EXHIBIT "1"
EASTCO INDUSTRIAL SAFETY CORP.
1996 INCENTIVE STOCK OPTION PLAN
1. Purpose. The purpose of the Plan is to provide additional
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incentive for such Key Employees of the Company, its Subsidiaries
and divisions, as may be designated for participation in the Plan by
granting stock incentive options and thereby encouraging such Key Employees
to invest in such shares, thereby furthering their identity of interest
with the Company's shareholders, giving them a greater personal interest and
increasing their interest in and commitment to the future growth and
prosperity of the Company.
2. Definitions. Unless otherwise required by the context, the
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following terms, when used in the Plan, shall have the meanings set forth
in this section 2. In addition to the definitions provided in this section 2,
certain words and phrases used in the Plan may be defined elsewhere in the Plan.
Act: The Securities Exchange Act of 1934, as amended.
Board of Directors or Board: The Board of Directors of the Company.
Change of Control: Any merger or consolidation of the Company, any
tender offer, exchange offer or other purchase of any outstanding
securities of the Company, or any sale of assets of the Company, if,
as a result of such event, the members of the Company's Board of
Directors prior to such event shall thereafter constitute less than
a majority of the Board of Directors of the
Company (or of the surviving or resulting corporation, as the
case may be).
Committee: (i) The Stock Option Committee of the Board of
Directors, which shall consist of not less than two (2) directors
of the Company; or (ii) such other entity as authorized under Rule
16b-3 promulgated under the Act, as the same may be amended or
supplemented from time to time. The members of the Committee shall
be "disinterested" persons within the meaning of Rule 16b-3
promulgated under the Act, as the same may be amended or
supplemented from time to time. No member of the Committee shall
be eligible to receive Incentive Stock Options unless permitted by
such Rule 16b-3.
Common Stock: The Common Stock of the Company, par value $0.12 per
share, or such other class of shares or other securities as may be
applicable pursuant to the provisions of section 6.
Company: Eastco Industrial Safety Corp. or such amended name as
utilized by the Company.
Fair Market Value: As applied to any date, the last price of the
Common Stock reported by NASDAQ, or if not applicable, by the
National Quotation Bureau or such stock exchange as said common stock
may be listed on.
Incentive Stock Option: A stock option that satisfies the
requirements of section 422 of the Internal Revenue Code.
Internal Revenue Code: The Internal Revenue Code of 1986, as
amended, and include the regulations promulgated pursuant thereto.
Key Employee: An employee of the Company or of a Subsidiary,
including an officer or director who is an employee, who in the
opinion of the Committee can contribute significantly to the growth
and successful operations of the Company or a Subsidiary. The grant
or recommendation of the grant of an Incentive Stock Option to an
employee by the Committee shall be deemed a determination by the
Committee that such employee is a Key Employee.
Plan: The Incentive Stock Option Plan herein set forth as the
same may from time to time be amended.
Restricted Shares: Shares of Common Stock issued or transferred
subject to restrictions as authorized by paragraph (c) of Section 9
of the Plan.
Subsidiary: A corporation or other form of business association of
which shares (or other ownership interests) having 50% or more of
the voting power are owned or controlled, directly or indirectly,
by the Company.
3. Administration of Plan.
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(a) Committee. The Plan shall be administered by the Committee,
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which shall consist of (i) not less than two (2) directors of the Company; or
(ii) such other members as authorized under Rule 16b-3 of the Act.
The members of the Committee shall be appointed by and shall serve at
the pleasure of the Board, which may from time to time change the Committee's
membership.
(b) Authority. The Committee shall have the sole and complete
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authority to:
(i) determine the individuals to whom Incentive Stock Options
are granted, the amounts of Incentive Stock Options to be
granted and the time of all such grants;
(ii) determine the terms, conditions and provisions of, and
restrictions relating to, each Incentive Stock Option granted;
(iii)interpret and construe the Plan and all Agreements;
(iv) prescribe, amend and rescind rules and regulations relating to
the Plan;
(v) determine the content and form of all Agreements;
(vi) determine all questions relating to Incentive Stock Options
under the Plan;
(vii)maintain accounts, records and ledgers relating to Incentive
Stock Options;
(viii)maintain records concerning its decisions and proceedings;
(ix) employ agents, attorneys, accountants or other persons for
such purposes as the Committee considers necessary or desir-
able;
(x) do and perform all acts which it may deem necessary or
appropriate for the administration of the Plan and to carry
out the objectives of the Plan.
(c) Determinations. All determinations, interpretations, or other
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actions made or taken by the Committee pursuant to the provisions of the Plan
shall be final, binding and conclusive for all purposes and upon all persons.
(d) Delegation. Except as required by Rule 16b-3 promulgated under
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the Act (and any successor to such rule) with respect to the grant of Incentive
Stock Options to Key Employees who are subject to Section 16 of the Act, the
Committee may delegate to appropriate senior officers of the Company its duties
under the Plan pursuant to such conditions and limitations as the Committee may
establish.
4. Grants of Incentive Stock Options.
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Subject to the provisions of the Plan, the Committee may at any
time, or from time to time, grant Incentive Stock Options under this Plan to,
and only to, Key Employees.
5. Stock Subject to the Incentive Stock Options.
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(a) Subject to the provisions of paragraph (c) of this section
5 and of Section 7, the aggregate number of shares of Common Stock which
may be issued or transferred pursuant to Incentive Stock Options granted under
the Plan shall not exceed 300,000.
(b) Authorized but unissued shares of Common Stock and shares of
Common Stock held in the treasury, whether acquired by the Company
specifically for use under the Plan or otherwise, may be used, as the
Committee may from time to time determine, for purposes of the Plan, provided,
however, that any previously issued shares acquired or held by the Company for
the purposes of the Plan shall, unless and until transferred to a Key Employee
in accordance with the Plan, be and at all times remain treasury shares of
the Company, irrespective of whether such shares are entered in a special
account for purposes of the Plan, and shall be available for any corporate
purposes and subject to the claims of creditors of the Company.
(c) If any shares of Common Stock subject to an Incentive Stock
Option shall not be issued or transferred and shall cease to be issuable or
transferable for any reason or if Any such shares shall, after issuance
or transfer, be reacquired or repurchased by the Company or Subsidiary, the
shares not so issued or transferred or the shares so reacquired or
repurchased by the Company or a Subsidiary may again be made subject to
Incentive Stock Options.
6. Provisions of Incentive Stock Options.
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(a) All Incentive Stock Options shall be subject to the following
provisions:
(1) The purchase price per share shall be determined by the
Committee from time to time and shall in no event be less than
100% of the Fair Market Value of such share on the date of
grant.
(2) Subject to the provisions of paragraphs (a)(5) and (a)(7)
of this section 6, an Option granted under the Plan may not be
exercised unless, at the time of such exercise, the optionee
shall be in the employ of the Company and shall have completed
at least twelve months of continuous employment with the
Company from the date of the grant of his Option. However,
in the event there is a Change in Control, an Option granted
under the Plan shall become immediately vested and
exercisable.
(3) Each Option shall expire at such time as the Committee may
determine, at the time the Option shall be granted, but not
later than ten years from the date such Option shall have
been granted.
(4) Any Option granted under the Plan may be exercised
solely by the person to whom granted (or by his
guardian or legal representative), except as provided in
paragraph (a)(7) of this section 6 in the case of such
person's death.
(5) Absence on leave, approved by an officer of the Company
or a Subsidiary authorized to give such approval, shall not
be considered an interruption or termination of employment
for any purpose of the Plan, or Options granted thereunder,
except that no Option may be granted to an employee while he
is absent on leave.
(6) An Option may be exercised, in whole or in part, at any time
or from time to time during the balance of the term of the
Option, except as limited by provisions contained in the
Option.
(7) The Option shall terminate if and when the optionee shall
cease to be an employee of the Company and its Subsidiaries,
except as follows:
(i) If the optionee shall die while in the employ of the
Company or of a Subsidiary, the Option shall be
exercisable, as and to the extent exercisable by such
person or persons as shall have acquired the optionee's
rights under the Option by will or the law of descent and
distribution, but not later than one year after the date
of death and not after the expiration of the specific
period fixed in the Option grant.
(ii) If an optionee shall become disabled (within the meaning
of section 105(d)(4) of the Internal Revenue Code) while
in the employ of the Company or of a Subsidiary and such
optionee's employment shall terminate by reason of such
disability the Option shall be exercisable, as and to
the extent exercisable at the time of the termination
of his employment, within such period as shall be set
forth in the Option grant, but only within one year
after the termination of the optionee's employment and
not after the expiration of the specific period fixed in
the Option grant as in effect at the time of the
termination of his employment.
(8) Shares purchased upon exercise of an Option shall be paid for
in full by cash, in the equivalent amount of the Company's
Common Stock or through a "Cashless Exercise". If a
Participant elects to utilize a Cashless
Exercise, he shall be entitled to a credit equal to the
amount of that equity by which the current Fair Market Value
exceeds the option price on that number of options
surrendered and to utilize that credit to exercise additional
options held by him that such equity could purchase. There
shall be canceled that number of options utilized for the
credit and for the options exercised for such credit. For
example, if the Participant has options to acquire 20,000
shares which are exercisable, the Fair Market Value is
$2.00 per share, the exercise price is $1.25 per share, and
the participant elects to utilize for a credit 10,000
options ($7,500), then upon a Cashless exercise in connection
therewith he shall be entitled to acquire 6,000 shares of
Common Stock in exchange for the options for 10,000 shares for
which a credit has been received and options for 6,000 shares
have been exercised. The Participant will still have
exercisable options to acquire 4,000 shares of Common Stock.
(9) The Option agreements or Option grants authorized by the Plan
may contain such other provisions as the Committee shall deem
advisable provided they do not violate the provisions of
Section 422 of the Internal Revenue Code.
(10) The aggregate Fair Market Value (determined as of the time
of grant) of stock for which Incentive Stock Options are
exercisable for the first time during any calendar year by
an optionee is to be limited to $100,000, but the value may
exceed $100,000 for which options may be granted to an
optionee.
(11) In the event that any Incentive Stock Option is granted under
the Plan to any individual who, at the time such Incentive
Stock Option is granted, owns stock possessing more than ten
percent of the total combined voting power of all classes of
stock of the Company or of any Subsidiary, the purchase price
per share under such Incentive Stock Option shall be at least
110% of the fair market value of such share at the time such
Incentive Stock Option is granted and such Incentive Stock
Option shall not be exercisable after the expiration of five
years from the date it is granted.
(12) Upon exercise of the Incentive Stock Option,no disposition of
such Common Stock shall be made within two (2) years from the
date of the granting of the Option nor within one (1) year
after the transfer of the Common Stock to him.
7. Adjustment Provisions. In the event that any recapitalization, or
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reclassification, split-up or consolidation of shares of Common Stock shall be
affected, or the outstanding shares of Common Stock are, in connection with a
merger or consolidation of the Company or a sale by the Company of all or a
part of its assets, exchanged for a different number or class of shares of
stock or other securities of any other corporation, or new, different or
additional shares or other securities of the Company or of another corporation
are received by the holder of Common Stock or any distribution is made to the
holders of Common Stock other than a cash dividend, (a) the number and class of
shares or other securities that may be issued or transferred and (b) the option
price shall in each case be equitably adjusted as the Committee may, in the
reasonable exercise of its discretion, determine. In no event may any change
be made under this section 7 in any Incentive Stock Option which would
constitute a "modification" within the meaning of Section 425(h)(3) of the
Internal Revenue Code.
8. Term. The Plan shall be deemed adopted and shall become effective upon:
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(i) approval and adoption by the shareholders at a Special Meeting of
Shareholders of the Company to be held on August 12, 1996 (the "Special
Meeting") of a one-for-ten reverse stock split of the Company's Common
Stock (the"Reverse Split"); (ii) completion of the Reverse Split; and
(iii) shareholder approval and adoption of the Plan at the Special Meeting.
No Stock Incentives shall be granted under the Plan on or after May 12, 2006.
9. General Provisions.
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(a) The Committee may from time to time adopt such rules and
regulations, not inconsistent with the provisions of the Plan, as it deems
necessary to determine eligibility to participate in the Plan and for the proper
administration of the Plan, and may amend or revoke any rule or regulation so
established. The Committee may make such determinations and interpretations
under or in connection with the Plan as it deems necessary or advisable. All
such rules, regulations, determinations and interpretations shall be binding
and conclusive upon the Company, its Subsidiaries, its shareholders and all
employees and upon their respective legal representatives, beneficiaries,
successors and assigns and upon all other persons claiming under or through
any of them.
(b) Any action required or permitted to be taken by the Committee
under the Plan shall require the affirmative vote of a majority of all the
members of the Committee.
(c) With respect to any shares of Common Stock issued or transferred
under the provision of the Plan, such shares may be issued or transferred
subject to such conditions, in addition to those specifically provided in the
Plan, as the Committee may direct and, without limiting the generality of
the foregoing, provision may be made in that shares issued or transferred
upon their grant or exercise shall be Restricted Shares subject to
forfeiture upon failure to comply with conditions and restrictions imposed in
the grant of such Stock Incentives.
(d) Nothing in the Plan nor in any instrument executed pursuant
thereto shall confer upon any employee any right to continue in the employ of
the Company or a Subsidiary or shall affect the right of the Company or of
a Subsidiary to terminate the employment of any employee with or without cause.
(e) No shares of Common Stock shall be sold, issued or transferred
pursuant to an Incentive Stock Option unless and until there has been
compliance, in the opinion of counsel to the Company, with all legal
requirements, applicable to the sale, issuance or transfer of such shares.
In connection with any such sale, issuance or transfer, the person acquiring
the shares shall, if requested by the Company, give assurances satisfactory to
counsel to the Company that the shares are being acquired for investment and
not with a view to resale or distribution thereof and assurances in respect of
such other matters as the Company or a Subsidiary may deem desirable to assure
compliance with all applicable legal requirements.
(f) No employee (individually or as a member of a group), and no
beneficiary or other person claiming under or through him, shall have any right,
title or interest in or to any shares of Common Stock allocated or reserved
for the purposes of the Plan except as to such shares of Common Stock, if any,
as shall have been issued or transferred to him.
(g) No Incentive Stock Option shall be assignable or subject to any
encumbrance, pledge or charge of any nature, shall be subject to execution,
attachment or similar process, or shall be transferable other than by will
or the laws of descent and distribution, and every Stock Incentive Option
and all rights under the Plan shall be exercisable during the employee's
lifetime only by him or his guardian or legal representative.
10. Amendment or Discontinuance of Plan.
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(a) The Plan may be amended by the Committee at any time, provided
that, without the approval of the shareholders of the Company, no amendment
shall be made which (i) increases the aggregate number of shares of Common
Stock that may be issued or transferred pursuant to Stock Incentive Options
as provided in paragraph (a) of Section 5, (ii) materially increases the
benefits accruing to participants under the Plan, (iii) materially modifies
the requirements as to eligibility for participation in the Plan, (iv) amends
Section 8 to extend the term of the Plan, (v) amends this section 10 or which
would otherwise invalidate this Plan under Section 422 of the Internal Revenue
Code.
(b) The Committee may, by resolution adopted by a majority of the
entire Committee, discontinue the Plan.
(c) No amendment or discontinuance of the Plan by the Committee or
the shareholders of the Company shall adversely affect, except with the consent
of the holder, any Incentive Stock Option theretofore granted.
11. Compliance with Section 422 of the Internal Revenue Code.
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This Plan is intended to comply with the provisions of Section 422 of
the Internal Revenue Code and to the extent inconsistent or non-complying, the
provisions of said section shall be deemed applicable to this Plan.
12. No Guarantee of Employment by Participation.
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Nothing in the Plan shall interfere with or limit in any way the
right of the Company to terminate any employee's employment at any time,
nor confer upon any employee any right to continue in the employment of
the Company.