Exhibit 4.2
FALCONSTOR SOFTWARE, INC.
2007 OUTSIDE DIRECTORS EQUITY COMPENSATION PLAN
1. PURPOSE. The FalconStor Software, Inc. 2007 Outside Directors Equity
Compensation Plan (the "Plan") is established effective as of the 26th day
of March, 2007, (the "Effective Date") to create additional incentive for
the non employee directors of FalconStor Software, Inc., a Delaware
corporation, and any successor corporation thereto (collectively referred
to as the "Company") to promote the financial success and progress of the
Company and any present or future parent and/or subsidiary corporations of
the Company. For purposes of the Plan, a parent corporation and a
subsidiary corporation shall be as defined in sections 424(e) and 424(f)
of the Internal Revenue Code of 1986, as amended (the "Code").
2. ADMINISTRATION. The Plan shall be administered by the Board of Directors
of the Company (the "Board") and/or by a duly appointed committee of the
Board having such powers as shall be specified by the Board. Any
subsequent references herein to the Board shall also mean the committee if
such committee has been appointed and, unless the powers of the committee
have been specifically limited, the committee shall have all of the powers
of the Board granted herein, including, without limitation, the power to
terminate or amend the Plan at any time subject to the terms of the Plan
and any applicable limitations imposed by law. The Board shall have no
authority, discretion or power to select the non-employee directors of the
Company who will receive options or be granted shares of restricted stock
under the Plan, to set the exercise price of the options granted under the
Plan, to determine the number of shares of common stock to be granted
under option or the time at which such options are to be granted, to
establish the duration of option grants, to determine the number of shares
of restricted stock to be granted or the time at which such shares of
restricted stock are to be granted or to alter other terms or conditions
specified in the Plan, except in the sense of administering the Plan
subject to the provisions of the Plan. All questions of interpretation of
the Plan, of any options granted under the Plan (an "Option") or of any
restricted stock granted under the plan ("Restricted Stock" and together
with the Options, an "Award") shall be determined by the Board, and such
determinations shall be final and binding upon all persons having an
interest in the Plan and/or any Award. Any officer of the Company shall
have the authority to act on behalf of the Company with respect to any
matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right, obligation, or
election.
3. ELIGIBILITY AND TYPE OF AWARDS. Awards may be granted only to directors of
the Company who, at the time of such grant, are not employees of the
Company or of any parent or subsidiary corporation of the Company
("Outside Directors"). Options granted to Outside Directors shall be
nonqualified stock options; that is, options that are not treated as
having been granted under section 422(b) of the Code. A person granted an
Option is hereinafter referred to as an "Optionee". A person granted
Restricted Stock is hereinafter referred to as a "Grantee" (and together
with the Optionees, the "Participants"). Notwithstanding anything
contained herein, no Participant may take any action that is prohibited by
the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated
by the Securities and Exchange Commission or any other agency thereunder.
4. SHARES SUBJECT TO AWARDS. Options shall be for the purchase of shares of
authorized but unissued common stock or treasury shares of common stock of
the Company (the "Stock"), subject to adjustment as provided in paragraph
8 below. The maximum number of shares of Stock which may be issued or
granted under the Plan shall be Three Hundred Thousand (300,000) shares.
Should any Option or share of Restricted Stock expire or be canceled prior
to its exercise or vesting in full or should the number of shares of Stock
to be delivered upon the exercise or vesting in full of an Option or share
of Restricted Stock be reduced for any reason, the shares of Stock
theretofore subject to such Option or share of Restricted Stock may be
subject to future Options or shares of Restricted Stock under the Plan.
5. TERMS, CONDITIONS AND FORM OF OPTIONS. Options granted pursuant to the
Plan shall be evidenced by written agreements specifying the number of
shares of Stock covered thereby, in substantially the form attached hereto
as Exhibit A (the "Option Agreement"), which written agreement may
incorporate all or any of the terms of the Plan by reference and shall
comply with and be subject to the following terms and conditions:
a. AUTOMATIC GRANT OF OPTIONS. Subject to execution by an Outside
Director of an appropriate Option Agreement, Options shall be
granted automatically and without further action of the Board, as
follows:
i. Each person who is newly elected or appointed as an Outside
Director on or after the Effective Date shall be granted an
Option on the day of such initial election or appointment to
purchase Fifty Thousand (50,000) shares of Stock.
ii. On the date of each Annual Meeting of Stockholders of the
Company occurring after the Effective Date, each Outside
Director shall be granted an Option to purchase Five Thousand
(5,000) shares of Stock; provided, however, that in the event
an Outside Director was elected or appointed as an Outside
Director and was granted an Option pursuant to the provisions
of subparagraph 5(a)(i) above within six months prior to the
Annual Meeting of Stockholders, that Outside Director shall be
ineligible to receive an Option with respect to such Annual
Meeting of Stockholders.
iii. On the date of the 2007 Annual Meeting of Stockholders, each
Outside Director who served as the Chairperson of any
committee of the Company's Board of Directors for at least six
months during the Company's most recently concluded fiscal
year shall be granted an Option to purchase Five Thousand
(5,000) shares of Stock. In the event an Outside Director
served as the Chairperson for two or more Committees, such
Outside Director shall be granted an option to purchase Five
Thousand (5,000) shares of Stock for each committee for which
the Outside Director served as Chairperson.
iv. Notwithstanding the foregoing, any person may elect not to
receive an Option to be granted pursuant to this paragraph
5(a) by delivering written notice of such election to the
Board no later than the day prior to the date on which such
Option would otherwise be granted. A person so declining an
Option shall receive no payment or other consideration in lieu
of such declined Option. A person who has declined an Option
may revoke such election by delivering written notice of such
revocation to the Board no later than the day prior to the
date on which such Option would be granted pursuant to
paragraph 5(a).
v. Notwithstanding any other provision of the Plan to the
contrary, no Option shall be granted to any individual on a
day when he or she is no longer serving as an Outside Director
of the Company.
b. OPTION EXERCISE PRICE. The exercise price per share of Stock subject
to an Option shall be the fair market value of a share of the Stock
on the close of business on the date of the granting of the Option.
Where there is a public market for the common stock of the Company,
the fair market value per share of Stock shall be the mean of the
bid and asked prices of the common stock of the Company on the date
of the granting of the Option, as reported in the Wall Street
Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation
("Nasdaq") System) or, in the event the common stock of the Company
is listed on the Nasdaq Global Market or a securities exchange, the
fair market value per share of Stock shall be the closing price on
such Global Market or exchange on the date of granting of the
Option, as reported in the Wall Street Journal. If the date of the
granting of an Option does not fall on a day on which the common
stock of the Company is trading on Nasdaq, the Nasdaq Global Market
or securities exchange, the date on which the Option exercise price
shall be established shall be the last day on which the common stock
of the Company was so traded prior to the date of the granting
Option.
c. EXERCISE PERIOD AND EXERCISABILITY OF OPTIONS. An Option granted
pursuant to the Plan shall be exercisable for a term of ten years.
Options granted pursuant to the Plan shall first become exercisable
on the day (the "Initial Vesting Date") which is one year from the
date on which the Option was granted. The Option shall first be
exercisable on and after the Initial Vesting Date and prior to
termination of the Option in an amount equal to the number of Option
Shares multiplied by the Vested Ratio (as hereinafter defined) as
set forth below, less the number of shares previously acquired upon
exercise of any portion of the Option.
The "Vested Ratio" shall mean, on any relevant date, except as otherwise
provided herein, the ratio determined as follows:
Vested Ratio
------------
(i) Prior to Initial Vesting Date: 0
On Initial Vesting Date, 1/3
provided the Optionee's Service has not
terminated prior to such date:
Plus
----
(ii) For each full year
of the Optionee's continuous Service
from the Initial Vesting Date until the
Vested Ratio equals 1/1, an additional: 1/3
For purposes of the Plan, "Service" shall mean the Optionee's service with the
Company, whether in the capacity of an employee, a director or a consultant. The
Optionee's Service shall not be deemed to have terminated merely because of a
change in the capacity in which the Optionee renders Service to the Company,
provided that there is no interruption or termination of the Optionee's Service.
d. TERMINATION OF OPTIONEE. In the event of an Optionee's termination
of Service for any reason other than as a result of death or
disability of the Optionee, in which case all Options that have
become vested will remain exercisable for the earlier of 36 months
or the expiration date of the Options, all Options that have not
become vested and exercisable as of the date of such cessation of
Service shall be forfeited and to the extent that such Options have
become vested and exercisable as of such date, such Options must be
exercised, if at all, within ninety (90) days after the Optionee's
termination of Service, after which time such Options shall
automatically terminate; provided, however, in the event an Optionee
ceases being a director because the Optionee's Service was
terminated for cause, all Options granted hereunder (whether vested
or unvested) shall terminate immediately.
e. PAYMENT OF OPTION EXERCISE. Payment of the exercise price for the
number of shares of Stock being purchased pursuant to any Option
shall be made (i) in cash, by check, or cash equivalent, (ii) by the
assignment of the proceeds of a sale of some or all of the shares
being acquired upon the exercise of an Option (including, without
limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System), (iii) by the delivery to
the Company of shares of Stock which have been owned by the holder
of the Option for more than six months and which have an aggregate
value equal to such exercise price, or (iv) by any combination
thereof. The Company reserves, at any and all times, the right, in
the Company's sole and absolute discretion, to establish, decline to
approve and/or terminate any program and/or procedure for the
exercise of Options by means of an assignment of the proceeds of a
sale of some or all the shares of Stock to be acquired upon such
exercise or the delivery of previously owned shares of Stock.
f. TRANSFER OF CONTROL. Notwithstanding any provision in this Plan, in
the event there IS a Change of Control (as defined below), the
Company shall, at no cost to the Participant, replace any and all
stock options granted by the Company and held by the Participant at
the time of the Change of Control, whether or not vested, with an
equal number of unrestricted and fully vested stock options to
purchase shares of the Company's Common Stock (the "Option
Replacement"). With respect to the Option Replacement, all options
will become fully vested. Alternatively, in the event of a Change of
Control, in lieu of the Option Replacement, a Participant may,
subject to Board approval at the time, elect to surrender the
Participant's rights to such options, and upon such surrender, the
Company shall pay to the Participant an amount in cash per stock
option (whether vested or unvested) then held, which is the
difference between the full exercise price of each option
surrendered and the greater of (i) the average price per share paid
in connection with the acquisition of control of the Company if such
control was acquired by the payment of cash or the then fair market
value of the consideration paid for such shares if such control was
acquired for consideration other than cash, (ii) the price per share
paid in connection with any tender offer for shares of the Company's
Common Stock leading to control, or (iii) the mean between the high
and low selling price of such stock on the Nasdaq Global Market or
other market on which the Company's Common Stock is then traded on
the date of the Change of Control.
For purposes of the Plan, a Change in Control shall be deemed
to have occurred if:
i. An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by
any "Person" (as the term "person" is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of more than fifty
percent (50%) of (1) the then-outstanding shares of common
stock of the Company (or any other securities into which such
shares of common stock are changed or for which such shares of
common stock are exchanged) (the "Shares") or (2) the combined
voting power of the Company's then-outstanding Voting
Securities; provided, however, that in determining whether a
Change in Control has occurred pursuant to this paragraph (i),
the acquisition of Shares or Voting Securities in a
"Non-Control Acquisition" (as hereinafter defined) shall not
constitute a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (a) an employee benefit plan (or
a trust forming a part thereof) maintained by (A) the Company
or (B) any corporation or other Person the majority of the
voting power, voting equity securities or equity interest of
which is owned, directly or indirectly, by the Company (for
purposes of this definition, a "Related Entity"), (b) the
Company or any Related Entity, or (c) any Person in connection
with a "Non-Control Transaction" (as hereinafter defined);
ii. The individuals who, as of the Effective Date, are members of
the board of directors of the Company (the "Incumbent Board"),
cease for any reason to constitute at least a majority of the
members of the board of directors of the Company or, following
a Merger (as hereinafter defined), the board of directors of
(x) the corporation resulting from such Merger (the "Surviving
Corporation"), if fifty percent (50%) or more of the combined
voting power of the then-outstanding voting securities of the
Surviving Corporation is not Beneficially Owned, directly or
indirectly, by another Person (a "Parent Corporation") or (y)
if there is one or more than one Parent Corporation, the
ultimate Parent Corporation; provided, however, that, if the
election, or nomination for election by the Company's common
stockholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director
shall, for purposes of the Plan, be considered a member of the
Incumbent Board; and provided, further, however, that no
individual shall be considered a member of the Incumbent Board
if such individual initially assumed office as a result of an
actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the board of directors of the
Company (a "Proxy Contest"), including by reason of any
agreement intended to avoid or settle any Proxy Contest; or
iii. The consummation of:
1. A merger, consolidation or reorganization (1) with or
into the Company or (2) in which securities of the
Company are issued (a "Merger"), unless such Merger is a
"Non-Control Transaction." A "Non-Control Transaction"
shall mean a Merger in which:
a. the stockholders of the Company immediately before
such Merger own directly or indirectly immediately
following such Merger at least fifty percent (50%)
of the combined voting power of the outstanding
voting securities of (x) the Surviving
Corporation, if there is no Parent Corporation or
(y) if there is one or more than one Parent
Corporation, the ultimate Parent Corporation;
b. the individuals who were members of the Incumbent
Board immediately prior to the execution of the
agreement providing for such Merger constitute at
least a majority of the members of the board of
directors of (x) the Surviving Corporation, if
there is no Parent Corporation, or (y) if there is
one or more than one Parent Corporation, the
ultimate Parent Corporation; and
c. (no Person other than (1) the Company, (2) any
Related Entity, or (3) any employee benefit plan
(or any trust forming a part thereof) that,
immediately prior to the Merger, was maintained by
the Company or any Related Entity, or (4) any
Person who, immediately prior to the Merger had
Beneficial Ownership of twenty percent (20%) or
more of the then outstanding Shares or Voting
Securities, has Beneficial Ownership, directly or
indirectly, of twenty percent (20%) or more of the
combined voting power of the outstanding voting
securities or common stock of (x) the Surviving
Corporation, if fifty percent (50%) or more of the
combined voting power of the then outstanding
voting securities of the Surviving Corporation is
not Beneficially Owned, directly or indirectly by
a Parent Corporation, or (y) if there is one or
more than one Parent Corporation, the ultimate
Parent Corporation;
2. A complete liquidation or dissolution of the Company; or
3. The sale or other disposition of all or substantially
all of the assets of the Company and its subsidiaries
taken as a whole to any Person (other than (x) a
transfer to a Related Entity, (y) a transfer under
conditions that would constitute a Non-Control
Transaction, with the disposition of assets being
regarded as a Merger for this purpose or (z) the
distribution to the Company's stockholders of the stock
of a Related Entity or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then outstanding Shares
or Voting Securities as a result of the acquisition of Shares or Voting
Securities by the Company which, by reducing the number of Shares or
Voting Securities then outstanding, increases the proportional number of
shares Beneficially Owned by the Subject Persons; provided, that if a
Change in Control would occur (but for the operation of this sentence) as
a result of the acquisition of Shares or Voting Securities by the Company
and, after such share acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional Shares or Voting Securities
and such Beneficial Ownership increases the percentage of the then
outstanding Shares or Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.
g. STOCKHOLDER APPROVAL. No Option may be granted pursuant to the Plan
prior to obtaining stockholder approval of the Plan.
h. TRANSFERABILITY OF OPTIONS.
(i) Except as provided in paragraph 5(h)(ii), an Option may be
exercised during the lifetime of the Optionee only by the
Optionee or the Optionee's guardian or legal representative
and may not be assigned or transferred in any manner except by
will or by the laws of descent and distribution.
(ii) Notwithstanding the foregoing, with the consent of the Board,
in its sole discretion, an Optionee may transfer all or a
portion of the Option to: (i) an Immediate Family Member (as
defined below), (ii) a trust for the exclusive benefit of the
Optionee and/or one or more Immediate Family Members, (iii) a
partnership in which the Optionee and/or one or more Immediate
Family Members are the only partners, or (iv) such other
person or entity as the Board may permit (individually, a
"Permitted Transferee"). For purposes of this paragraph
5(h)(ii) "Immediate Family Members" shall mean the Optionee's
spouse, former spouse, children or grandchildren, whether
natural or adopted. As a condition to such transfer, each
Permitted Transferee to whom the Option or any interest
therein is transferred shall agree in writing (in a form
satisfactory to the Company) to be bound by all of the terms
and conditions of the Option Agreement evidencing such Option
and any additional restrictions or conditions as the Company
may require. Following the transfer of an Option, the term
"Optionee" shall refer to the Permitted Transferee, except
that, with respect to any requirements of continued Service or
provision for the Company's tax withholding obligations, such
term shall refer to the original Optionee. The Company shall
have no obligation to notify a Permitted Transferee of any
termination of the transferred Option, including an early
termination resulting from the termination of Service of the
Original Optionee. A Permitted Transferee shall be prohibited
from making a subsequent transfer of a transferred Option
except to the original Optionee or to another permitted
Transferee or as provided in paragraph 5(h)(i).
i. RE-PRICING OF OPTIONS / REPLACEMENT OPTIONS. The Company shall not
re-price any Options or issue any replacement Options unless the
Option re-pricing or Option replacement shall have been approved by
the holders of a majority of the outstanding shares of the Company.
j. DIVIDEND EQUIVALENTS. Simultaneously with the grant of any Option
and under such terms and conditions as the Board deems appropriate
and subject to Section 10 herein, the Board may grant special
dividend equivalent rights ("Dividend Equivalents") which amount
shall be determined by multiplying the number of shares of Stock
subject to an Option by the per-share cash dividend, or the
per-share fair market value (as determined by the Board) of any
dividend in consideration other than cash, paid by the Company on
its Stock on a dividend payment date (other than the regular
quarterly cash dividends of the Company, if any). Unless otherwise
determined by the Board at grant, the Dividend Equivalents (i) shall
have the same vesting schedule, if any, as the Options to which the
Dividend Equivalents relate and (ii) shall be payable upon exercise
of the Options to which the Dividend Equivalents relate. At the
discretion of the Board, Dividend Equivalents shall be credited to
accounts on the Company's records for purposes of the Plan. Dividend
Equivalents may be accrued as a cash obligation, or may be converted
to shares of Stock for the Participant. The Board shall determine
whether any deferred Dividend Equivalents will accrue interest. The
Board may provide that an Optionee may use Dividend Equivalents to
pay the purchase price. Dividend Equivalents may be payable in cash
or shares of Stock or in a combination of the two, as determined by
the Board.
k. TIME FOR GRANTING OPTIONS. All Options shall be granted, if at all,
within three years from the Effective Date.
6. TERMS AND CONDITIONS OF RESTRICTED STOCK: Restricted Stock awarded
pursuant to the Plan shall be evidenced by written agreements specifying
the number of shares of Restricted Stock covered thereby, in substantially
the form attached hereto in Exhibit B (the "Restricted Stock Agreement").
Grants of Restricted Stock shall be subject to the following conditions
and shall contain such additional terms and conditions (including
provisions relating to the acceleration of vesting of Restricted Stock
upon a Change of Control), not inconsistent with the terms of the Plan, as
the Board shall deem desirable:
a AUTOMATIC GRANT OF RESTRICTED STOCK. Subject to execution by an
Outside Director of an appropriate Restricted Stock Agreement,
Restricted Stock shall be granted automatically and without further
action of the Board, as follows:
i. On the date of each Annual Meeting of Stockholders of the
Company occurring after the Effective Date, each Outside
Director shall be granted Five Thousand (5,000) shares of
Restricted Stock; provided, however, that in the event an
Outside Director was elected or appointed as an Outside
Director and was granted an Option pursuant to the provisions
of subparagraph 5(a)(i) above within six months prior to the
Annual Meeting of Stockholders, that Outside Director shall be
ineligible to receive any Restricted Stock with respect to
such Annual Meeting of Stockholders. Such Restricted Stock
shall have the same Vested Ratio as is provided under Section
5(b) hereto.
ii. Notwithstanding any other provision of the Plan to the
contrary, no Restricted Stock shall be granted to any
individual on a day when he or she is no longer serving as an
Outside Director of the Company.
b GRANTEE RIGHTS. A Grantee shall have no rights to an award of
Restricted Stock unless and until Grantee accepts the award within
the period prescribed by the Board. After acceptance and issuance of
a certificate or certificates, as provided for below, the Grantee
shall have the rights of a stockholder with respect to Restricted
Stock subject to the non-transferability and forfeiture restrictions
described in Section 6(e) below.
c ISSUANCE OF CERTIFICATES. The Company shall issue, in the Grantee's
name, a certificate or certificates for the shares of Restricted
Stock associated with the award promptly after the Grantee accepts
such award.
d DELIVERY OF CERTIFICATES. Unless otherwise provided, any certificate
or certificates issued evidencing shares of Restricted Stock shall
not be delivered to the Grantee until such shares are free of any
restrictions specified by the Board at the time of grant.
e FORFEITABILITY, NON-TRANSFERABILITY OF RESTRICTED STOCK. Shares of
Restricted Stock are forfeitable until the terms of the Restricted
Stock grant have been satisfied. Shares of Restricted Stock are not
transferable until the date on which the Board has specified such
restrictions have lapsed. Unless otherwise provided by the Board at
or after grant, distributions in the form of dividends or otherwise
of additional shares or property in respect of shares of Restricted
Stock shall be subject to the same restrictions as such shares of
Restricted Stock.
f TRANSFER OF CONTROL. Upon the occurrence of a Change of Control as
defined in Section 5(f), the Board may accelerate the vesting of
outstanding Restricted Stock, in whole or in part, as determined by
the Board, in its sole discretion.
g TERMINATION OF GRANTEE. In the event the Grantee ceases to be an
Outside Director or otherwise associated with the Company for any
other reason, all shares of Restricted Stock theretofore awarded to
him which are still subject to restrictions shall be forfeited and
the Company shall have the right to complete a blank stock power.
The Board may provide (on or after grant) that restrictions or
forfeiture conditions relating to shares of Restricted Stock will be
waived in whole or in part in the event of termination resulting
from specified causes, and the Board may in other cases waive in
whole or in part restrictions or forfeiture conditions relating to
Restricted Stock.
7. AUTHORITY TO VARY TERMS. The Board shall have the authority from time to
time to vary the terms of the Option and Restricted Stock Agreements
either in connection with the grant of an individual Option or Restricted
Stock or in connection with the authorization of a new standard form or
forms of Awards; provided, however, that the terms and conditions of such
revised or amended standard form or forms of stock option agreement shall
be in accordance with the terms of the Plan. Such authority shall include,
but not be limited to, the authority to grant Options which are
immediately exercisable subject to the Company's right to repurchase any
unvested shares of Stock acquired by the Participant on exercise of an
Option in the event such Participant's service as director of the Company
is terminated for any reason.
8. EFFECT OF CHANGE IN STOCK SUBJECT TO PLAN. Appropriate adjustments shall
be made in the number and class of shares of Stock subject to the Plan,
the number of shares to be granted under the Plan and to any outstanding
Options or shares of Restricted Stock and in the Option exercise price of
any outstanding Options in the event of a stock dividend, stock split,
recapitalization, reverse stock split, combination, reclassification, or
like change in the capital structure of the Company.
9. TERMINATION OR AMENDMENT OF PLAN. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan at any time;
provided, however, that without the approval of the stockholders of the
Company, there shall be no increase in the total number of shares of Stock
covered by the Plan (except by operation of the provisions of paragraph 8
above). In any event, no amendment may adversely affect any then
outstanding Option, or any unexercised portion thereof, without the
consent of the Participant. It is the intention of the Board that the Plan
comply strictly with the provisions of Section 409A of the Code and
Treasury Regulations and other Internal Revenue Service guidance
promulgated thereunder (the "Section 409A Rules") and the Board shall
exercise its discretion in granting awards hereunder (and the terms of
such awards), accordingly. The Plan and any grant of an award hereunder
may be amended from time to time (without, in the case of an award, the
consent of the Participant) as may be necessary or appropriate to comply
with the Section 409A Rules.
10. TAXES.
a. The Company may make such provisions as it may deem appropriate,
consistent with applicable law, in connection with any Options or
Restricted Stock granted under the Plan with respect to the
withholding of any taxes (including income or employment taxes) or
any other tax matters.
b. If any Grantee, in connection with the acquisition of Restricted
Stock, makes the election permitted under Section 83(b) of the Code
(that is, an election to include in gross income in the year of
transfer the amounts specified in Section 83(b)), such Grantee shall
notify the Company of the election with the Internal Revenue Service
pursuant to regulations issued under the authority of Code Section
83(b).
11. GOVERNMENT REGULATIONS. The Plan, and the grant and exercise of Options or
Restricted Stock hereunder, and the obligation of the Company to sell and
deliver shares under such Options and Restricted Stock shall be subject to
all applicable laws, rules and regulations, and to such approvals by any
governmental agencies, national securities exchanges and interdealer
quotation systems as may be required.
12. GENERAL PROVISIONS.
a. CERTIFICATES. All certificates for shares of Stock delivered under
the Plan shall be subject to such stop transfer orders and other
restrictions as the Board may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange
Commission, or other securities commission having jurisdiction, any
applicable Federal or state securities law, any stock exchange or
interdealer quotation system upon which the Stock is then listed or
traded and the Board may cause a legend or legends to be placed on
any such certificates to make appropriate reference to such
restrictions.
b. EMPLOYMENT MATTERS. Neither the adoption of the Plan nor any grant
or award under the Plan shall confer upon any Participant who is a
director, continued service as a director, with the Company or a
Subsidiary, as the case may be, nor shall it interfere in any way
with the right of the Company or any Subsidiary to terminate the
service of any of its directors at any time.
c. LIMITATION OF LIABILITY. No member of the Board, or any officer or
employee of the Company acting on behalf of the Board, shall be
personally liable for any action, determination or interpretation
taken or made in good faith with respect to the Plan, and all
members of the Board and each and any officer or employee of the
Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of
any such action, determination or interpretation.
d. REGISTRATION OF STOCK. Notwithstanding any other provision in the
Plan, no Option may be exercised unless and until the Stock to be
issued upon the exercise thereof has been registered under the
Securities Act of 1933, as amended, and applicable state securities
laws, or are, in the opinion of counsel to the Company, exempt from
such registration in the United States. The Company shall not be
under any obligation to register under applicable federal or state
securities laws any Stock to be issued upon the exercise of an
Option granted hereunder in order to permit the exercise of an
Option and the issuance and sale of the Stock subject to such
Option, although the Company may in its sole discretion register
such Stock at such time as the Company shall determine. If the
Company chooses to comply with such an exemption from registration,
the Stock issued under the Plan may, at the direction of the
Committee, bear an appropriate restrictive legend restricting the
transfer or pledge of the Stock represented thereby, and the Board
may also give appropriate stop transfer instructions with respect to
such Stock to the Company's transfer agent.
13. GOVERNING LAW. The validity, construction, and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in
accordance with the internal laws of the State of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal law.
