INTEGRA LIFESCIENCES CORPORATION
1996 INCENTIVE STOCK OPTION
AND
NON-QUALIFIED STOCK OPTION PLAN
(As Amended Through
December 27, 1997)
INTEGRA LIFESCIENCES CORPORATION
1996 INCENTIVE STOCK OPTION AND
NON-QUALIFIED STOCK OPTION PLAN
-------------------------------
SECTION 1
Purpose
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This INTEGRA LIFESCIENCES CORPORATION 1996 INCENTIVE STOCK OPTION AND
NON-QUALIFIED STOCK OPTION PLAN ("Plan") is intended to provide a means whereby
Integra LifeSciences Corporation ("Company") may, through the grant of incentive
stock options and non-qualified stock options (collectively, "Options") to
purchase common stock of the Company ("Common Stock") to Key Employees and
Associates (both as defined in Section 3 hereof), attract and retain such Key
Employees and Associates and motivate them to exercise their best efforts on
behalf of the Company and of any Related Corporation (as defined below).
For purposes of the Plan, a "Related Corporation" shall mean either a
corporate subsidiary of the Company, as defined in section 424(f) of the
Internal Revenue Code of 1986, as amended ("Code"), or the corporate parent of
the Company, as defined in section 424(e) of the Code. Further, as used in the
Plan (a) the term "ISO" shall mean an Option which, at the time such Option is
granted under the Plan, qualifies as an incentive stock option within the
meaning of section 422 of the Code; and (b) the term "NQSO" shall mean an Option
which, at the time such Option is granted, does not qualify as an incentive
stock option.
SECTION 2
Administration
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The Plan shall be administered by the Company's Stock Option Committee
("Committee"), which shall consist of at least two and no more than three
directors of the Company who shall be appointed by, and shall serve at the
pleasure of, the Company's Board of Directors ("Board"). Each member of such
Committee, while serving as such, shall be deemed to be acting in his capacity
as a director of the Company. Except as otherwise permitted under section 16(b)
of the Securities Exchange Act of 1934, and the rules and regulations
thereunder, no member of the Committee shall have been granted or awarded
Options pursuant to the Plan or equity securities (within the meaning of 17
C.F.R. ss. 240.16a-1(d)) pursuant to any other plan of the Company or of any of
its affiliates, as defined in the Securities Exchange Act of 1934, at any time
during the period commencing with the date which is one year prior to the date
his service on the Committee began and ending on the date which is one day after
the date on which his service on the Committee ceased. Each member of the
Committee shall also be an "outside director" within the meaning of Treas. Reg.
ss.1.162-27(e)(3), or any successor thereto.
The Committee shall have full authority, subject to the terms
of the Plan, to select the Key Employees and Associates (both as defined in
Section 3 hereof) to be granted ISOs and/or NQSOs under the Plan, to grant
Options on behalf of the Company,
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and to set the date of grant and the other terms of such Options. The Committee
may correct any defect, supply any omission and reconcile any inconsistency in
this Plan and in any Option granted hereunder in the manner and to the extent it
shall deem desirable. The Committee also shall have the authority to establish
such rules and regulations, not inconsistent with the provisions of the Plan,
for the proper administration of the Plan, and to amend, modify or rescind any
such rules and regulations, and to 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 stockholders and all officers and employees and
former officers and employees, and upon their respective legal representatives,
beneficiaries, successors and assigns, and upon all other persons claiming under
or through any of them. No member of the Board or the Committee shall be liable
for any action or determination made in good faith with respect to the Plan or
any Option granted under it.
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SECTION 3
Eligibility
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(a) In General. Key Employees and Associates shall be eligible to
receive Options under the Plan. Key Employees and Associates who have been
granted an Option under the Plan shall be referred to as "Optionees." More than
one Option may be granted to an Optionee under the Plan.
(b) Key Employees. "Key Employees" are officers, executives, and
managerial employees of the Company and/or a Related Corporation. Key Employees
shall be eligible to receive ISOs and/or NQSOs.
(c) Associates. "Associates" are designated non-employee directors,
consultants and other persons providing services to the Company and/or Related
Corporation. Associates shall be eligible to receive only NQSOs.
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SECTION 4
Stock
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Options may be granted under the Plan to purchase up to a maximum of
1,500,000 shares of the Company's Common Stock, par value $0.01 per share;
provided, however, that no Key Employee shall receive Options for more than
1,000,000 shares of Common Stock over any one-year period. However, both limits
in the preceding sentence shall be subject to adjustment as hereinafter
provided. Shares issuable under the Plan may be authorized but unissued shares
or reacquired shares, and the Company may purchase shares required for this
purpose, from time to time, if it deems such purchase to be advisable.
If any Option granted under the Plan expires or otherwise terminates
for any reason whatsoever (including, without limitation, the Optionee's
surrender thereof) without having been exercised, the shares subject to the
unexercised portion of such Option shall continue to be available for the
granting of Options under the Plan as fully as if such shares had never been
subject to an Option; provided, however, that (a) if an Option is cancelled, the
shares of Common Stock covered by the cancelled option shall be counted against
the maximum number of shares specified above for which Options may be granted to
a single Key Employee, and (b) if the exercise price of an Option is reduced
after the date of grant, the transaction shall be treated as a cancellation of
the original Option and the grant of a new Option for purposes of counting the
maximum number of shares for which
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Options may be granted to a Key Employee.
SECTION 5
Granting of Options
-------------------
From time to time until the expiration or earlier suspension or
discontinuance of the Plan, the Committee may, on behalf of the Company, grant
to Key Employees and Associates under the Plan such Options as it determines are
warranted, subject to the limitations of the Plan; provided, however, that
grants of ISOs and NQSOs shall be separate and not in tandem. The granting of an
Option under the Plan shall not be deemed either to entitle the Key Employee or
Associate to, or to disqualify the Key Employee or Associate from, any
participation in any other grant of Options under the Plan. In making any
determination as to whether a Key Employee or Associate shall be granted an
Option, the type of Option to be granted, and the number of shares to be covered
by such Option, the Committee shall take into account the duties of the Key
Employee or Associate, his or her present and potential contributions to the
success of the Company or a Related Corporation, the tax implications to the
Company and the Key Employee or Associate of any Option granted, and such other
factors as the Committee shall deem relevant in accomplishing the purposes of
the Plan. Moreover, the Committee may provide in the Option that said Option may
be exercised only if certain conditions, as determined by the Committee, are
fulfilled.
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SECTION 6
Annual Limit
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(a) ISOs. The aggregate Fair Market Value (determined as of the date
the ISO is granted) of the Common Stock with respect to which ISOs are
exercisable for the first time by a Key Employee during any calendar year
(counting ISOs under this Plan and incentive stock options under any other stock
option plan of the Company or a Related Corporation) shall not exceed $100,000.
The term "Fair Market Value" shall mean the value of the shares of Common Stock
arrived at by a good faith determination of the Committee and shall be:
(1) The mean between the highest and lowest quoted selling price,
if there is a market for the Common Stock on a registered securities exchange or
in an over-the-counter market, on the date specified;
(2) The weighted average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the specified
date, if there are no such sales on the specified date but there are such sales
on dates within a reasonable period both before and after the specified date;
(3) The mean between the bid and asked prices, as reported by
the National Quotation Bureau on the specified date, if actual sales are not
available during a reasonable period beginning before and ending after the
specified date; or
(4) If (1) through (3) above are not applicable,
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such other method of determining Fair Market Value as shall be authorized by the
Code, or the rules or regulations thereunder, and adopted by the Committee.
Where the Fair Market Value of shares of Common Stock
is determined under (2) above, the average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the specified
date shall be weighted inversely by the respective numbers of trading days
between the dates of reported sales and the specified date (i.e., the valuation
date), in accordance with Treas. Reg. ss. 20.2031-2(b)(1), or any successor
thereto.
(b) Options Over Annual Limit. If an Option intended as an ISO is
granted to a Key Employee and such Option may not be treated in whole or in part
as an ISO pursuant to the limitation in Subsection (a) above, such Option shall
be treated as an ISO to the extent it may be so treated under such limitation
and as an NQSO as to the remainder. For purposes of determining whether an ISO
would cause such limitation to be exceeded, ISOs shall be taken into account in
the order granted.
(c) NQSOs. The annual limits set forth above for ISOs shall not apply
to NQSOs.
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SECTION 7
Option Agreements - Other Provisions
------------------------------------
Options granted under the Plan shall be evidenced by written documents
("Option Agreements") in such form as the Committee shall, from time to time,
approve. An Option Agreement shall specify whether the Option is an ISO or NQSO;
provided, however, if the Option is not designated in the Option Agreement as an
ISO or NQSO, the Option shall constitute an ISO if it complies with the terms of
section 422 of the Code, and otherwise, it shall constitute an NQSO. Each
Optionee shall enter into, and be bound by, such Option Agreements, as soon as
practicable after the grant of an Option.
In connection with the grant of any Option, the associated Option
Agreement may, in the discretion of the Committee, modify or vary any of the
terms of this Plan, including, without limitation, the terms relating to the
vesting and exercise of options, both in general and upon termination of
employment or service, disability, and death, the terms relating to the number
of shares issuable upon the exercise of outstanding Options and the treatment of
Options upon the occurrence of certain corporate transactions; provided,
however, that any further increase in the maximum number of shares which may be
granted to an individual in a single grant pursuant to the Plan shall require
such shareholder approval as may be then required under the applicable rules and
regulations under the Internal Revenue Code of 1986, as amended, or any
successor thereto; and
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that with respect to any grant of an option which is intended to be an incentive
stock option the terms of the Plan, as in effect on the date hereof or
subsequently amended, and not the terms of the applicable Option Agreement,
shall control. In all other cases, in the event of any inconsistency or conflict
between an Option Agreement approved by the Committee and this Plan, the terms
of the Option Agreement shall control to the extent provided in the Option
Agreement. No Option Agreement may be amended except in a writing executed by a
duly authorized officer of the Company and the Optionee or his permitted
successors and assigns.
SECTION 8
Terms and Conditions of Options
-------------------------------
Options granted pursuant to the Plan shall include expressly or by
reference the following terms and conditions, as well as such other provisions
not inconsistent with the provisions of this Plan and, for ISOs granted under
this Plan, the provisions of section 422(b) of the Code, as the Committee shall
deem desirable:
(a) Number of Shares. A statement of the number of shares to which the
Option pertains.
(b) Price. A statement of the Option price which shall be determined
and fixed by the Committee in its discretion, but shall not be less than the
higher of 100% (110% in the case of ISOs granted to more than 10% shareholders
as discussed in
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Subsection (j) below) of the fair market value of the optioned shares of Common
Stock, or the par value thereof, on the date the Option is granted.
(c) Term.
(1) ISOs. Subject to earlier termination as provided in
Subsections (e), (f) and (g) below and in Section 9 hereof, the term of each ISO
shall be not more than ten years (five years in the case of more than 10%
shareholders as discussed in Subsection (j) below) from the date of grant.
(2) NQSOs. Subject to earlier termination as provided in
Subsections (e), (f) and (g) below and in Section 9 hereof, the term of each
NQSO shall be not more than ten years from the date of grant.
(d) Exercise.
(1) General. Options shall be exercisable in such installments
and on such dates, not less than six months from the date of grant, as the
Committee may specify, provided that:
(A) in the case of new Options granted to an Optionee in
replacement for options (whether granted under the Plan or otherwise) held by
the Optionee, the new Options may be made exercisable, if so determined by the
Committee, in its discretion, at the earliest date the replaced options were
exercisable, but not earlier than three months from the date of grant of the new
Options; and
(B) the Committee may accelerate the
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exercise date of any outstanding Options (including, without limitation, the
three-month exercise date referred to in (i) above), in its discretion, if it
deems such acceleration to be desirable.
Any Option shares, the right to the purchase of which has accrued, may
be purchased at any time up to the expiration or termination of the Option.
Exercisable Options may be exercised, in whole or in part, from time to time by
giving written notice of exercise to the Company at its principal office,
specifying the number of shares to be purchased and accompanied by payment in
full of the aggregate Option exercise price for such shares. Only full shares
shall be issued under the Plan, and any fractional share which might otherwise
be issuable upon exercise of an Option granted hereunder shall be forfeited.
(2) Manner of Payment. The Option price shall be payable:
(A) in cash or its equivalent;
(B) in the case of an ISO, if the Committee in its
discretion causes the Option Agreement so to provide, and in the case of an
NQSO, if the Committee in its discretion so determines at or prior to the time
of exercise:
(i) in Common Stock previously acquired by the Optionee;
provided that if such shares of Common Stock were acquired through the exercise
of an incentive stock option and are used to pay the Option price of an ISO,
such shares have been held by the Optionee for a period of not less than the
holding
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period described in section 422(a)(1) of the Code on the date of exercise, or if
such shares of Common Stock were acquired through exercise of a non-qualified
stock option or through exercise of an incentive stock option and are used to
pay the Option price of an NQSO, such shares have been held by the Optionee for
a period of more than 12 months on the date of exercise;
(ii) in Common Stock newly acquired by the Optionee upon
exercise of such Option (which shall constitute a disqualifying disposition in
the case of an ISO);
(iii) in the discretion of the Committee, in any
combination of (A), (B)(i) and (B)(ii) above; or
(iv) by delivering a properly executed notice of exercise
of the Option to the Company and a broker, with irrevocable instructions to the
broker promptly to deliver to the Company the amount of sale or loan proceeds
necessary to pay the exercise price of the Option.
In the event the Option price is paid, in whole or in part, with
shares of Common Stock, the portion of the Option price so paid shall be equal
to the Fair Market Value on the date of exercise of the Option of the Common
Stock surrendered in payment of such Option price.
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(e) Termination of Employment or Service. If an Optionee's employment
by or service with the Company (and Related Corporations) is terminated by
either party prior to the expiration date fixed for his or her Option for any
reason other than death or disability, such Option may be exercised, to the
extent of the number of shares with respect to which the Optionee could have
exercised it on the date of such termination, or to any greater extent permitted
by the Committee, by the Optionee at any time prior to the earlier of (i) the
expiration date specified in such Option, or (ii) an accelerated termination
date determined by the Committee, in its discretion, except that, subject to
Section 9 hereof, such accelerated termination date shall not be earlier than
the date of the Optionee's termination of employment or service, and in the case
of an ISO, such termination date shall not be later than three months after the
date of the Key Employee's termination of employment.
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(f) Exercise upon Disability of Optionee. If an Optionee shall become
disabled (within the meaning of section 22(e)(3) of the Code) during his or her
employment by or service with the Company (and Related Corporations) and, prior
to the expiration date fixed for his or her Option, his or her employment or
service is terminated as a consequence of such disability, such Option may be
exercised, to the extent of the number of shares with respect to which the
Optionee could have exercised it on the date of such termination, or to any
greater extent permitted by the Committee, by the Optionee at any time prior to
the earlier of (i) the expiration date specified in such Option, or (ii) an
accelerated termination date determined by the Committee, in its discretion,
except that, subject to Section 9 hereof, such accelerated termination date
shall not be earlier than the date of the Optionee's termination of employment
or service by reason of disability, and in the case of an ISO, such date shall
not be later than one year after the date of the Key Employee's termination of
employment. In the event of the Optionee's legal disability, such Option may be
so exercised by the Optionee's legal representative.
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(g) Exercise upon Death of Optionee. If an Optionee shall die during
his or her employment by or service with the Company (and Related Corporations),
and prior to the expiration date fixed for his or her Option, or if an Optionee
whose employment or service is terminated for any reason, shall die following
his or her termination of employment or service but prior to the earliest of (i)
the expiration date fixed for his or her Option, (ii) the expiration of the
period determined under Subsections (e) and (f) above, or (iii) in the case of
an ISO, three months following termination of the Key Employee's employment,
such Option may be exercised, to the extent of the number of shares with respect
to which the Optionee could have exercised it on the date of his or her death,
or to any greater extent permitted by the Committee, by the Optionee's estate,
personal representative or beneficiary who acquired the right to exercise such
Option by bequest or inheritance or by reason of the death of the Optionee, at
any time prior to the earlier of (i) the expiration date specified in such
Option or (ii) an accelerated termination date determined by the Committee, in
its discretion except that, subject to Section 9 hereof, such accelerated
termination date shall not be earlier than one year, nor later than three years
after the date of death.
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(h) Non-Transferability. No Option shall be assignable or transferable
by the Optionee otherwise than by will or by the laws of descent and
distribution, and during the lifetime of the Optionee, the Option shall be
exercisable only by him or her or by his or her guardian or legal
representative. If the Optionee is married at the time of exercise and if the
Optionee so requests at the time of exercise, the certificate or certificates
shall be registered in the name of the Optionee and the Optionee's spouse,
jointly, with right of survivorship.
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(i) Rights as a Stockholder. An Optionee shall have no rights as a
stockholder with respect to any shares covered by his or her Option until the
issuance of a stock certificate to him for such shares.
(j) Ten Percent Shareholder. If the Optionee owns more than 10% of the
total combined voting power of all shares of stock of the Company or of a
Related Corporation at the time an ISO is granted to him or her, the Option
price for the ISO shall be not less than 110% of the fair market value of the
optioned shares of Common Stock on the date the ISO is granted, and such ISO, by
its terms, shall not be exercisable after the expiration of five years from the
date the ISO is granted. The conditions set forth in this Subsection (j) shall
not apply to NQSOs.
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(k) Listing and Registration of Shares. Each Option shall be subject
to the requirement that, if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the shares
covered thereby upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such Option
or the purchase of shares thereunder, or that action by the Company or by the
Optionee should be taken in order to obtain an exemption from any such
requirement, no such Option may be exercised, in whole or in part, unless and
until such listing, registration, qualification, consent, approval, or action
shall have been effected, obtained, or taken under conditions acceptable to the
Committee. Without limiting the generality of the foregoing, each Optionee or
his legal representative or beneficiary may also be required to give
satisfactory assurance that shares purchased upon exercise of an Option are
being purchased for investment and not with a view to distribution, and
certificates representing such shares may be legended accordingly.
(l) Withholding and Use of Shares to Satisfy Tax Obligations. The
obligation of the Company to deliver shares of Common Stock upon the exercise of
any Option shall be subject to applicable federal, state and local tax
withholding requirements.
If the exercise of any Option is subject to the withholding
requirements of applicable tax laws, the Committee,
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in its discretion (and subject to such withholding rules ("Withholding Rules")
as shall be adopted by the Committee), may permit the Optionee to satisfy the
withholding tax, in whole or in part, by electing to have the Company withhold
(or by returning to the Company) shares of Common Stock, which shares shall be
valued, for this purpose, at their Fair Market Value on the date of exercise of
the Option (or if later, the date on which the Optionee recognizes ordinary
income with respect to such exercise) (the "Determination Date"); provided,
however, that with respect to Optionees who are subject to section 16 of the
Exchange Act, any such amount of taxes required to be withheld automatically
shall be satisfied by withholding Common Stock or, in the discretion of the
Committee, by receipt of cash. An election to use shares of Common Stock to
satisfy tax withholding requirements must be made in compliance with and subject
to the Withholding Rules. The Committee may not withhold shares in excess of the
number necessary to satisfy the minimum federal income tax withholding
requirements. In the event shares of Common Stock acquired under the exercise of
an ISO are used to satisfy such withholding requirement, such shares of Common
Stock must have been held by the Optionee for a period of not less than the
holding period described in section 422(a)(1) of the Code on the Determination
Date, or if such shares of Common Stock were acquired through exercise of an
NQSO or of an option under a similar plan, such option was granted to the
Optionee at least six months prior to the Determination Date.
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SECTION 9
Capital Adjustments
-------------------
The number of shares which may be issued under the Plan, the maximum
number of shares with respect to which Options may be granted to any Key
Employee under the Plan, both as stated in Section 4 hereof, and the number of
shares issuable upon exercise of outstanding Options under the Plan (as well as
the Option price per share under such outstanding Options), shall, subject to
the provisions of section 424(a) of the Code, be adjusted, as may be deemed
appropriate by the Committee, to reflect any stock dividend, stock split, share
combination, or similar change in the capitalization of the Company.
In the event of a corporate transaction (as that term is
described in section 424(a) of the Code and the Treasury Regulations issued
thereunder as, for example, a merger, consolidation, acquisition of property or
stock, separation, reorganization, or liquidation), each outstanding Option
shall be assumed by the surviving or successor corporation; provided, however,
that, in the event of a proposed corporate transaction, the Committee may
terminate all or a portion of the outstanding Options if it determines that such
termination is in the best interests of the Company. If the Committee decides to
terminate outstanding Options, the Committee shall give each Optionee holding an
outstanding Option to be terminated not less than seven days' notice prior to
any such termination by reason of
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such a corporate transaction, and any such Option which is to be so terminated
may be exercised (if and only to the extent that it is then exercisable) up to,
and including the date immediately preceding such termination. Further, as
provided in Section 8(d) hereof the Committee, in its discretion, may
accelerate, in whole or in part, the date on which any or all Options become
exercisable.
The Committee also may, in its discretion, change the terms of any
outstanding Option to reflect any such corporate transaction, provided that, in
the case of ISOs, such change is excluded from the definition of a
"modification" under section 424(h) of the Code.
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SECTION 10
Acquisitions
------------
Notwithstanding any other provision of this Plan, Options may
be granted hereunder in substitution for options held by directors, key
employees, and associates of other corporations who are about to, or have,
become Key Employees or Associates of the Company or a Related Corporation as a
result of a merger, consolidation, acquisition of assets or similar transaction
by the Company or a Related Corporation. The terms, including the option price,
of the substitute options so granted may vary from the terms set forth in this
Plan to such extent as the Committee may deem appropriate to conform, in whole
or in part, to the provisions of the options in substitution for which they are
granted.
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SECTION 11
Amendment or Replacement of Outstanding Options
-----------------------------------------------
The Committee shall have the authority to effect, at any time and from
time to time, with the consent of the affected Optionees, the cancellation of
any or all outstanding Options under the Plan and to grant in substitution
therefor new Options under the Plan covering the same or a different number of
shares of Common Stock but having a per share purchase price not less than the
greater of par value or 100% of the Fair Market Value of a share of Common Stock
on the new date of the grant. The Committee may permit the voluntary surrender
of all or a portion of any Option to be conditioned upon the granting to the
Optionee under the Plan of a new Option for the same or a different number of
shares of Common Stock as the Option surrendered, or may require such voluntary
surrender as a condition precedent to a grant of a new Option to such Optionee.
Any new Option shall be exercisable at the price, during the period, and in
accordance with any other terms and conditions specified by the Committee at the
time the new Option is granted, all determined in accordance with the provisions
of the Plan without regard to the price, period of exercise, and any other terms
or conditions of the Option surrendered.
SECTION 12
Amendment or Discontinuance of the Plan
---------------------------------------
(a) General. The Board from time to time may suspend
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or discontinue the Plan or amend it in any respect whatsoever, except that the
following amendments shall require shareholder approval (given in the manner set
forth in Subsection (b) below):
(1) Any amendment which would:
(A) materially increase the benefits accruing to directors
and officers, within the meaning of 17 CFR ss. 240.16a-1(f) (hereinafter
referred to as "Officers"), under the Plan;
(B) materially increase the number of shares of Common
Stock which may be issued to directors and Officers under the Plan; or
(C) materially modify the requirements as to eligibility
for directors and Officers to participate in the Plan;
(2) With respect to ISOs, any amendment which would:
(A) change the class of employees eligible to participate
in the Plan;
(B) except as permitted under Section 9 hereof, increase
the maximum number of shares of Common Stock with respect to which ISOs may be
granted under the Plan; or
(C) extend the duration of the Plan under Section 18 hereof
with respect to any ISOs granted hereunder;
(3) Any amendment which would require shareholder approval
pursuant to Treas. Reg. ss.1.162-27(e)(4)(vi), or any successor thereto.
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Notwithstanding the foregoing, no such suspension, discontinuance or amendment
shall materially impair the rights of any holder of an outstanding Option
without the consent of such holder.
(b) Shareholder Approval Requirements. Shareholder approval must meet
the following requirements:
(i) The approval of shareholders must be by a majority of the
outstanding shares of Common Stock either (A) present, or represented,
and entitled to vote at a meeting duly held in accordance with the
applicable laws of the State of Delaware or (B) pursuant to written
consent of shareholders in lieu of a meeting in accordance with the
applicable laws of the State of Delaware; and
(ii) The approval of shareholders must comply with all applicable
provisions of the corporate charter, bylaws, and applicable state law
prescribing the method and degree of shareholder approval required for
the issuance of corporate stock or options. If the applicable state
law does not prescribe a method and degree of shareholder approval in
such case, the approval of shareholders must be effected:
(A) By a method and in a degree that would be treated as
adequate under applicable state law in the case of an action
requiring shareholder approval (i.e., an action on which
shareholders would be entitled to vote if the action were taken
at a duly held shareholders' meeting); or
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(B) By a majority of the votes cast at a duly held
shareholders' meeting at which a quorum representing a majority
of all outstanding voting stock is, either in person or by proxy,
present and voting on the plan.
SECTION 13
Rights
------
Neither the adoption of the Plan nor any action of the Board or the
Committee shall be deemed to give any individual any right to be granted an
Option, or any other right hereunder, unless and until the Committee shall have
granted such individual an Option, and then his rights shall be only such as are
provided by the Option Agreement.
Any Option under the Plan shall not entitle the holder thereof to any
rights as a stockholder of the Company prior to the exercise of such Option and
the issuance of the shares pursuant thereto. Further, notwithstanding any
provisions of the Plan or the Option Agreement with an Optionee, the Company
shall have the right, in its discretion, to retire an Optionee at any time
pursuant to its retirement rules or otherwise to terminate his or her employment
or service at any time for any reason whatsoever.
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SECTION 14
Indemnification of Board and Committee
--------------------------------------
Without limiting any other rights of indemnification which they may
have from the Company and any Related Corporation, the members of the Board and
the members of the Committee shall be indemnified by the Company against all
costs and expenses reasonably incurred by them in connection with any claim,
action, suit, or proceeding 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 legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit, or proceeding, except a judgment based upon a finding of
willful misconduct or recklessness on their part. Upon the making or institution
of any such claim, action, suit, or proceeding, the Board or Committee member
shall notify the Company in writing, giving the Company an opportunity, at its
own expense, to handle and defend the same before such Board or Committee member
undertakes to handle it on his own behalf.
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SECTION 15
Application of Funds
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The proceeds received by the Company from the sale of Common Stock
pursuant to Options granted under the Plan shall be used for general corporate
purposes. Any cash received in payment for shares upon exercise of an Option to
purchase Common Stock shall be added to the general funds of the Company and
shall be used for its corporate purposes. Any Common Stock received in payment
for shares upon exercise of an Option to purchase Common Stock shall become
treasury stock.
SECTION 16
Shareholder Approval
--------------------
This Plan shall become effective as of March 22, 1996 (the date the
Plan was adopted by the Board); provided, however, that if the Plan is not
approved in the manner described in Section 12(b) within 12 months before or
after said date, the Plan and all Options granted hereunder shall be null and
void and no additional options shall be granted hereunder.
SECTION 17
No Obligation to Exercise Option
--------------------------------
The granting of an Option shall impose no obligation upon an Optionee
to exercise such Option.
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SECTION 18
Termination of Plan
-------------------
Unless earlier terminated as provided in the Plan, the Plan and all
authority granted hereunder shall terminate absolutely at 12:00 midnight on
March 21, 2006, which date is within ten years after the date the Plan was
adopted by the Board (or the date the Plan was approved by the shareholders of
the Company, whichever is earlier), and no Options hereunder shall be granted
thereafter. Nothing contained in this Section 18, however, shall terminate or
affect the continued existence of rights created under Options issued hereunder
and outstanding on March 21, 2006, which by their terms extend beyond such date.
SECTION 19
Governing Law
-------------
With respect to any ISOs granted pursuant to the Plan and the Option
Agreements thereunder, the Plan, such Option Agreements and any ISOs granted
pursuant thereto shall be governed by the applicable Code provisions to the
maximum extent possible. Otherwise, the laws of the state of Delaware shall
govern the operation of, and the rights of Optionees under, the Plan, the Option
Agreements and any Options granted thereunder.
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