CROMPTON & KNOWLES CORPORATION
1993 Stock Option Plan for Non - Employee Directors
1. Purpose
The purpose of this 1993 Stock Option Plan for Non - Employee Directors
(the "Plan") of Crompton & Knowles Corporation (the "Company") is to attract
and retain highly qualified non-employee directors of the Company and to
encourage non-employee directors to own shares of the Company's Common Stock,
$.10 par value ("Common Stock").
2. Participation
All directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
3. Administration
(a) Grants. Grants of stock options under the Plan shall be automatic as
provided in Section 6.
(b) Committee. A committee (the "Committee"), which shall be the
Committee on Executive Compensation of the Board or such other committee
composed of three or more directors or other persons appointed for such
purpose by the Board, shall administer the Plan. If at any time no committee
designated to administer the Plan shall be in office, the functions of the
Committee shall be exercised by the Board.
(c) Rules; Committee Action. The Committee shall have the authority to
adopt, alter and repeal such administrative rules, guidelines, and practices
governing the Plan as it shall from time to time deem advisable and to
interpret the terms and provisions of the Plan and any award issued under the
Plan (and any agreement relating thereto). The Committee may act only by a
majority of its members then in office, except that the members thereof may
authorize any one or more of their number or any officer of the Company to
execute and deliver documents on behalf of the Committee.
4. Stock Available for Options
(a) Shares Available. Subject to adjustment under subsection (b),
options may be granted under the Plan in respect of a maximum of 100,000
shares of Common Stock. Shares subject to an option that expires or
terminates unexercised shall again be available for options hereunder to the
extent of such expiration or termination. Shares issued under the Plan may
consist in whole or in part of authorized but unissued shares or treasury
shares.
(b) Adjustment. In the event of any stock dividend, extraordinary cash
dividend, creation of a class of equity securities, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination,
exchange of shares, issuance of warrants or activation of rights to purchase
Common Stock at a price substantially below fair market value, or similar
change affecting the Common Stock, such adjustment shall be made in the
maximum number and kind of shares subject to the Plan, in the number and kind
of shares subject to outstanding options and subsequent options grants, and in
the purchase price of outstanding options as the Board shall deem to be
appropriate under the circumstances to prevent substantial dilution or
enlargement of the rights granted to participants hereunder.
5. Nonstatutory Stock Options
All options granted under the Plan shall be nonstatutory options not
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
6. Terms and Conditions of Options
Each option granted under the Plan shall be evidenced by a written
instrument in such form as the Committee may approve and shall be subject to
the following terms and conditions:
(a) Grant of Options. As used in the Plan, the term "Grant Date" means
the date of the first regular meeting of the Board in the fourth quarter of
each calendar year. Each year, an option shall be granted automatically to
each eligible director on the Grant Date to purchase that number of full
shares of Common Stock determined by dividing the amount of the annual
retainer then payable to directors for service on the Board by the Fair Market
Value (as hereinafter defined) of the Common Stock on the Grant Date.
(b) Purchase Price. The purchase price for Common Stock subject to an
option shall be 100% of the Fair Market Value of the Common Stock on the Grant
Date.
(c) Fair Market Value. As used in the Plan, the term "Fair Market Value"
means the mean, as of any given date, between the highest and lowest reported
sales prices of the Common Stock on the New York Stock Exchange Composite
Index on such date (or, if there is no reported sale on such date, on the last
preceding date on which any reported sale occurred).
(d) Expiration Date of Options. The expiration date of each option shall
be fixed by the Committee, but no option granted under the Plan shall be
exercisable more than ten years after the Grant Date.
(e) Exercisability of Options. Options shall be exercisable in whole or
in part with respect to 50% of the shares covered thereby on or after the
first anniversary of the Grant Date and as to the remaining 50% of such shares
on or after the second anniversary of the Grant Date.
(f) Termination of Service. In the event service on the Board by the
holder of any option terminates for any reason other than disability, death,
or Change in Control (as hereinafter defined), the then outstanding options of
such holder may thereafter be exercised, to the extent exercisable at the time
of such termination, for a period of one year from the date of such
termination but in no event after the stated expiration date of each option.
(g) Disability or Death; Change in Control. In the event service on the
Board by the holder of any option terminates by reason of disability, death,
or Change in Control, the then outstanding options of such holder will become
immediately exercisable, to the extent not otherwise exercisable, and will
expire one year after such termination. Such options may be exercised during
such one-year period regardless of their stated expiration dates. The rights
of the option holder may be exercised by the holder's guardian or legal
representative in the case of disability and by the beneficiary designated by
the holder in writing delivered to the Company or, if none has been
designated, the holder's estate in the case of death.
(h) Exercise and Payment. Options may be exercised only by written
notice to the Secretary of the Company accompanied by payment of the full
purchase price for the shares as to which they are exercised. The purchase
price may be paid in cash, in shares of Common Stock already owned for at
least six months by the optionee (or other person entitled to exercise the
option), or partly in cash and partly in such shares of Common Stock. The
value of shares delivered in payment of the purchase price shall be their Fair
Market Value, as determined above, as of the date of exercise. Upon receipt
of such notice and payment, the Company shall promptly issue and deliver to
the optionee (or other person entitled to exercise the option) a certificate
or certificates for the number of shares as to which the exercise is made.
(i) Change in Control. As used herein, a "Change in Control" means a
change in control of the Company of a nature that would be required to be
reported in response to Item 1(a) of the Current Report on Form 8-K, as in
effect on the effective date of the Plan, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"); provided that,
without limitation, such a "Change in Control" shall be deemed to have
occurred if:
(i) A third person, including a "group" as such term is used in
Section 13(d)(3) of the Exchange Act, other than the trustee of a Company
employee benefit plan, becomes the beneficial owner, directly or indirectly,
of 20 percent or more of the combined voting power of the Company's
outstanding voting securities ordinarily having the right to vote for the
election of directors of the Company;
(ii) During any period of 24 consecutive months individuals who, at
the beginning of such consecutive 24-month period, constitute the Board of
Directors of the Company (the "Board" generally and as of the effective date
of the Plan the "Incumbent Board") cease for any reason (other than retirement
upon reaching normal retirement age, disability, or death) to constitute at
least a majority of the Board; provided that any person becoming a director
subsequent to the effective date of the Plan whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; or
(iii) The Company shall cease to be a publicly owned corporation
having its outstanding stock listed on the New York Stock Exchange or quoted
in the NASDAQ National Market System.
7. Options not Transferable
Options granted under the Plan shall not be transferable by the holder other
than by will or 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 ("ERISA") or the rules thereunder.
8. Limitation of Rights
Neither the Plan nor the granting of any option hereunder shall constitute
an agreement or understanding that the Company will retain a director for any
period of time or at any particular rate of compensation. The holder of an
option shall have no rights as a shareholder with respect to shares as to
which the option has not been exercised and payment made hereunder.
9. Purchase for Investment
Unless the options and shares of Common Stock covered by the Plan have been
registered under the Securities Act of 1933, as amended, or the Company has
determined that such registration is unnecessary, each holder exercising an
option may be required by the Company to represent in writing that such holder
is acquiring the shares subject to the option for his own account for
investment and not with a view to, or for sale in connection with, the
distribution of any part thereof.
10. Compliance with Regulations
It is the intention of the Company that the Plan comply in all respects with
Rule 16b-3 promulgated under Section 16(b) of the Exchange Act and that
eligible directors remain disinterested persons for purposes of administering
other employee benefit plans of the Company and having such other plans be
exempt from Section 16(b) of the Exchange Act. Therefore, if any Plan
provision or Committee rule is later found not to be in compliance with Rule
16b-3 or if any Plan provision or Committee rule would disqualify eligible
directors from remaining disinterested persons, that provision or rule shall
be deemed null and void, and in all events the Plan shall be construed in
favor of its meeting the requirements of Rule 16b-3.
11. Effective Date of the Plan
The Plan shall be effective as of the date it is adopted by the Board.
Options granted under the Plan may not be exercised prior to the time the Plan
shall have been approved by the holders of a majority of the outstanding
Common Stock present or represented and entitled to vote at a meeting of
shareholders of the Company. If such approval of the Plan by the shareholders
is not obtained within one year of the adoption of the Plan by the Board, the
Plan and any options granted pursuant to the Plan shall be null and void.
12. Amendment of the Plan
The Board may amend, suspend, or terminate the Plan or any portion thereof
at any time, provided that no amendment affecting the amount of Common Stock
subject to options granted under the Plan, the exercise price of options, or
the timing of grants may be made more than once every six months, other than
to comport with changes in the Code, ERISA, or the rules thereunder.
13. Governing Law
The Plan shall be governed by and interpreted in accordance with the laws of
the Commonwealth of Massachusetts.
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