to a committee. (See Article 4)
Affiliate means a corporation which, for purposes of Section 424 of
the Code, is a parent or subsidiary of the Company, direct or
indirect.
Board of Directors means the Board of Directors of the Company.
Code means the United States Internal Revenue Code of 1986, as
amended.
Committee means the Committee to which the Board of Directors has
delegated power to act under or pursuant to the provisions of the
Plan.
Common Stock means shares of the Company's common stock, $.001 par
value.
Company means Telor Ophthalmic Pharmaceuticals, Inc., a Delaware
corporation.
Disability or Disabled means permanent and total disability as defined
in Section 22(e)(3) of the Code.
Fair Market Value of a Share of Common Stock means:
(1) If the Common Stock is listed on a national securities exchange or
traded in the over-the-counter market and sales prices are regularly
reported for the Common Stock, either (a) the average of the closing or
last prices of the Common Stock on the Composite Tape or other comparable
reporting system for the ten (10) consecutive trading days immediately
preceding the applicable date or (b) the closing or last price of
<PAGE>
the Common Stock on the Composite Tape or other comparable reporting system
for the trading day immediately preceding the applicable date, as the
Administrator shall determine;
(2) If the Common Stock is not traded on a national securities
exchange but is traded on the over-the-counter market, if sales prices
are not regularly reported for the Common Stock for the trading days
or day referred to in clause (1), and if bid and asked prices for the
Common Stock are regularly reported, either (a) the average of the
mean between the bid and the asked price for the Common Stock at the
close of trading in the over-the-counter market for the ten (10)
trading days on which Common Stock was traded immediately preceding
the applicable date or (b) the mean between the bid and the asked
price for the Common Stock at the close of trading in the
over-the-counter market for the trading day on which Common Stock was
traded immediately preceding the applicable date, as the Administrator
shall determine; and
(3) If the Common Stock is neither listed on a national securities
exchange nor traded in the over-the-counter market, such value as the
Administrator, in good faith, shall determine.
ISO means an option meant to qualify as an incentive stock option
under Code Section 422.
Key Employee means an employee of the Company or of an Affiliate
(including, without limitation, an employee who is also serving as an
officer or director of the Company or of an Affiliate), designated by
the Administrator to be eligible to be granted one or more Options
under the Plan.
Non-Qualified Option means an option which is not intended to qualify
as an ISO.
Option means an ISO or Non-Qualified Option granted under the Plan.
Option Agreement means an agreement between the Company and a
Participant executed and delivered pursuant to the Plan.
Participant means a Key Employee, director or consultant to whom one
or more Options are granted under the Plan. As used herein,
"Participant" shall include "Participant's Survivors" where the
context requires.
Participant's Survivors means a deceased Participant's legal
representatives and/or any person or persons who acquired the
Participant's rights to an Option by will or by the laws of descent
and distribution.
Plan means this Telor Ophthalmic Pharmaceuticals, Inc. 1993 Stock
Plan.
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<PAGE>
Shares means shares of the Common Stock as to which Options have been
or may be granted under the Plan or any shares of capital stock into
which the Shares are changed or for which they are exchanged within
the provisions of Article 3 of the Plan. The Shares issued upon
exercise of Options granted under the Plan may be authorized and
unissued shares or shares held by the Company in its treasury, or
both.
2. PURPOSES OF THE PLAN.
The Plan is intended to encourage ownership of Shares by Key Employees,
directors and certain consultants to the Company in order to attract such
people, to induce them to work for the benefit of the Company or of an Affiliate
and to provide additional incentive for them to promote the success of the
Company or of an Affiliate. The Plan provides for the issuance of ISOs and
Non-Qualified Options.
3. SHARES SUBJECT TO THE PLAN.
The number of Shares subject to this Plan as to which Options may be
granted from time to time shall be 245,000 or the equivalent of such number of
Shares after the Administrator, in its sole discretion, has interpreted the
effect of any stock split, stock dividend, combination, recapitalization or
similar transaction in accordance with Article 17 of the Plan.
If an Option ceases to be "outstanding", in whole or in part, the Shares
which were subject to such Option shall be available for the granting of other
Options under the Plan. Any Option shall be treated as "outstanding" until such
Option is exercised in full, or terminates or expires under the provisions of
the Plan, or by agreement of the parties to the pertinent Option Agreement.
4. ADMINISTRATION OF THE PLAN.
The Administrator of the Plan will be the Board of Directors, except to the
extent the Board of Directors delegates its authority to a Committee of the
Board of Directors. Following the date on which the Common Stock is registered
under the Securities and Exchange Act of 1934, as amended (the "1934 Act"), the
Plan is intended to comply in all respects with Rule 16b-3 or its successors,
promulgated pursuant to Section 16 of the 1934 Act with respect to Participants
who are subject to Section 16 of the 1934 Act, and any provision in this Plan
with respect to such persons contrary to Rule 16b-3 shall be deemed null and
void to the extent permissible by law and deemed appropriate by the
Administrator. Subject to the provisions of the Plan, the Administrator is
authorized to:
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<PAGE>
a. Interpret the provisions of the Plan or of any Option or Option
Agreement and to make all rules and determinations which it deems
necessary or advisable for the administration of the Plan;
b. Determine which employees of the Company or of an Affiliate shall be
designated as Key Employees and which of the Key Employees and
consultants shall be granted Options;
c. Determine the number of Shares for which an Option or Options shall be
granted; and
d. Specify the terms and conditions upon which an Option or Options may
be granted;
provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Code Section 422 of those Options which are designated as ISOs.
Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Option granted under it
shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is other than the Board of Directors.
5. ELIGIBILITY FOR PARTICIPATION.
The Administrator will, in its sole discretion, name the Participants in
the Plan, provided, however, that each Participant named by the Administrator
must be a Key Employee or consultant of the Company or of an Affiliate at the
time an Option is granted. Members of the Company's Board of Directors who are
not employees of the Company or of an Affiliate may receive options pursuant to
Article 6, Subparagraph A(f), but only pursuant thereto. Notwithstanding any of
the foregoing provisions, the Administrator may authorize the grant of an Option
to a person not then an employee or consultant of the Company or of an
Affiliate. The actual grant of such Option, however, shall be conditioned upon
such person becoming eligible to become a Participant at or prior to the time of
the execution of the Option Agreement evidencing such Option. ISOs may be
granted only to Key Employees. Non-Qualified Options may be granted to any Key
Employee or consultant of the Company or an Affiliate. The granting of any
Option to any individual shall neither entitle that individual to, nor
disqualify him or her from, participation in any other grant of Options. In no
event shall any Participant be granted in any calendar year Options to purchase
or receive more than 750,000 shares of the Company's Common Stock pursuant to
this Plan.
- 4 -
<PAGE>
6. TERMS AND CONDITIONS OF OPTIONS.
Each Option shall be set forth in writing in an Option Agreement, duly
executed by the Company and by the Participant. The Administrator may provide
that Options be granted subject to such conditions as the Administrator may deem
appropriate including, without limitation, subsequent approval by the
stockholders of the Company of this Plan or any amendments thereto. The Option
Agreements shall be subject to at least the following terms and conditions:
A. Non-Qualified Options: Each Option intended to be a Non-Qualified
Option shall be subject to the terms and conditions which the
Administrator determines to be appropriate and in the best interest of
the Company, subject to the following minimum standards for any such
Non-Qualified Option:
a. Option Price: The option price (per share) of the Shares covered
by each Option shall be determined by the Administrator but shall
not be less than the par value per share of Common Stock.
b. Each Option Agreement shall state the number of Shares to which
it pertains;
c. Each Option Agreement shall state the date or dates on which it
first is exercisable and the date after which it may no longer be
exercised, and may provide that the Option rights accrue or
become exercisable in installments over a period of months or
years, or upon the attainment of stated goals or events; and
d. Exercise of any Option may be conditioned upon the Participant's
execution of a Share purchase agreement in form satisfactory to
the Administrator providing for certain protections for the
Company and its other shareholders including requirements that:
i. The Participant's or the Participant's Survivors' right to
sell or transfer the Shares may be restricted; and
ii. The Participant or the Participant's Survivors may be
required to execute letters of investment intent and must
also acknowledge that the Shares will bear legends noting
any applicable restrictions.
f. Directors' Options: Each director of the Company who is not an
employee of the Company or any Affiliate shall be granted the
following Non-Qualified Options:
- 5 -
<PAGE>
i. Each director of the Company who is not an employee of the
Company or any Affiliate, who is first elected or appointed
to the Board of Directors after the date of the annual
meeting of stockholders to be held in May 1995 or any
adjournment(s) thereof (the "1995 Annual Meeting"), shall be
granted upon such election or appointment a Non-Qualified
Option to purchase 12,000 Shares. Each such Option shall (i)
have an exercise price equal to the Fair Market Value (per
share) of the Shares on the date of grant of the Option,
which shall be determined based on the trading day
immediately preceding such grant date as provided for in
Article 1, (ii) have a term of ten (10) years, and (iii)
shall become cumulatively exercisable in three (3) equal
annual installments of thirty-three and 33/100 per cent
(33.33%) each, upon completion of one full year of service
on the Board of Directors after the date of grant, and
continuing on each of the next two (2) full years of service
thereafter.
ii. At the 1995 Annual Meeting, each director of the Company who
is not an employee of the Company or any Affiliate and who
has been in the continued and uninterrupted service of the
Company as a director for at least the last six (6) months
shall be granted a Non-Qualified Option to purchase 8,000
Shares. Such Option shall (i) have an exercise price equal
to $.875 per share, which amount is the Fair Market Value
(per share) of the Shares on February 1, 1995 as determined
based on the trading day immediately preceding such date as
provided for in Article 1, (ii) have a term of ten (10)
years, and (iii) shall be immediately exercisable in full as
of the date of the 1995 Annual Meeting.
iii. At each annual meeting of stockholders or special meeting in
lieu thereof on and after the 1995 Annual Meeting, each
director who is not then and employee of the Company or an
Affiliate and who has been in the continued and
uninterrupted service of the Company as a director for at
least the last six (6) months shall be granted a
Non-Qualified Option to purchase 8,000 Shares (the "Annual
Director Grant"). Such Option shall (i) have an exercise
price equal to the Fair Market Value (per share) of the
Shares on the date of grant of the Option, which shall be
determined based on the trading day immediately preceding
such date as provided for in Article 1, (ii) have a term of
ten (10) years, and (iii) shall become immediately
exercisable in full as of the date of the next annual
meeting of stockholders or special meeting in lieu thereof
following the annual meeting or special meeting in lieu
thereof at which the option was granted (the "Subsequent
Annual Meeting"),
- 6 -
<PAGE>
whether or not such director is re-elected at that meeting,
provided that such director has been in the continued and
uninterrupted service of the Company as a director from the
date of that grant through the day prior to the Subsequent
Annual Meeting.
Notwithstanding the foregoing provisions of this Article 6,
Paragraph A(f) and the provisions of Article 14, in the
event of a "Change of Control" (as defined below) while a
non-employee director who received an Option grant under
this subparagraph (f) is a director of the Company and is
not an employee of the Company or of an Affiliate, that
non-employee director shall be entitled to exercise any
Option granted under this subparagraph (f), commencing as of
immediately prior to the consummation of such Change of
Control (but subject to the consummation of such Change of
Control), for all of the shares then remaining subject to
purchase under such grant(s) whether or not the right to
purchase said shares shall have become vested and become
exercisable.
A "Change of Control" shall be deemed to have occurred upon
the occurrence of any of the following:
(I) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or
substantially all of the assets of the Company;
(II) individuals who, as of May 10, 1995, constitute the
entire Board of Directors of the Company (the
"Incumbent Directors") cease for any reason to
constitute at least 50% of the Board of Directors
(hereinafter referred to as a "Board Change"), provided
that any individual becoming a director subsequent to
May 10, 1995 whose election or nomination for election
was approved by a vote of at least a majority of the
then Incumbent Directors shall be, for purposes of
provision, considered as though such individual were an
Incumbent Director; or
(III)any consolidation or merger of the Company (including,
without limitation, a triangular merger) where the
shareholders of the Company, immediately prior to the
consolidation or merger, would not, immediately after
the consolidation or merger, beneficially own, directly
or indirectly, shares representing in the aggregate
more than 50% of the combined voting power of all the
outstanding
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securities of the corporation issuing cash or
securities in the consolidation or merger (or of its
ultimate parent corporation, if any); or
(IV) any "person," as such term is used in Section 13(d) of
the Securities Exchange Act of 1934, as amended (or any
successor provision) (the "Exchange Act") (other than
the Company, any employee benefit plan of the Company
or any entity organized, appointed or established by
the Company for or pursuant to the terms of any such
plan), together with all "affiliates" and "associates"
(as such terms are defined in Rule 12b-2 under the
Exchange Act or any successor provision) of such
person, shall become the "beneficial owner"or
"beneficial owners" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act or any successor
provision), directly or indirectly, of securities of
the Company representing in the aggregate thirty
percent (30%) or more of either (a) the then
outstanding shares of Common Stock of the Company or
(b) the combined voting power of all then outstanding
securities of the Company having the right under
ordinary circumstances to vote in an election of the
Board of Directors of the Company ("Voting Securities")
(hereafter referred to as an "Acquisition"); provided,
that, notwithstanding the foregoing, an Acquisition
shall not be deemed to have occurred for purposes of
this clause (IV) (1) solely as the result of an
acquisition of securities by the Company which, by
reducing the number of shares of Common Stock or other
Voting Securities outstanding, increases (x) the
proportionate number of shares of Common Stock
beneficially owned by any person to thirty percent
(30%) or more of the Common Stock then outstanding or
(y) the proportionate voting power represented by the
Voting Securities beneficially owned by any person to
thirty percent (30%) or more of the combined voting
power of all then outstanding Voting Securities or (2)
solely as the result of an acquisition of securities
from the Company; except that if any person referred to
in clause (1)(x) or (1)(y) of this sentence or to which
clause (2) of this sentence is applicable shall
hereafter become the beneficial owner of any additional
shares of Common Stock or other Voting Securities
(other than pursuant to a stock split, stock dividend
or similar transaction or a transaction to which
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<PAGE>
clause (2) applies), then an Acquisition shall be
deemed to have occurred for purposes of this clause
(IV);
provided, however, that notwithstanding the foregoing, the
Compensation Committee will by written notification to such
non-employee directors prior to a Change of Control provide
that such acceleration of vesting an exercisability shall
not occur if and to the extent that the Compensation
Committee has received from the Board of Directors written
notification that (i) the Company's independent accountant
has advised the Board of Directors that such acceleration
could prohibit the accounting treatment of the transaction
which is a Change of Control as a pooling under APB Opinion
No. 16 (or any successor opinion) and (ii) that the Board of
Directors reasonably believes it is the intent of the
Company to treat such transaction as a pooling.
Any director entitled to receive an Option grant under this
subparagraph (f) may elect to decline the Option.
Notwithstanding the provisions of Article 24 concerning
amendment of the Plan, the provisions of this subparagraph
(f) shall not be amended more than once every six months,
other than to comport with changes in the Code, the Employee
Retirement Income Security Act, or the rules thereunder. The
provisions of Articles 10, 11, 12 and 13 below shall not
apply to Options granted pursuant to this subparagraph (f).
B. ISOs: Each Option intended to be an ISO shall be issued only to a Key
Employee and be subject to at least the following terms and
conditions, with such additional restrictions or changes as the
Administrator determines are appropriate but not in conflict with Code
Section 422 and relevant regulations and rulings of the Internal
Revenue Service:
a. Minimum standards: The ISO shall meet the minimum standards
required of Participants who are granted Non-Qualified Options,
as described above, except clause (a) thereunder.
b. Option Price: Immediately before the Option is granted, if the
Participant owns, directly or by reason of the applicable
attribution rules in Code Section 424(d):
i. Ten percent (10%) or less of the total combined voting power
of all classes of share capital of the Company or an
Affiliate, the Option price (per share) of the Shares
covered by each Option shall not be less than one hundred
percent (100%) of the Fair Market Value (per share) of the
Shares on the date of the grant of the Option.
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<PAGE>
ii. More than ten percent (10%) of the total combined voting
power of all classes of share capital of the Company or an
Affiliate, the Option price (per share) of the Shares
covered by each Option shall not be less than one hundred
ten percent (110%) of the said Fair Market Value on the date
of grant.
c. Term of Option: For Participants who own
i. Ten percent (10%) or less of the total combined voting power
of all classes of share capital of the Company or an
Affiliate, each Option shall terminate not more than ten
(10) years from the date of the grant or at such earlier
time as the Option Agreement may provide;
ii. More than 10% of the total combined voting power of all
classes of share capital of the Company or an Affiliate,
each Option shall terminate not more than five (5) years
from the date of the grant or at such earlier time as the
Option Agreement may provide.
d. Medium of Payment: The Option price shall be payable upon the
exercise of the Option and only in such form as the Administrator
determines and as is permitted by Section 422 of the Code.
e. Limitation on Yearly Exercise: The Option Agreements shall
restrict the amount of Options which may be exercisable in any
calendar year (under this or any other ISO plan of the Company or
an Affiliate) so that the aggregate Fair Market Value (determined
at the time each ISO is granted) of the stock with respect to
which ISOs are exercisable for the first time by the Participant
in any calendar year does not exceed one hundred thousand dollars
($100,000), provided that this subparagraph (e) shall have no
force or effect if its inclusion in the Plan is not necessary for
Options issued as ISOs to qualify as ISOs pursuant to Section
422(d) of the Code.
f. Limitation on Grant of ISOs: No ISOs shall be granted after
February 16, 2003, the date which is the earlier of ten (10)
years from the date of the adoption of the Plan by the Company
and the date of the approval of the Plan by the shareholders of
the Company.
7. EXERCISE OF OPTION AND ISSUE OF SHARES.
An Option (or any part or installment thereof) shall be exercised by giving
written notice to the Company at its principal office address, together with
provision for payment of the full purchase price in accordance with this
paragraph for the Shares as to which such Option is being
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<PAGE>
exercised, and upon compliance with any other condition(s) set forth in the
Option Agreement. Such written notice shall be signed by the person exercising
the Option, shall state the number of Shares with respect to which the Option is
being exercised and shall contain any representation required by the Plan or the
Option Agreement. Payment of the purchase price for the Shares as to which such
Option is being exercised shall be made (a) in United States dollars in cash or
by check, or (b) at the discretion of the Administrator, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, determined in good faith by
the Administrator, or (c) at the discretion of the Administrator, by delivery of
the grantee's personal recourse note bearing interest payable not less than
annually at no less than 100% of the applicable Federal rate, as defined in
Section 1274(d) of the Code, or (d) at the discretion of the Administrator, in
accordance with a cashless exercise program established with a security
brokerage firm, and approved by the Administrator, or (e) at the discretion of
the Administrator, by any combination of (a), (b), (c) and (d) above.
Notwithstanding the foregoing, the Administrator shall accept only such payment
on exercise of an ISO as is permitted by Section 422 of the Code.
The Company shall then reasonably promptly deliver the Shares as to which
such Option was exercised to the Participant (or to the Participant's Survivors,
as the case may be). In determining what constitutes "reasonably promptly," it
is expressly understood that the delivery of the Shares may be delayed by the
Company in order to comply with any law or regulation which requires the Company
to take any action with respect to the Shares prior to their issuance. The
Shares shall, upon delivery, be evidenced by an appropriate certificate or
certificates for fully paid, non-assessable Shares.
The Administrator shall have the right to accelerate the date of exercise
of any installment of any Option; provided that the Administrator shall not
accelerate the exercise date of any installment of any Option granted to any Key
Employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Article 20) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in paragraph
6(e).
The Administrator may, in its discretion, amend any term or condition of an
outstanding Option provided (i) such term or condition as amended is permitted
by the Plan, (ii) any such amendment shall be made only with the consent of the
Participant to whom the Option was granted or in the event of the death of the
Participant, the Participant's Survivors, (iii) any such amendment of any ISO
shall be made only after the Administrator, after consulting with counsel for
the Company, determines whether such amendment would constitute a "modification"
of any Option which is an ISO (as that term is defined in Section 424(h) of the
Code) or would cause any adverse tax consequences for the holders of such ISO,
and (iv) with respect to any Option held by any Participant who is subject to
the provisions of Section 16(a) of the 1934 Act, any such amendment shall be
made only after the Administrator, after consulting with counsel for the
Company, determines whether such amendment would constitute the grant of a new
Option.
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<PAGE>
8. RIGHTS AS A SHAREHOLDER.
No Participant to whom an Option has been granted shall have rights as a
shareholder with respect to any Shares covered by such Option, except after due
exercise of the Option and tender of the full purchase price for the Shares
being purchased pursuant to such exercise and registration of the Shares in the
Company's share register in the name of the Participant.
9. ASSIGNABILITY AND TRANSFERABILITY OF OPTIONS.
By its terms, an Option granted to a Participant shall not be transferable
by the Participant other than by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act or the rules thereunder,
and shall be exercisable, during the Participant's lifetime, only by such
Participant (or by his or her legal representative). Such Option shall not be
assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.
Any attempted transfer, assignment, pledge, hypothecation or other disposition
of any Option or of any rights granted thereunder contrary to the provisions of
this Plan, or the levy of any attachment or similar process upon an Option,
shall be null and void.
10. EFFECT OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE".
Except as otherwise provided in the pertinent Option Agreement, in the
event of a termination of service (whether as an employee or consultant) with
the Company or an Affiliate before the Participant has exercised all Options,
the following rules apply:
a. A Participant who ceases to be an employee or consultant of the
Company or of an Affiliate (for any reason other than termination "for
cause", Disability, or death for which events there are special rules
in Articles 11, 12, and 13, respectively), may exercise any Option
granted to him or her to the extent that the right to purchase Shares
has accrued on the date of such termination of service, but only
within such term as the Administrator has designated in the pertinent
Option Agreement.
b. In no event may an Option Agreement provide, if the Option is intended
to be an ISO, that the time for exercise be later than three (3)
months after the Participant's termination of employment.
c. The provisions of this Article, and not the provisions of Article 12
or 13, shall apply to a Participant who subsequently becomes disabled
or dies after the termination of employment or consultancy, provided,
however, in the case of a Participant's death within three (3) months
after the termination of employment
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<PAGE>
or consulting, the Participant's Survivors may exercise the Option
within one (1) year after the date of the Participant's death, but in
no event after the date of expiration of the term of the Option.
d. Notwithstanding anything herein to the contrary, but if and only if
the pertinent Option Agreement for any Option expressly provides by a
specific reference to this paragraph for application of this
provision, then if subsequent to a Participant's termination of
employment or termination of consultancy, but prior to the exercise of
an Option, the Board of Directors determines that, either prior or
subsequent to the Participant's termination, the Participant engaged
in conduct which would constitute "cause", then such Participant shall
forthwith cease to have any right to exercise any Option.
e. A Participant to whom an Option has been granted under the Plan who is
absent from work with the Company or with an Affiliate because of
temporary disability (any disability other than a permanent and total
Disability as defined in Article 1 hereof), or who is on leave of
absence for any purpose, shall not, during the period of any such
absence, be deemed, by virtue of such absence alone, to have
terminated such Participant's employment or consultancy with the
Company or with an Affiliate, except as the Administrator may
otherwise expressly provide.
f. Options granted under the Plan shall not be affected by any change of
employment or other service within or among the Company and any
Affiliates, so long as the Participant continues to be an employee or
consultant of the Company or any Affiliate, provided, however, if a
Participant's employment by either the Company or an Affiliate should
cease (other than to become an employee of an Affiliate or the
Company), such termination shall affect the Participant's rights under
any Option granted to such Participant in accordance with the terms of
the Plan and the pertinent Option Agreement.
11. EFFECT OF TERMINATION OF SERVICE "FOR CAUSE".
The Administrator may provide that an Option shall be subject to the
following terms of this Article 11, but no Option shall be subject to the
following terms of this Article 11 unless the pertinent Option Agreement
expressly provides by specific reference to this Article 11 for such
application.
If the Participant's service (whether as an employee or consultant) with
the Company or an Affiliate is terminated "for cause" prior to the time that all
of his or her outstanding Options have been exercised:
a. All outstanding and unexercised Options as of the date the Participant
is notified his or her service is terminated "for cause" will
immediately be forfeited.
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<PAGE>
b. Except as agreed to by the Administrator, for purposes of this
Article, "cause" shall include (and is not limited to) dishonesty with
respect to the employer, insubordination, substantial malfeasance or
non-feasance of duty, unauthorized disclosure of confidential
information, and conduct substantially prejudicial to the business of
the Company or any Affiliate. The determination of the Administrator
as to the existence of cause will be conclusive on the Participant and
the Company.
c. "Cause" is not limited to events which have occurred prior to a
Participant's termination of service, nor is it necessary that the
Administrator's finding of "cause" occur prior to termination. If the
Administrator determines, subsequent to a Participant's termination of
service but prior to the exercise of an Option, that either prior or
subsequent to the Participant's termination the Participant engaged in
conduct which would constitute "cause", then the right to exercise any
Option is forfeited.
12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY.
Except as otherwise provided in the pertinent Option Agreement, a
Participant who ceases to be an employee or consultant of the Company or of an
Affiliate by reason of Disability may exercise any Option granted to such
Participant to the extent that the right to purchase Shares has accrued on the
date of his or her Disability.
A Disabled Participant may exercise such rights only within a period of not
more than one (1) year after the date that the Participant became Disabled,
notwithstanding that the Participant might have been able to exercise the Option
as to some or all of the Shares on a later date if he or she had not become
Disabled and had continued to be an employee or consultant or, if earlier,
within the originally prescribed term of the Option.
The Administrator shall make the determination both of whether Disability
has occurred and the date of its occurrence. If requested, the Participant shall
be examined by a physician selected or approved by the Administrator, the cost
of which examination shall be paid for by the Company.
13. EFFECT OF DEATH WHILE AN EMPLOYEE OR CONSULTANT.
Except as otherwise provided in the pertinent Option Agreement, in the
event of the death of a Participant while the Participant is an employee or
consultant of the Company or of an Affiliate and to whom an Option has been
granted, then such Option may be exercised by the Participant's Survivors to the
extent exercisable but not exercised on the date of death.
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<PAGE>
If the Participant's Survivors wish to exercise the Option, they must take
all necessary steps to exercise the Option within one (1) year after the date of
death of such Participant, notwithstanding that the decedent might have been
able to exercise the Option as to some or all of the Shares on a later date if
he or she had not died and had continued to be an employee or consultant or, if
earlier, within the originally prescribed term of the Option.
14. TERMINATION OF DIRECTORS' OPTION RIGHTS.
Except as otherwise provided in the pertinent Option Agreement, if a
director who receives Options pursuant to Article 6, subparagraph (f):
a. ceases to be a member of the Board of Directors of the Company for any
reason other than death or Disability, any then unexercised Options
granted to such director may be exercised by the director within a
period of ninety (90) days after the date the director ceases to be a
member of the Board of Directors, but only to the extent of the number
of shares with respect to which the Options are exercisable on the
date the director ceases to be a member of the Board of Directors, and
in no event later than the expiration date of the Option; or,
b. ceases to be a member of the Board of Directors of the Company by
reason of his or her death or Disability, any then unexercised Options
granted to such director may be exercised by the director (or by the
director's personal representative, heir or legatee, in the event of
death) within a period of one hundred eighty (180) days after the date
the director ceases to be a member of the Board of Directors, but only
to the extent of the number of Shares with respect to which the
Options are exercisable on the date the director ceases to be a member
of the Board of Directors, and in no event later than the expiration
date of the Option.
15. PURCHASE FOR INVESTMENT.
Unless the offering and sale of the Shares to be issued upon the particular
exercise of an Option shall have been effectively registered under the
Securities Act of 1933, as now in force or hereafter amended (the "1933 Act"),
the Company shall be under no obligation to issue the Shares covered by such
exercise unless and until the following conditions have been fulfilled:
a. The person(s) who exercise such Option shall warrant to the Company,
at the time of such exercise or receipt, as the case may be, that such
person(s) are acquiring such Shares for their own respective accounts,
for investment, and not with a view to, or for sale in connection
with, the distribution of any such Shares, in which event the
person(s) acquiring such Shares shall be bound by the
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<PAGE>
provisions of the following legend which shall be endorsed upon the
certificate(s) evidencing their Shares issued pursuant to such
exercise or such grant:
"The shares represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by
any person, including a pledgee, unless (1) either (a) a
Registration Statement with respect to such shares shall be
effective under the Securities Act of 1933, as amended, or (b)
the Company shall have received an opinion of counsel
satisfactory to it that an exemption from registration under such
Act is then available, and (2) there shall have been compliance
with all applicable state securities laws.
b. The Company shall have received an opinion of its counsel that the
Shares may be issued upon such particular exercise in compliance with
the 1933 Act without registration thereunder.
The Company may delay issuance of the Shares until completion of any action
or obtaining of any consent which the Company deems necessary under any
applicable law (including, without limitation, state securities or "blue sky"
laws).
16. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
Upon the dissolution or liquidation of the Company, all Options granted
under this Plan which as of such date shall not have been exercised will
terminate and become null and void; provided, however, that if the rights of a
Participant or a Participant's Survivors have not otherwise terminated and
expired, the Participant or the Participant's Survivors will have the right
immediately prior to such dissolution or liquidation to exercise any Option to
the extent that the right to purchase Shares has accrued under the Plan as of
the date immediately prior to such dissolution or liquidation.
17. ADJUSTMENTS.
Upon the occurrence of any of the following events, a Participant's rights
with respect to any Option granted to him or her hereunder which have not
previously been exercised in full shall be adjusted as hereinafter provided,
unless otherwise specifically provided in the written agreement between the
Participant and the Company relating to such Option:
A. Stock Dividends and Stock Splits. If the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of such Option shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the
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purchase price per share to reflect such subdivision, combination or stock
dividend. The number of Shares subject to options to be granted to directors
pursuant to Section A.f of Article 6 shall also be proportionately adjusted upon
the occurrence of such events.
B. Consolidations or Mergers. If the Company is to be consolidated with or
acquired by another entity in a merger, sale of all or substantially all of the
Company's assets or otherwise (an "Acquisition"), the Administrator or the board
of directors of any entity assuming the obligations of the Company hereunder
(the "Successor Board"), shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by substituting on an
equitable basis for the Shares then subject to such Options either the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition or securities of any successor or acquiring
entity; or (ii) upon written notice to the Participants, provide that all
Options must be exercised, to the extent then exercisable (as the Options may
have been amended), within a specified number of days of the date of such
notice, at the end of which period the Options shall terminate; or (iii)
terminate all Options in exchange for a cash payment equal to the excess of the
Fair Market Value of the shares subject to such Options (to the extent then
exercisable as the Options may have been amended) over the exercise price
thereof.
C. Recapitalization or Reorganization. In the event of a recapitalization
or reorganization of the Company (other than a transaction described in
subparagraph B above) pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock, a
Participant upon exercising an Option shall be entitled to receive for the
purchase price paid upon such exercise the securities he or she would have
received if he or she had exercised such Option prior to such recapitalization
or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraph A, B or C with respect to ISOs shall be made only
after the Administrator, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424(h) of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Administrator
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments, unless
the holder of an ISO specifically requests in writing that such adjustment be
made and such writing indicates that the holder has full knowledge of the
consequences of such "modification" on his or her income tax treatment with
respect to the ISO.
18. ISSUANCES OF SECURITIES.
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject
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to Options. Except as expressly provided herein, no adjustments shall be made
for dividends paid in cash or in property (including without limitation,
securities) of the Company.
19. FRACTIONAL SHARES.
No fractional share shall be issued under the Plan and the person
exercising such right shall receive from the Company cash in lieu of such
fractional share equal to the fair market value thereof determined in good faith
by the Board of Directors of the Company.
20. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS:
TERMINATION OF ISOs.
The Administrator, at the written request of any Participant, may in its
discretion take such actions as may be necessary to convert such Participant's
ISOs (or any portions thereof) that have not been exercised on the date of
conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the Participant is an employee of the Company
or an Affiliate at the time of such conversion. Such actions may include, but
not be limited to, extending the exercise period or reducing the exercise price
of the appropriate installments of such Options. At the time of such conversion,
the Administrator (with the consent of the Participant) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the
Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any Participant the right to have such Participant's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action. The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such termination.
21. WITHHOLDING.
In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other
amounts are required by applicable law or governmental regulation to be withheld
from the Option holder's salary, wages or other remuneration in connection with
the exercise of an Option or a Disqualifying Disposition (as defined in Article
21), the Option holder shall advance in cash to the Company, or to any Affiliate
of the Company which employs or employed the Option holder, the amount of such
withholdings unless a different withholding arrangement, including the use of
shares of the Company's Common Stock, is authorized by the Administrator (and
permitted by law), provided, however, that with respect to persons subject to
Section 16 of the 1934 Act, any such withholding arrangement shall be in
compliance with any applicable provisions of Rule 16b-3 promulgated under
Section 16 of the 1934 Act. For purposes hereof, the fair market value of the
shares withheld for purposes of payroll withholding shall be determined in the
manner
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provided in Article 1 above, as of the most recent practicable date prior to the
date of exercise. If the fair market value of the shares withheld is less than
the amount of payroll withholdings required, the Option holder may be required
to advance the difference in cash to the Company or the Affiliate employer. The
Administrator in its discretion may condition the exercise of an Option for less
than the then Fair Market Value on the Participant's payment of such additional
withholding.
22. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
Each Key Employee who receives an ISO must agree to notify the Company in
writing immediately after the Key Employee makes a Disqualifying Disposition of
any shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired shares by exercising the
ISO. If the Key Employee has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
23. TERMINATION OF THE PLAN.
The Plan will terminate on February 16, 2003, the date which is ten (10)
years from the earlier of the date of its adoption and the date of its approval
by the stockholders of the Company. The Plan may be terminated at an earlier
date by vote of the stockholders of the Company; provided, however, that any
such earlier termination will not affect any Options granted or Option
Agreements executed prior to the effective date of such termination.
24. AMENDMENT OF THE PLAN.
The Plan may be amended by the stockholders of the Company. The Plan may
also be amended by the Administrator, including, without limitation, to the
extent necessary to qualify any or all outstanding Options granted under the
Plan or Options to be granted under the Plan for favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, to the extent necessary
to ensure the qualification of the Plan under Rule 16b-3, and to the extent
necessary to qualify the shares issuable upon exercise of any outstanding
Options granted, or Options to be granted, under the Plan for listing on any
national securities exchange or quotation in any national automated quotation
system of securities dealers. Any amendment approved by the Administrator which
is of a scope that requires stockholder approval in order to ensure favorable
federal income tax treatment for any incentive stock options or requires
stockholder approval in order to ensure the compliance of the Plan with Rule
16b-3 shall be subject to obtaining such stockholder approval. Any modification
or amendment of the Plan shall not, without the consent of a Participant, affect
his or her rights under an Option previously granted to him or her. With
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the consent of the Participant affected, the Administrator may amend outstanding
Option Agreements in a manner not inconsistent with the Plan.
25. EMPLOYMENT OR OTHER RELATIONSHIP.
Nothing in this Plan or any Option Agreement shall be deemed to prevent the
Company or an Affiliate from terminating the employment, director status or
consultancy of a Participant, nor to prevent a Participant from terminating his
or her own employment, director status or consultancy or to give any Participant
a right to be retained in employment or other service by the Company or any
Affiliate for any period of time.
26. GOVERNING LAW.
This Plan shall be construed and enforced in accordance with the law of the
State of Delaware.
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