THE JOHN B. SANFILIPPO & SON, INC.
1998 EQUITY INCENTIVE PLAN
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John B. Sanfilippo & Son, Inc. (the "Company") hereby
establishes The John B. Sanfilippo & Son, Inc. 1998 Equity
Incentive Plan (the "Plan"), to become effective September 1, 1998
(the "Effective Date"), subject to approval by the holders of a
majority of the combined voting power of the Common Stock, $.01 par
value, of the Company ("Common Stock") and Class A Common Stock,
$.01 par value, of the Company ("Class A Stock") present, or
represented, and entitled to vote at a meeting duly called and
held. Grants may be made hereunder prior to such stockholder
approval, provided that any such grants shall be subject to such
stockholder approval.
1. Definitions.
In this Plan, except where the context otherwise indicates,
the following definitions apply:
1.1. "Agreement" means a written agreement implementing a
grant of an Option.
1.2 "Board" means the Board of Directors of the Company.
1.3 "Change in Control" shall have the meaning set forth in
Subsection 15.1 hereof.
1.4 "Class A Stock" means the Class A Common Stock, $.01 par
value per share, of the Company.
1.5 "Code" means the Internal Revenue Code of 1986, as
amended.
1.6 "Committee" means the entire Board or any committee of
the Board appointed by the Board to administer the Plan,
meeting the standards of Rule 16b-3(d)(1) under the Exchange
Act, or any similar successor rule and Temp. Treas. Reg.
Section 1.162-27(e)(3) or any similar successor rule. Unless
otherwise determined by the Board, the entire Board shall be
the Committee and shall administer the Plan.
1.7 "Common Stock" means the Common Stock, par value $.01 per
share, of the Company, and any other shares into which such
common stock shall thereafter be exchanged by reason of a
recapitalization, merger, consolidation, split-up,
combination, exchange of shares or the like.
1.8. "Company" means John B. Sanfilippo & Son, Inc., a
Delaware corporation, its successors and assigns.
1.9. "Current Grant" shall have the meaning set forth in
Subsection 6.4(e) hereof.
1.10. "Date of Exercise" means the date on which the
Company receives notice of the exercise of an Option in
accordance with the terms of Section 8 hereof.
1.11. "Date of Grant" means the date on which an Option is
granted by the Committee (or such later date as specified in
advance by the Committee) or, in the case of a Nonstatutory
Stock Option granted to an Outside Director, the date on which
such Nonstatutory Stock Option is granted pursuant to and in
accordance with the provisions of Section 10 hereof.
1.12. "Effective Date" means September 1, 1998, subject to
approval by the holders of the combined voting power of the
Common Stock and Class A Stock present, or represented, and
entitled to vote at a meeting duly called and held.
1.13. "Employee" means any person determined by the
Committee to be an employee of the Company or any Subsidiary.
1.14. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.15. "Fair Market Value" of a Share means:
(a) If on the applicable date the Common Stock is
listed for trading on a national or regional securities exchange
or authorized for quotation on the Nasdaq National Market System,
the closing price of the Common Stock on such exchange or Nasdaq
National Market System, as the case may be, on the applicable date,
or if no sales of Common Stock shall have occurred on such exchange
or Nasdaq National Market System, as the case may be, on the
applicable date, the closing price of the Common Stock on the next
preceding date on which there were such sales;
(b) If on the applicable date the Common Stock is not
listed for trading on a national or regional securities
exchange or authorized for quotation on the Nasdaq National
Market System, the mean between the closing bid price and the
closing ask price of the Common Stock as otherwise reported by
the Nasdaq Stock Market, Inc. with respect to the applicable
date or, if closing bid and ask prices for the Common Stock
shall not have been so reported with respect to the applicable
date, on the next preceding date with respect to which such
bid and ask prices were so reported; or
(c) If on the applicable date the Common Stock is not
listed for trading on a national or regional securities
exchange or authorized for quotation on the Nasdaq National
Market System or otherwise reported by the Nasdaq Stock
Market, Inc., the fair market value of a Share as determined
by the Committee pursuant to a reasonable method adopted in
good faith for such purpose.
Such Fair Market Value shall be subject to adjustment as
provided in Section 23 hereof.
1.16. "For Cause" shall have the meaning set forth in
Subsection 14.2 hereof.
1.17. "Incentive Stock Option" means an Option granted
under the Plan that qualifies as an incentive stock option
under Section 422 of the Code and that the Company designates
as such in the Agreement granting the Option.
1.18. "Insider" means a director, officer or beneficial
owner of more than 10% of the Common Stock of the Company for
purposes of Section 16 of the Exchange Act.
1.19. "Nonstatutory Stock Option" means an Option granted
under the Plan that is not an Incentive Stock Option.
1.20. "Option" means a right to purchase Common Stock
granted under the Plan in accordance with the terms of either
Section 6 or Section 10 hereof.
1.21. "Optionee" means an Outside Director or an Employee
to whom an Option has been granted.
1.22. "Option Period" means the period during which an
Option may be exercised.
1.23. "Option Price" means the price per Share at which an
Option may be exercised. The Option Price shall be determined
by the Committee in accordance with the terms and conditions
of the Plan, except that, in the case of Nonstatutory Stock
Options granted to Outside Directors pursuant to the
provisions of Section 10, in no event shall the Option Price
be less than 100% of the Fair Market Value per Share
determined as of the Date of Grant.
1.24. "Other Plans" shall have the meaning set forth in
Subsection 6.4(d) hereof.
1.25. "Outside Director" means any person who is a
director of the Company and who is not also an employee of
either the Company, any Subsidiary or any of their respective
affiliates.
1.26. "Permanent Disability" means a mental or physical
condition which, in the opinion of the Committee, renders an
Optionee unable or incompetent to carry out the job
responsibilities which such Optionee held or tasks to which
such Optionee was assigned at the time the disability was
incurred and which is expected to be permanent or for an
indefinite period.
1.27. "Plan" means The John B. Sanfilippo & Son, Inc. 1998
Equity Incentive Plan.
1.28. "Prior Grants" shall have the meaning set forth in
Subsection 6.4(e) hereof.
1.29. "Reload Option" means a new Option granted to an
Optionee pursuant to and in accordance with Subsections
4.3(f)(v) and 8.2 hereof, upon the surrender of Shares to pay
the Option Price of a previously granted Option.
1.30 "Share" means a share of Common Stock.
1.31. "Share Withholding" shall have the meaning set forth
in Subsection 13.1 hereof.
1.32. "Subsidiary" means a corporation at least 50% of the
total combined voting power of all classes of stock of which
is owned by the Company either directly or through one or more
Subsidiaries.
1.33. "Ten Percent Owner" shall have the meaning set forth
in Subsection 6.4(a) hereof.
1.34. "Termination of Employment" shall have the meaning
set forth in Subsection 14.1 hereof.
1.35. "$100,000 Limit" shall have the meaning set forth in
Subsection 6.4(d) hereof.
2. Purpose.
The purpose of the Plan is to advance the interests of
the Company and its Subsidiaries by encouraging and
facilitating the acquisition of a larger personal financial
interest in the Company by Outside Directors and those
Employees upon whose judgment and interest the Company and its
Subsidiaries are largely dependent for the successful conduct
of their operations, and by making executive positions in the
Company and its Subsidiaries more attractive. It is
anticipated that the acquisition of such financial interest
will stimulate the efforts of such Employees and Outside
Directors on behalf of the Company and its Subsidiaries and
strengthen their desire to continue in the service of the
Company and its Subsidiaries. It is also anticipated that the
opportunity to obtain such a financial interest will prove
attractive to promising executive talent and will assist the
Company and its Subsidiaries in attracting such persons. The
Plan is intended to meet the requirements of Rule 16b-3 of the
Exchange Act at all times during which Insiders are subject to
the requirements of Section 16 of the Exchange Act.
3. Scope of the Plan.
3.1. Shares Available. An aggregate of 350,000 Shares is
hereby authorized and made available and shall be reserved for
issuance under the Plan with respect to the exercise of
Options. Such number of Shares shall be reduced by the
aggregate number of Shares acquired from time to time to be
held as treasury Shares reserved for use under the Plan.
Subject to the foregoing and the other provisions of this
Section 3, Shares that are issued upon the exercise of Options
awarded under the Plan may be issued out of either the
Company's authorized and unissued or treasury shares of Common
Stock. The aggregate number of Shares available under this
Plan shall be subject to adjustment upon the occurrence of any
of the events and in the manner set forth in Section 23
hereof.
3.2. Shares Subject to Terminated Options. If, and to the
extent, an Option shall expire or terminate for any reason
without having been exercised in full, the Shares subject
thereto which have not become outstanding shall (unless the
Plan shall have terminated) become available under the Plan
for other grants.
3.3 Authority to Purchase Shares. The Board, such committee
of the Board that the Board shall specifically authorize or
direct on its behalf, or the Committee shall have the
authority to cause the Company to purchase from time to time,
in such amounts and at such prices as the Board, in its
discretion, shall deem advisable or appropriate, Shares to be
held as treasury Shares and reserved and used solely for or in
connection with grants under the Plan, at the discretion of
the Committee.
4. Administration.
4.1. The Committee. The Plan shall be administered by the
Committee.
4.2. Authority of the Committee. The Committee shall have
full and final authority, in its discretion, but subject to
the express provisions of the Plan, as follows:
(a) to grant Options;
(b) subject to Sections 6 and 10, to determine (a) the
Option Price of the Shares subject to each Option, (b) the
Employees and Outside Directors to whom, and the time or times
at which, Options shall be granted, and (c) subject to
Section 3, the number of Shares subject to an Option to be
granted to each Optionee thereof;
(c) to determine all other terms and provisions of each
Agreement (which may, but need not be, identical), other than
the exercisability of Options which is governed by
Subsection 6.2 hereof, and, with the consent of the Optionee,
to modify any Agreement;
(d) to construe and interpret the Plan and Agreements;
(e) to prescribe, amend and rescind rules and
regulations relating to the Plan, including, without
limitation and subject to Section 14 hereof, the rules with
respect to the exercisability of Options;
(f) to require, whether or not provided for in the
pertinent Agreement, of any person exercising an Option, at
the time of such exercise, the making of any representations
or agreements which the Committee may deem necessary or
advisable in order to comply with the securities laws of the
United States of America or of any state;
(g) to prescribe the method by which grants of Options
shall be evidenced;
(h) to cancel, with the consent of the Optionee thereof,
outstanding Options and to grant new Options in substitution
therefor;
(i) to require withholding from or payment by an
Optionee of any federal, state or other governmental taxes;
(j) to prohibit the election described in Section 11
hereof;
(k) to make all other determinations deemed necessary or
advisable for the administration of the Plan; and
(l) to impose such additional conditions, restrictions
and limitations upon the exercise, vesting or retention of
Options as the Committee may, prior to or concurrently with
the grant or award thereof, deem appropriate, including, but
not limited to, limiting the percentage of Options which may
from time to time be exercised by an Optionee.
4.3. Agreements Evidencing Stock Options.
(a) Options awarded under the Plan shall be evidenced by
Agreements which shall not be inconsistent with the terms and
provisions of the Plan, and which shall contain such
provisions as the Committee may in its sole discretion deem
necessary or desirable. Without limiting the generality of
the foregoing, the Committee may in any Agreement impose such
restrictions or conditions upon the exercise of such Option or
upon the sale or other disposition of the shares of Common
Stock issuable upon exercise of such Option as the Committee
may in its sole discretion determine. By accepting an award
pursuant to the Plan each Optionee shall thereby agree that
each such award shall be subject to all of the terms and
provisions of the Plan, including, but not limited to, the
provisions of Section 4.6.
(b) Each Agreement shall set forth the number of shares
of Common Stock subject to the Option granted thereby, subject
to adjustment by the Committee to reflect changes in
capitalization as contemplated by Section 23.
(c) Each Agreement relating to Options shall set forth
the amount payable by the Optionee to the Company upon
exercise of the Option evidenced thereby, subject to
adjustment by the Committee to reflect changes in
capitalization as contemplated by Section 23.
(d) Each Agreement shall set forth the period during
which the Option shall be exercisable, which shall be
determined by the Committee in its discretion, subject to the
terms of Subsection 6.4(b) and Section 10 hereof; provided,
however, that no Option shall be exercisable after the
expiration of ten (10) years from the Date of Grant, and each
Option shall be subject to earlier termination as herein
provided.
(e) Each Agreement shall specify whether the Option is a
Nonstatutory Stock Option or an Incentive Stock Option.
(f) Without limiting the foregoing, the Committee shall
provide, in its discretion, in any Agreement:
(i) for an agreement by the Optionee to render
services to the Company or a Subsidiary upon such terms
and conditions as may be specified in the Agreement,
provided that the Committee shall not have the power to
commit the Company or a Subsidiary to employ or otherwise
retain any Optionee;
(ii) for restrictions on the transfer, sale or other
disposition of Shares issued to the Optionee upon the
exercise of an Option;
(iii) for an agreement by the Optionee to resell
to the Company, under specified conditions, Shares issued
upon the exercise of an Option;
(iv) for the payment of the Option Price upon the
exercise of an Option otherwise than in cash, including
without limitation by delivery of Shares valued at Fair
Market Value on the Date of Exercise of the Option in
accordance with the terms of Subsection 8.1 hereof, or a
combination of cash and Shares, or for the payment in
part of the Option Price with a promissory note in
accordance with the terms of Subsection 8.3 hereof;
(v) for the automatic issuance of a Reload Option
covering a number of Shares equal to the number of any
Shares used to pay the Option Price in accordance with
the terms of Subsection 8.2 hereof; or
(vi) for the right of the Optionee to surrender to
the Company an Option (or a portion thereof) that has
become exercisable and to receive upon such surrender,
without any payment to the Company or a Subsidiary (other
than required tax withholding amounts), that number of
Shares (equal to the highest whole number of Shares)
having an aggregate Fair Market Value as of the date of
surrender equal to that number of Shares subject to the
Option (or portion thereof) being surrendered multiplied
by an amount equal to the excess of (i) the Fair Market
Value of a Share on the date of surrender, over (ii) the
Option Price, plus an amount of cash equal to the Fair
Market Value of any fractional Share to which the
Optionee might be entitled. Any such surrender shall be
treated as the exercise of the Option (or portion
thereof).
4.4. Finality of Committee Determinations: Liability of
Members. The determination of the Committee on all matters
relating to the Plan or any Agreement shall be final, binding
and conclusive. No member of the Committee shall be liable
for any action or determination made in good faith with
respect to the Plan, any Agreement or any grant thereunder.
4.5. Periodic Committee Review and Meetings with Management.
The Committee shall from time to time review the
implementation and results of the Plan to determine the extent
to which the Plan's purpose is being accomplished. In
addition, the Committee shall periodically meet with senior
management of the Company to review their suggestions
regarding grants under the Plan, including the individuals who
are proposed to receive grants and the amount and terms of
such grants; provided, however, that all such grants shall be
determined solely by the Committee in its discretion.
4.6. Indemnification of Committee. In addition to such other
rights of indemnification as they may have as directors of the
Company or as members of the Committee, the members of the
Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees, actually and
reasonably 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 hereunder, and against all
amounts reasonably paid by them in settlement thereof or paid
by them in satisfaction of a judgment in any such action, suit
or proceeding, other than for actions involving wilful
misfeasance, gross negligence or reckless disregard of the
member's duties.
5. Eligibility.
Options may be granted only to Outside Directors and
Employees, except that (i) Outside Directors are not eligible
to receive Options other than pursuant to Section 10 and (ii)
neither Jasper B. Sanfilippo, Sr. nor Mathias A. Valentine
shall be eligible to receive Options under the Plan. Subject
to the provisions of Section 3 and Subsection 6.5 hereof, an
Employee or Outside Director who has been granted an Option
may be granted additional Options; provided, however, that
grants of Nonstatutory Stock Options to Outside Directors are
subject to the limitations set forth in Section 10. In
selecting the individuals to whom Options shall be granted as
well as in determining the number of Shares subject to each
Option to be granted, the Committee shall take into
consideration such factors as it deems relevant in connection
with promoting the purposes of the Plan.
6. Conditions to Grants and Awards.
6.1. General. Subject to the provisions of Sections 5 and 10
hereof, the Committee is hereby authorized to grant
Nonstatutory Stock Options to Outside Directors and Employees
and Incentive Stock Options to Employees. All Options
designated as Incentive Stock Options shall be, in addition to
the other provisions of this Plan, subject to the terms and
conditions of Subsection 6.4 below. Subject to the provisions
of Section 3 hereof, an individual who has been granted an
Option may, if such individual is otherwise eligible, be
granted additional Options if the Committee shall so
determine. Subject to the other provisions of this Plan, the
Committee may grant Options with terms and conditions which
differ among the Optionees thereof.
6.2. Exercisability. Each Option granted under this Plan
shall provide that the Option shall become exercisable in
equal installments of 25% of the total number of Shares
subject to being purchased thereunder on each of the first,
second, third and fourth anniversaries of the Option's Date of
Grant; provided, however, that the Optionee remains an
Employee (or a director of the Company in the case of a
Nonstatutory Stock Option granted to an Outside Director
pursuant to Section 10 hereof) on each such anniversary of the
Date of Grant. To the extent not set forth in the Plan, the
terms and conditions of each grant shall be set forth in an
Agreement.
6.3. Grants of Options and Option Price. Subject to the
provisions of Section 10, before the grant of any Option, the
Committee shall determine the Option Price of the Shares
subject to such Option; provided that, except as provided in
Subsection 6.4 below with respect to Incentive Stock Options,
the Option Price shall not be less than fifty percent (50%) of
the Fair Market Value of a Share on the Date of Grant.
6.4. Grants of Incentive Stock Options. Any Option designated
as an Incentive Stock Option may be granted only to an
Employee and shall:
(a) have an Option Price of (i) not less than 100% of
the Fair Market Value of a Share on the Date of Grant, or (ii)
in the case of an Employee who owns stock (including stock
treated as owned under Section 424(d) of the Code) possessing
more than 10% of the total combined voting power of all
classes of stock of the Company or any of its Subsidiaries (a
"Ten Percent Owner"), not less than 110% of the Fair Market
Value of a Share on the Date of Grant;
(b) have an Option Period of not more than ten (10)
years (five (5) years, in the case of a Ten Percent Owner)
from the Date of Grant, and shall be subject to earlier
termination as herein provided;
(c) notwithstanding the provisions relating to
termination of employment set forth in Section 14 hereof, not
be exercisable more than three (3) months (or one (1) year, in
the case of an Optionee who is disabled within the meaning of
Section 22(e)(3) of the Code) after termination of employment;
(d) not have an aggregate Fair Market Value of Shares
(determined for each Incentive Stock Option at the time it is
granted) with respect to which Incentive Stock Options are
exercisable for the first time by such Optionee during any
calendar year (under this Plan and any other employee stock
option plan of the Optionee's employer or any parent or 50%-
or-more owned subsidiary thereof ("Other Plans")), determined
in accordance with the provisions of Section 422 of the Code,
which exceeds $100,000 (the "$100,000 Limit");
(e) if the aggregate Fair Market Value of Shares
(determined on the Date of Grant) with respect to all
Incentive Stock Options previously granted under this Plan and
the Other Plans ("Prior Grants") and any Incentive Stock
Options under such grant (the "Current Grant") which are
exercisable for the first time during any calendar year would
exceed the $100,000 Limit, be exercisable as follows:
(i) the portion of the Current Grant exercisable
for the first time by the Optionee during any calendar
year which would be, when added to any portions of any
Prior Grants exercisable for the first time by the
Optionee during any such calendar year with respect to
Shares which would have an aggregate Fair Market Value
(determined at the time of each such grant) in excess of
the $100,000 Limit shall, notwithstanding the terms of
the Current Grant, be exercisable for the first time by
the Optionee in the first subsequent calendar year or
years in which it could be exercisable for the first time
by the Optionee when added to all Prior Grants without
exceeding the $100,000 Limit; and
(ii) if, viewed as of the date of the Current Grant,
any portion of a Current Grant could not be exercised
under the provisions of the immediately preceding
sentence during any calendar year commencing with the
calendar year in which it is first exercisable through
and including the last calendar year in which it may by
its terms be exercised, such portion of the Current Grant
shall not be an Incentive Stock Option, but shall be
exercisable as a separate Option at such date or dates as
are provided in the Current Grant.
(f) be granted within ten (10) years from the earlier of
the date the Plan is adopted or the date the Plan is approved
by the stockholders of the Company; and
(g) require the Optionee to notify the Committee of any
disposition of any Shares issued pursuant to the exercise of
the Incentive Stock Option under the circumstances described
in Section 421(b) of the Code (relating to certain
disqualifying dispositions), within ten (10) days of such
disposition.
6.5. Code Section 162(m) Compliance for Option Grants. The
maximum number of Shares subject to Options which may be
awarded to any Optionee in any one calendar year shall not
exceed 50,000 Shares. In all events, determinations under the
preceding sentence shall be made in a manner which is
consistent with Code Section 162 and the regulations
promulgated thereunder.
7. Non-transferability.
Each Option granted hereunder shall by its terms not be
assignable or transferable other than by will or the laws of
descent and distribution. During the life of the Optionee,
all rights granted to the Optionee under the Plan or under any
Agreement shall be exercisable only by the Optionee.
8. Exercise of Options.
8.1. Manner of Exercise and Payment. Subject to the
provisions hereof and the provisions of the Agreement under
which it was granted, each Option shall be exercised by
delivery to the Company's treasurer of written notice of
intent to purchase a specific whole number of Shares subject
to the Option. The Option Price of any Shares as to which an
Option is exercised shall be paid in full at the time of the
exercise, unless and to the extent that the Committee agreed
in the Agreement in which the Option was granted to accept a
promissory note as provided in Subsection 8.3 below. Payment
may, at the election of the Optionee, be made in (i) cash,
(ii) Shares valued at their Fair Market Value on the Date of
Exercise, (iii) surrender of an exercisable Option covering
Shares with an aggregate Fair Market Value as of the date of
exercise in excess of the aggregate dollar amount of the
Option Prices of such Shares under such Option equal to the
Option Price of the Options sought to be exercised,
(iv) through the delivery of irrevocable instructions to a
broker to deliver promptly to the Company an amount in cash
equal to the Option Price, (v) any combination of the
foregoing, or (vi) in accordance with the terms of the
Agreement under which the Options sought to be exercised were
granted. In certain circumstances, payment may also be made
in accordance with Subsection 8.3 below.
8.2. Reload Option. Pursuant to Subsection 4.3(f)(v) hereof,
the Committee may, in its sole discretion, award Reload
Options in an amount equal to the number of Shares that could
be delivered in payment of the Option Price (as set forth in
Subsection 8.1 above) in connection with the exercise of an
Option. To the extent required by applicable law, the number
of Reload Options available to each Optionee shall be set
forth in each grant. The Option Price for any Reload Option
shall be the Fair Market Value of a Share on the date that
Shares are surrendered in payment of the Option Price. Other
terms of the Reload Option shall be the same as the terms
contained in the Agreement relating to the Option being
exercised, provided that if a Reload Option is granted in
connection with the use of Shares to pay the exercise price of
an Incentive Stock Option, the Reload Option shall be a
Nonstatutory Stock Option.
8.3. Deferred Payment of Option Price. To the extent
permitted by applicable law, the Committee may agree in the
Agreement in which an Option is granted to accept as partial
payment for the Shares a promissory note of the Optionee
evidencing his or her obligation to make future cash payment
therefor; provided, however, that in no event may the
Committee accept a promissory note for an amount in excess of
the difference between the aggregate Option Price and the par
value of the Shares purchased pursuant to the Option.
Promissory notes made pursuant to this Subsection 8.3 shall be
payable as determined by the Committee, shall be secured by a
pledge of the Shares in respect of the purchase of which the
promissory is being delivered and shall bear interest at a
rate fixed by the Committee (which rate shall not be lower
than a reasonable commercial rate).
9. Accelerated Exercise.
Notwithstanding any other provisions of the Plan, all
unexercised Options may be exercised or disposed of commencing
on the date of a Change of Control, as defined in Section 15
hereof; provided, however, that the Company may cancel all
such Options under the Plan as of the date of a Change of
Control by giving notice to each Optionee thereof of its
intention to do so and by permitting the purchase during the
thirty-day period next preceding such effective date of all of
the Shares subject to such outstanding Options.
10. Grant of Stock Options to Outside Directors.
Each Outside Director shall be eligible to be granted
Nonstatutory Stock Options and all such grants shall only be
made under and in accordance with the provisions in this
Section 10.
10.1. Grant to Outside Directors. Each person who becomes
an Outside Director shall be granted on the date such person
first becomes elected as an Outside Director, and on each date
such person is re-elected as an Outside Director, which in
each case shall be the Date of Grant, a Nonstatutory Stock
Option to purchase 1,000 Shares at an Option Price equal to
the Fair Market Value of such Shares on the Date of Grant.
Each such Nonstatutory Stock Option shall provide that it may
be exercised no later than ten (10) years following the Date
of Grant and that the Nonstatutory Stock Option shall become
exercisable in equal installments of 250 Shares on each of the
first, second, third and fourth anniversaries of the Date of
Grant, provided, however, that the Optionee remains a director
of the Company on each such anniversary of the Date of Grant.
10.2. Insufficient Shares Available. If on any date on
which Nonstatutory Stock Options are to be granted pursuant to
Subsection 10.1 above there is an insufficient number of
Shares available pursuant to Section 3 hereof for such grant,
the number of Shares subject to each Option granted pursuant
to Subsection 10.1 on such date shall equal the number of
Shares that otherwise would be subject to such Nonstatutory
Stock Options but for such limitation multiplied by a
fraction, the numerator of which shall be the total number of
Shares then available pursuant to Section 3 for the grant of
Nonstatutory Stock Options,. and the denominator of which
shall be the aggregate number of Shares that otherwise would
be granted pursuant to Subsection 10.1, such product to be
rounded down to the nearest whole number.
10.3. Amendments to Section. Notwithstanding Section 24
hereof, the provisions in this Section 10 may not be amended
more than once every six (6) months, other than to comport
with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.
11. Notification under Section 83(b).
Provided that the Committee has not prohibited such
Optionee from making the following election, if an Optionee
shall, in connection with the exercise of any Option, make the
election permitted under Section 83(b) of the Code (i e., an
election to include in such Optionee's gross income in the
year of transfer the amounts specified in Section 83(b) of the
Code), such Optionee shall notify the Committee of such
election within ten (10) days of filing notice of the election
with the Internal Revenue Service, in addition to any filing
and notification required pursuant to regulations issued under
the authority of Section 83(b) of the Code.
12. Withholding Taxes.
12.1. Remittance of Tax as Condition of Delivery. The
Company shall be entitled to require as a condition of
delivery of Shares hereunder that the Optionee remit an amount
sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto.
12.2. Mandatory Withholding on Officers, Directors and
Greater Than 10% Stockholders. In the case of an Optionee
who is an officer, director or beneficial owner of more than
10% of the Common Stock of the Company (as determined in
accordance with Rule 13d-3 under the Exchange Act), whenever
under the Plan, Shares are to be delivered, the Company shall
withhold an amount sufficient to satisfy all federal, state
and other governmental withholding tax requirements related
thereto.
13. Elective Share Withholding.
13.1. An Optionee, other than an Insider, may, subject to
Committee approval, elect the withholding ("Share
Withholding") by the Company of a portion of the Shares
otherwise deliverable to such Optionee upon his or her
exercise of an Option having a Fair Market Value equal to
either (a) the amount necessary to satisfy such Optionee's
required federal, state or other governmental withholding tax
liability with respect thereto, or (b) a greater amount, not
to exceed the estimated total amount of such Optionee's tax
liability with respect thereto.
13.2. Share Withholding Is Subject to Committee Approval.
Share Withholding is subject to Committee approval and each
Share Withholding election by an Optionee shall also be
subject to the following restrictions:
(a) the election must be made prior to the date on which
the amount of tax to be withheld is determined; and
(b) the election shall be irrevocable.
14. Termination of Employment.
14.1. Forfeiture. Subject to the provisions of
Subsection 6.4 hereof with respect to Incentive Stock Options,
an unexercised Option shall terminate and/or be forfeited upon
the date on which the Optionee thereof is no longer an
Employee ("Termination of Employment") if the Termination of
Employment was the result of the resignation of the Optionee
or the Optionee was terminated For Cause (as defined in
Subsection 14.2 below) or otherwise, except that:
(a) Death. If the Optionee's Termination of Employment
is by reason of his or her death, unexercised Options to the
extent exercisable on the date of the Optionee's death, may be
exercised, in whole or in part, at any time within one (1)
year after the date of death by the Optionee's personal
representative or by the person to whom the Options are
transferred by will or the applicable laws of descent and
distribution.
(b) Retirement. If the Optionee's employment is
terminated as a result of retirement under the provisions of a
retirement plan of the Company or a Subsidiary applicable to
the Optionee (or on or after age 60 if no retirement plan of
the Company or Subsidiary is applicable to the Optionee), any
unexercised Option, to the extent exercisable at the date of
such Termination of Employment, may be exercised, in whole or
in part, at any time within ninety (90) days after the date of
such Termination of Employment; provided that, if the Optionee
dies after such Termination of Employment and before the
expiration of such 90-day period, unexercised Options held by
such deceased Optionee may be exercised by his or her personal
representative or by the person to whom the Option is trans-
ferred by will or the applicable laws of descent and
distribution within one (1) year after the Optionee's
Termination of Employment.
(c) Permanent Disability. If the Optionee's employment
is terminated as a result of his or her Permanent Disability,
any unexercised Option, to the extent exercisable at the date
of such Termination of Employment, may be exercised, in whole
or in part, at any time within one (1) year after the date of
such Termination of Employment; provided that, if an Optionee
dies after such Termination of Employment and before the
expiration of such one (1) year period, the unexercised
Options may be exercised by the deceased Optionee's personal
representative or by the person to whom the unexercised
Options are transferred by will or the applicable laws of
descent and distribution within one (1) year after the
Optionee's Termination of Employment, or, if later, within 180
days after the Optionee's death.
(d) Other Reasons for Termination. If the Optionee has
a Termination of Employment for any reason other than by
death, retirement, Permanent Disability, resignation or For
Cause, any unexercised Option to the extent exercisable on the
date of such Termination of Employment, may be exercised, in
whole or in part, at any time within three (3) months from the
date of such Termination of Employment.
14.2. "For Cause." A Termination of Employment "For
Cause" shall mean a Termination of Employment that, in the
judgment of the Committee, is the result of (i) the breach by
the Employee of any employment agreement, employment
arrangement or any other agreement with the Company or a
Subsidiary, (ii) the Employee engaging in a business that
competes with the Company or a Subsidiary, (iii) the Employee
disclosing business secrets, trade secrets or confidential
information of the Company or a Subsidiary to any party,
(iv) dishonesty, misconduct, fraud or disloyalty by the
Employee, (v) misappropriation of corporate funds, or
(vi) such other conduct by the Employee of an incompetent,
insubordinate, immoral or criminal nature as to have rendered
the continued employment of the Employee incompatible with the
best interests of the Company and its Subsidiaries.
14.3. Option Term. Any of the provisions herein to the
contrary notwithstanding, no Option shall be exercisable
beyond the term specified in the related Agreement thereof.
15. Change of Control.
15.1. Definition of "Change of Control." A "Change of
Control" occurs if, and as of the first date on which, no
shares of Class A Stock remain outstanding.
15.2. Notice of Change of Control. The Company shall
notify all Optionees of the occurrence of a Change of Control
promptly after its occurrence, but any failure of the Company
to notify shall not deprive the Optionees of any rights
accruing hereunder by virtue of a Change of Control.
16. Substituted Options.
If the Committee cancels, with the consent of an
Optionee, any Option granted under the Plan, and a new Option
is substituted therefor, then the Committee may, in its
discretion, provide that the Date of Grant of the canceled
Option shall be the date used to determine the earliest date
or dates for exercising the new substituted Option under
Subsection 6.2 hereof so that the Optionee may exercise or
dispose of the substituted Option at the same time as if the
Optionee had held the substituted Option since the Date of
Grant of the canceled Option; provided, however, that no
Optionee who for purposes of Section 16 of the Exchange Act is
treated as an officer, director or 10% stockholder of the
Company may dispose of a substituted Option, within less than
six months after the Date of Grant (calculated without
reference to this Section 16).
17. Securities Law Matters.
17.1. Investment Intent Representation: Restrictive
Legend. Where an investment intent representation or
restrictive legend is deemed necessary to comply with the
Securities Act of 1933, as amended, the Committee may require
a written representation to that effect by the Optionee, or
may require that such legend be affixed to certificates for
Shares at the time the Option is exercised.
17.2. Company's Right to Postpone Exercise. If based upon
the opinion of counsel to the Company, the Committee
determines that the exercise of any Options would violate any
applicable provision of (i) state or federal securities law,
(ii) the listing requirements of any securities exchange
registered under the Exchange Act on which are listed any of
the Company's equity securities, (iii) the listing
requirements of the Nasdaq National Market if any of the
Company's equity securities are listed thereon, or (iv) the
listing requirements of The Nasdaq Small Cap Market if any of
the Company's equity securities are listed thereon, then the
Committee may postpone any such exercise; provided, however,
that the Company shall use its best efforts to cause such
exercise to comply with all such provisions at the earliest
practicable date; and provided further, that the Committee's
authority under this Subsection 17.2 shall expire from and
after the date of any Change of Control.
17.3. Rule 16b-3 Compliance. With respect to Insiders,
transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under
the Exchange Act. To the extent any provision of the Plan or
action by the Board or the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Board and the Committee.
18. Funding.
Benefits payable under the Plan to any person shall be
paid directly by the Company. The Company shall not be
required to fund, or otherwise segregate assets to be used for
payment of, benefits under the Plan.
19. No Employment Rights.
Neither the establishment of the Plan, nor the granting
of any rights under the Plan, shall be construed to (a) give
any Optionee the right to remain employed by the Company, any
Subsidiary or any of their affiliates or to any benefits not
specifically provided by the Plan, or (b) in any manner modify
the right of the Company, any Subsidiary or any of their
affiliates to modify, amend or terminate any of its employee
benefit plans.
20. Stockholder Rights.
An Optionee shall not, by reason of any right granted
hereunder, have any right as a stockholder of the Company with
respect to the Shares which may be deliverable upon exercise
of such Option until such Shares have been delivered to him or
her.
21. Nature of Payments.
Any and all grants or deliveries of Shares hereunder
shall constitute special incentive payments to the Optionee
and shall not be taken into account in computing the amount of
salary or compensation of the Optionee for the purposes of
determining any pension, retirement, death or other benefits
under (a) any pension, retirement, profit-sharing, bonus, life
insurance or other employee benefit plan of the Company, any
Subsidiary or any of their affiliates, or (b) any agreement
between the Company, any Subsidiary or any of their
affiliates, on the one hand, and the Optionee, on the other
hand, except as such plan or agreement shall otherwise
expressly provide.
22. Non-Uniform Determinations.
Neither the Committee's nor the Board's determinations
under the Plan need be uniform and may be made by the
Committee or the Board selectively among persons who receive,
or are eligible to receive, grants under the Plan (whether or
not such persons are similarly situated). Without limiting
the generality of the foregoing, the Committee shall be
entitled, among other things, to make non-uniform and
selective determinations, and to enter into non-uniform and
selective Option agreements as to (a) the persons to receive
grants under the Plan, (b) the terms and provisions of grants
under the Plan, and (c) the treatment, under Section 14
hereof, of leaves of absence.
23. Adjustments.
Any Option entered into hereunder may contain such
provisions as the Committee shall determine for equitable
adjustment of (a) the number of Shares covered thereby, (b)
the Option Price, or (c) otherwise, to reflect a stock
dividend, stock split, reverse stock split, Share combination,
recapitalization, merger, consolidation, asset spin-off,
reorganization or similar event, of or by the Company. In any
such event, regardless of whether specified in an Agreement,
the aggregate number of Shares available under the Plan shall
be appropriately adjusted to equitably reflect such event.
24. Amendment of the Plan.
Subject to Subsection 10.3 hereof, the Board may make such
modifications of the Plan as it shall deem advisable;
provided, however, no modifications shall be made which would
impair the rights of any Option theretofore granted without
the Optionee's consent; and provided further, the Board may
not, without further approval of the stockholders of the
Company, except as provided in Section 23 above, either:
(a) materially increase the number of Shares reserved
for issuance under the Plan;
(b) materially increase the benefits accruing to
participants under the Plan;
(c) materially modify the requirements as to eligibility
for participation in the Plan; or
(d) extend the date of termination of the Plan.
25. Termination of the Plan.
The Plan shall terminate on the tenth (10th) anniversary
of the Effective Date or at such earlier time as the Board may
determine. Any termination, whether in whole or in part,
shall not affect any rights then outstanding under the Plan.
26. Controlling Law.
The Plan shall be governed, construed and administered in
accordance with the laws of the State of Delaware, except its
laws with respect to choice of law.
27. Action by the Company.
Any action required by the Company under the Plan shall
be by resolution of the Board.