INCENTIVE STOCK OPTION PLAN OF 1988
OF
WELKIN ASSOCIATES, LTD.
THIS IS THE INCENTIVE STOCK OPTION PLAN OF 1988 ("the Plan") of Welkin
Associates, Ltd. ("the Corporation"), under which options may be granted
from time to time to eligible employees of the Corporation or any of its
subsidiary corporations ("the Subsidiaries") to purchase shares of the
Corporation, subject to the limitations, provisions and requirements
hereinafter stated. The Plan is as follows:
1. PURPOSE
The general purpose of the Plan is to aid in developing and retaining
key employees capable of assuring the future success of the Corporation.
The Plan is designed to aid the Corporation in attracting and retaining the
services of key employees by offering such personnel additional incentives
to put forth maximum efforts for the success of the business, to afford
them opportunities to obtain or increase a proprietary interest in the
Corporation on a favorable basis, and thereby to have an opportunity to
share in its success.
2. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the
Corporation.
The interpretation and construction by the Board of any provisions of
the Plan or of any option granted under it shall be final. No member of
the Board of Directors shall be liable for any action or determination made
in good faith with respect to the Plan or any option granted under it.
3. ELIGIBILITY
The persons who shall be eligible to receive options shall be such key
employees (including officers, whether or not they are directors) of the
Corporation or its Subsidiaries (as such term is defined in Section 425 of
the Internal Revenue Code of 1954) existing from time to time as the Board
shall select from time to time. An optionee may hold more than one option,
but only on the terms and subject to the restrictions hereafter set forth.
No option shall be granted hereunder to any employee if, at the time
of the grant, such employee owns stock representing more than ten (10)
percent of the total combined voting power of all classes of stock of the
Corporation, its parent or Subsidiaries. This stock ownership limitation
will not apply if the option price is at least 110 percent of the fair
market value (at the time the option is granted) of the stock subject to
the option, and the option by its terms is not exercisable more than five
(5) years from the date it is granted.
4. STOCK
The stock subject to the options shall be shares of the Corporations's
authorized but unissued or reacquired $1.00 par value common stock,
hereafter sometimes called Capital Stock. The aggregate number of shares
which may be issued under such options shall not exceed 17,500. This
number shall be appropriately adjusted if the number of the Corporation's
issued shares shall be increased or reduced by change in par value,
combination, split-up, reclassification, distribution of dividend payable
in stock, or the like.
In the event that any outstanding option under the Plan for any reason
expires or is terminated, the shares of such option may again be subjected
to an option under the Plan.
5. TERMS AND CONDITIONS OF OPTIONS
Incentive Stock Options granted pursuant to the Plan by the Board
shall be evidenced by agreements in such form as the Board shall from time
to time approve, which agreements shall comply with and be subject to the
following terms and conditions:
(a) NUMBER OF SHARES
Each option shall state the number of shares to which it
pertains.
(b) OPTION PRICE
Each option shall state the option price, which shall be not less
than 100% of the fair market value of the shares of Capital Stock of
the Corporation on the date of the granting of the option, as
determined by the Board at the time of the grant in accordance with
applicable provisions of the Internal Revenue Code and Treasury
Department rulings and regulations thereunder.
(c) MEDIUM AND TIME OF PAYMENT
The option price shall be payable in United States dollars upon
the exercise of the option and may be paid by Cashier's, Certified or
other check.
(d) APPLICABILITY OF THE STOCK REPURCHASE AGREEMENT OF JUNE 10, 1988
As a condition of exercising an option granted under the Plan,
the optionee must understand and agree to execute and be bound by the
terms of the Welkin Associates, Ltd., Stock Repurchase Agreement dated
June 10, 1988, which provides that any Stockholder leaving the
Corporation or otherwise needing to dispose of his shares must offer
those shares for sale to the Corporation or other Stockholders.
Legends restricting the sale, transfer, pledge or hypothecation of the
stock will be affixed to each certificate representing stock acquired
through exercise of an option granted under this Plan.
(e) TERM AND EXERCISE OF OPTIONS
No option shall be exercised prior to the expiration of twelve
months from the date of granting thereof. Subject to the right of
cumulation provided in the last sentence of this Article 5(e), each
option shall be exercisable as to not more than twenty-five percent
(25%) of the total number of shares covered thereby during each
consecutive twelve-month period commencing on a date twelve months
after the granting of the option until all shares covered by the
option shall have been purchased. No option shall be exercisable
after the expiration of ten years from the date it is granted. (For
rules applicable to ten-percent shareholders, see Article 3 hereof.)
Not less than one hundred shares may be purchased at any one time
unless the number purchased is the total number at the time
purchasable under the option. During the life-time of the optionee,
the option shall be exercisable only by him and shall not be
assignable or transferable by him, and no other person shall acquire
any rights therein. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, in any subsequent
period but not later than ten years from the date the option is
granted.
(f) PRIOR OUTSTANDING OPTION
No option (for purposes of this Article 5(f) called New Option)
shall be exercisable while there is outstanding any Incentive Stock
Option (as defined in Section 422A of the Internal Revenue Code),
granted under this or any other Plan before the granting of the New
Option, to the person to whom the New Option is granted, to purchase
stock in the Corporation or in a corporation which, at the time the
New Option is granted, is a parent or subsidiary corporation (as those
terms are defined in Section 425 of the Internal Revenue Code of 1954)
of the Corporation, or is a predecessor corporation of the
Corporation, or of such parent or subsidiary corporation.
(g) MAXIMUM AMOUNT OF OPTIONS THAT MAY BE GRANTED
The aggregate fair market value (determined as of the time the
option is granted) of the stock for which any employee may be granted
options in any calendar year (under all Incentive Stock Option plans,
as described in Section 422A of the Internal Revenue Code of 1954, of
the Corporation, its parent or Subsidiaries) shall not exceed one
hundred thousand dollars plus any unused limit carryover to that year,
as defined in Article 5(h) hereof.
(h) CARRYOVER OF UNUSED LIMIT
If one hundred thousand dollars exceeds the aggregate fair market
value (determined as of the time the option is granted) of the stock
for which an employee was granted options in any calendar year (under
all Incentive Stock Option plans, as described in Section 422A of the
Internal Revenue Code of 1954, of his employer corporation and its
parent and subsidiary corporations), one-half of such excess shall be
unused limit carryover to each of the three succeeding calendar years.
The amount of the unused limit carryover from any calendar year which
may be taken into account in any succeeding calendar year shall be the
amount of such carryover reduced by the amount of such carryover which
was used in prior calendar years. For purposes of the previous
sentence the amount of options granted during any calendar year shall
be treated as first using up the $100,000 limitation of Article 5(g)
hereof, and then shall be treated as using up unused limit carryovers
to such year in the order of the calendar years in which the
carryovers arose.
(i) TERMINATION OF EMPLOYMENT EXCEPT DEATH
In the event that an optionee shall cease to be employed by the
Corporation or Subsidiaries for any reason other than his death and
shall be no longer in the employ of any of them, no option shall be
exercisable by such optionee. Whether authorized leave of absence or
absence for military or governmental service shall constitute
termination of employment, for purposes of the Plan, shall be
determined by the Board, which determination shall be final and
conclusive.
(j) DEATH OF OPTIONEE AND TRANSFER OF OPTION
If the optionee shall die while in the employ of the Corporation
or a Subsidiary and shall not have fully exercised the option, the
option may be exercised, subject to the condition that no option shall
be exercisable after the expiration of ten years from the date it is
granted, to the extent that the optionee's right to exercise such
option had accrued pursuant to Article 5(e) of the Plan at the time of
his death and had not been previously exercised, at any time prior to
one year after the date of the optionee's death, which date shall not
in any event be later than ten years from the date the option is
granted, by the executors or administrators of the optionee's estate
or by any person or persons who shall have acquired the option
directly from the optionee by bequest or inheritance.
No option shall be transferable by the optionee otherwise than by
will or the laws of descent and distribution.
As a condition of exercising such option, the executor,
administrator, or inheritor must understand and agree to execute and
be bound by the terms of the Welkin Associates, Ltd., Stock Repurchase
Agreement dated June 10, 1988, which, among other things, specifically
provides that the estate of such deceased optionee must offer shares
of stock purchased pursuant to this Article 5(j) for sale to the
Corporation or other Stockholders within 210 days of exercise of the
option. Legends restricting the sale, transfer, pledge or
hypothecation of the stock will be affixed to each certificate
representing stock acquired through exercise of such option.
(k) RECAPITALIZATION, MERGER, LIQUIDATION, ETC.
Subject to any required action by the Stockholders, the number of
shares of Capital Stock covered by each outstanding option and the
price per share thereof in each such option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares
of Capital Stock of the Corporation resulting from a subdivision or
consolidation of shares or the payment of a stock dividend (but only
on the Capital Stock) or any other increase or decrease in the number
of such shares effected without receipt of consideration by the
Corporation.
Subject to any required action by the Stockholders, if the
Corporation shall be the surviving corporation in any merger or
consolidation, each outstanding option shall pertain to and apply to
the securities to which a holder of the number of shares of Capital
Stock subject to the option would have been entitled. In the event
that the Corporation is succeeded by another corporation in a
reorganization, merger, consolidation, sale or acquisition of property
or stock, or liquidation, or in the event that the Corporation is
dissolved, each outstanding option will terminate, provided that each
optionee shall, in such event, if a period of two years from the date
of the option shall have expired, have the right immediately prior to
such reorganization, dissolution or liquidation, merger or
consolidation, sale or acquisition to exercise his option in whole or
in part without regard to the installment provisions of Article 5(e)
of the Plan.
In the event of a change in the Capital Stock of the Corporation
as presently constituted, which is limited to a change of all of its
authorized shares with par value into the same number of shares with a
different par value or without par value, the shares resulting from
any such change shall be deemed to be the Capital Stock within the
meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the
Board, whose determination in that respect shall be final, binding and
conclusive, provided that each option granted pursuant to this Plan
shall not be adjusted in a manner that causes the option to fail to
continue to qualify as an Incentive Stock Option within the meaning of
Section 422A of the Internal Revenue Code of 1954.
Except as hereinbefore expressly provided in this Article 5(k),
the optionee shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any
stock dividend or any other increase or decrease in the number of
shares of any class or by reason of any dissolution, liquidation,
merger, or consolidation or spin-off of assets or stock of another
corporation, and any issue by the Corporation of shares of stock of
any class, or securities convertible into shares of stock of any
class, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Capital Stock
subject to the option.
The grant of an option pursuant to the Plan shall not affect in
any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve,
liquidate or sell, or transfer all or any part of its business or
assets.
(l) RIGHTS AS A STOCKHOLDER
An optionee or a transferee of an option shall have no rights as
a Stockholder with respect to any shares covered by his option until
the date of the issuance of a stock certificate to him for such
shares. No adjustments shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in
Article 5(k) hereof.
(m) INVESTMENT PURPOSES
Each option under the Plan shall be granted on the condition that
the purchases of stock thereunder shall be for investment purposes,
and not with a view to resale or distribution except that in the event
that stock subject to such option is registered under the Securities
Act of 1933, as amended, or in the event a resale of such stock
without such registration would otherwise be permissible, such
condition shall be inoperative if in the opinion of counsel for the
Corporation such condition is not required under the Securities Act of
1933 or any other applicable law, regulation or rule of any
governmental agency.
(n) OTHER PROVISIONS
The option agreements authorized under the Plan shall contain
such other provisions, including, without limitation, restrictions
upon the exercise of the option, as the Board of Directors of the
Corporation shall deem advisable.
6. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time, within
a period of ten years from the date the Plan is adopted, or the date the
Plan is approved by the Stockholders, whichever is earlier.
7. INDEMNIFICATION OF THE BOARD OF DIRECTORS
In addition to such other rights of indemnification as they may have
as directors, the members of the Board shall be indemnified by the
Corporation against the reasonable expenses, including attorneys' fees
actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any option granted
thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected
by the Corporation) or paid by them in satisfaction of a judgement in any
action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such Board member
is liable for negligence or misconduct in the performance of this duties;
provided that within 60 days after institution of any such action, suit or
proceeding a Board member shall in writing offer the Corporation the
opportunity, at its own expense, to handle and defend the same.
8. AMENDMENT OF THE PLAN
The Board of Directors of the Corporation may, insofar as permitted by
law, from time to time, suspend or discontinue the Plan or revise or amend
it in any respect whatsoever except that without approval of the
Stockholders, no such revision or amendment shall change the number of
shares subject to the Plan, change the designation of the class of
employees eligible to receive options, decrease the price at which options
may be granted, or remove the administration of the Plan from the Board.
9. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of Capital
Stock pursuant to options will be used for general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee
to exercise such option.
11. APPROVAL OF STOCKHOLDERS
The Plan shall become effective on the date the Plan is adopted by the
Board of Directors of the Corporation, provided, however, any options
granted under the Plan shall be void and of no effect if the Plan is not
approved by the holders of a majority of the outstanding shares of Capital
Stock of the Corporation, which approval must occur within the period
beginning twelve months before and ending twelve months after the date the
Plan is adopted by the Board of Directors. Moreover, in the event such
options are granted under the Plan prior to approval of such Plan by the
holders of a majority of the outstanding shares of the Capital Stock of the
Corporation, such options shall not be exercisable until such approval is
obtained.
Date Plan adopted by the Board of Directors: June 10, 1988
Date Plan approved by Stockholders: June 10, 1988