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PENWEST, LTD.
1994 STOCK OPTION PLAN
(AS AMENDED JANUARY 23, 1996)
1. INTRODUCTION:
This Plan establishes the right of and procedures for PENWEST, LTD.
(the "Company") to grant stock options to its key employees. The Plan provides
for the granting of two types of options, namely, (1) Non-Statutory Stock
Options and (2) Incentive Stock Options. This Plan sets forth provisions
applicable to both types of options, to Non-Statutory Options only and to
Incentive Stock Options only.
2. PROVISIONS OF GENERAL APPLICATION:
The provisions of this Section 2 apply to both Non-Statutory Options
and Incentive Stock Options granted by the Company.
2.1 Objectives of the Plan:
The purpose of this Plan is to encourage ownership of Common Stock of
the Company by key employees of the Company and any subsidiary. This Plan is
intended to provide an incentive for maximum effort in the successful operation
of the Company and is expected to benefit the shareholders by enabling the
Company to attract and retain personnel of the best available talent through the
opportunity to share, by the proprietary interests created by this Plan, in the
increased value of the Company's shares to which such personnel have
contributed.
2.2 Stock Reserved for this Plan:
The stock reserved for issue upon the exercise of options granted under
this Plan will not exceed 500,000 shares of the Common Stock of the Company (the
"Shares"). Except to the extent provided by the last sentence of this Section
2.2, if any outstanding option under this Plan expires or is terminated for any
reason, Shares allocable to the unexercised portion of such option shall remain
available for other options under this Plan provided that the aggregate number
of Shares subject to options under this Plan shall not exceed 500,000 Shares.
The maximum number of Shares for which grants of options may be made to any
employee over the life of this Plan is 100,000. If an option granted to an
employee is canceled, the canceled option shall be counted against the maximum
number of shares for which options may be granted to the employee hereunder.
2.3 Administration of this Plan:
This Plan will be administered by the Compensation Committee of the
Board of Directors of the Company (the "Committee") composed of two or more
members all of whom shall be "disinterested persons" as defined in the rules and
regulations promulgated by the Securities and Exchange Commission pursuant to
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and all of whom shall be "outside directors" as defined in the regulations
promulgated by the Internal Revenue Service pursuant to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
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A majority of the Committee shall constitute a quorum, and acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by all members of the Committee, shall be deemed the
acts of the Committee.
The Committee, after considering the recommendations of the President
and other officers of the Company, if the Committee shall deem the same
appropriate, shall:
(a) determine the number of shares subject to each option, the
terms thereof and the type of options to be granted, and direct the
President, or other officer in his absence, to enter into an
appropriate agreement evidencing such option;
(b) prescribe rules and regulations from time to time for
administration of this Plan;
(c) decide any questions arising as to the interpretation or
application of any provision of this Plan.
Any action, decision, interpretation or determination by the Committee
with respect to this Plan shall be final and binding upon all employees.
This Plan shall otherwise be administered in accordance with Section 16
of the Exchange Act, including where required or advisable any amendments
thereto or successor statutes.
2.4 Eligibility Facts to be Considered in Granting Options:
An option may be granted to any officer or key employee who, at the
time the option is granted, is a regular full time employee of the Company or of
any subsidiary. In its determination of an employee to whom an option shall be
granted and the number of Shares to be covered by such option, the Committee
shall take into account the duties of the employee, the present and potential
contributions of the employee to the success of the Company, the anticipated
number of years of service remaining before the attainment by the employee of
the age of retirement, and other factors deemed relevant by the Committee in
connection with accomplishing the purpose of this Plan. An employee who has been
granted an option to purchase Shares, whether under this Plan or otherwise, may,
if the Committee shall so determine, be granted additional options. As used in
this Plan, the term "Optionee" shall refer to the holder of an option granted
hereunder.
2.5 Vesting of Options:
The Committee shall have the authority to establish the conditions for
determining when the optioned Shares may be purchased, and whether all of the
options may be exercised at one time or in increments. The conditions for
vesting may include continued employment, attainment of individual,
departmental, divisional or Company goals, or such other conditions as the
Committee may designate.
2.6 Accelerated Vesting:
The Committee shall have the authority to establish criteria for
accelerating the vesting of options if certain events occur. The Committee may
provide for accelerated vesting in the case of such events as merger,
consolidation, reorganization, tender offer, takeover bid, sale of assets, or
dissolution.
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All options shall automatically vest upon the option holder's: (i) death, (ii)
"disability" as defined in, and determined in accordance with, the Company's
Supplemental Plan of Disability, or (iii) retirement (1) in accordance with the
Company's normal retirement policy or (2) prior to attaining sixty-five (65)
years of age provided specific approval of such vesting is given by the Company.
No such acceleration shall allow the holder of an option to purchase any
optioned Shares for which the options have expired.
2.7 Terms and Expiration of Options:
Each option granted under this Plan shall be in writing, shall be
subject to such amendment or modification from time to time as the Committee
shall deem necessary or appropriate to comply with, or take advantage of
applicable laws or regulations and shall contain provisions to the following
effect, together with such other provisions as the Committee shall from time to
time approve:
(a) that, subject to the provisions of Section 2.7(b) below,
the option, as to the whole or any part thereof, may be exercised only
by the Optionee or his or her personal representative;
(b) that neither the whole nor any part of the option shall be
transferable by the Optionee or by operation of law otherwise than by
the will of, or by the laws of descent and distribution applicable to,
a deceased Optionee and that the option and any and all rights granted
to the Optionee thereunder and not theretofore effectively and
completely exercised shall automatically terminate and expire upon any
sale, transfer or hypothecation or any attempted sale, transfer or
hypothecation of such rights or upon the bankruptcy or insolvency of
the Optionee or his or her estate;
(c) that subject to the foregoing provisions, an option may be
exercised at different times for portions of the total number of option
Shares for which the right to purchase or exercise shall have vested
provided that such portions are in multiples of five (5) Shares;
(d) that the Optionee shall have no right to receive any
dividend on or to vote or exercise and right in respect of any Shares
the certificate for which has not been issued to him or her;
(e) that the option shall each expire at the earliest of the
following:
(1) the date specified in the option;
(2) a date specified in the option but not later than
twelve (12) months after voluntary or involuntary termination
of the Optionee's employment other than termination as
described in Paragraph (3) below;
(3) upon the discharge of the Optionee for
misconduct, willfully or wantonly harmful to the Company;
(4) twelve (12) months after the Optionee's death or
disability;
(5) such earlier date as the Committee may specify in
the event of a merger, consolidation, reorganization, tender
offer, takeover bid, sale of assets, or dissolution;
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(f) that the terms of the option shall not be affected by any
change of the Optionee's duties or position so long as the Optionee
shall continue to be employed by the Company or a subsidiary.
2.8 Notice of Intent to Exercise Option:
The Optionee (or other person or persons, if any, entitled thereto
hereunder) desiring to exercise an option granted hereunder as to all or part of
the Shares covered thereby shall in writing notify the Company at its principal
office at Bellevue, Washington, to that effect specifying the number of option
Shares to be purchased. With respect to any Shares acquired pursuant to Section
2.6, the Optionee shall be deemed to have given to the Company the notice of
exercise required by this Section 2.8 ten (10) days prior to the closing or
effective date of any accelerating event.
2.9 Recapitalization:
The aggregate number of Shares for which options may be granted
hereunder, the number of Shares 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 outstanding shares of Common Stock of the
Company resulting from a division or consolidation of shares or any other
increase or decrease in such shares effected without receipt of consideration by
the Company excluding any decrease resulting from the purchase of shares for the
treasury. If the adjustment would result in a fractional share, the Optionee
shall be entitled to one (1) additional share, provided that the total number of
Shares to be granted under this Plan shall not be increased above the equivalent
number of shares initially allocated to this Plan or subsequently approved by
the shareholders of the Company for issuance hereunder.
2.10 Termination and Amendment of this Plan:
The directors of the Company may at any time modify, amend or terminate
this Plan except with respect to options granted prior to such action, provided,
however, that no such amendment or modification shall increase the number of
Shares as to which options may be granted under this Plan or change the class of
employee to whom options may be granted under this Plan.
2.11 Granting of Options:
The granting of any option pursuant to this Plan shall be entirely in
the discretion of the Committee and nothing herein contained shall be construed
to give any officer or employee any right to participate under this Plan or to
receive any option under it.
The granting of an option pursuant to this Plan shall not constitute an
agreement or understanding, express or implied, on the part of the Company or a
subsidiary to employ the Optionee for any specified period.
2.12 Withdrawal:
An Optionee may at any time elect in writing to abandon an option with
respect to the number of Shares as to which the option shall not have been
exercised.
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2.13 Government Regulations:
This Plan and the granting and exercise of any option hereunder and the
obligations of the Company to sell and deliver Shares under any such option
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies as may be required. This Plan shall be
governed by the laws of the State of Washington.
2.14 Shareholder Approval:
This Plan shall be submitted to the shareholders for their approval
within twelve (12) months - from the date hereof.
2.15 Compliance with Securities Laws:
The Committee shall have the right to:
(a) require an Optionee to execute, as a condition of the
exercise of an option, a letter evidencing the Optionee's intent to
acquire the Shares for investment and not with a view to the
distribution thereof;
(b) place appropriate legends upon the certificate or
certificates for the Shares; and
(c) take such other acts as it deems necessary in order to
cause the issuance of optioned Shares to comply with applicable
provisions of state and federal securities laws.
3. PROVISIONS APPLICABLE TO NON-STATUTORY AND INCENTIVE STOCK
OPTIONS:
The provisions of this Section 3 shall apply to Non-Statutory Options
and Incentive Stock Options.
3.1 Method of Exercise of Option:
Within ten (10) days after receipt by the Company of the notice
provided for in Section 2.8, but not later than the expiration date specified in
Section 2.7(e), the option shall be exercised as to the number of Shares
specified in the notice of payment to the Company of the amount specified in
either Section 4.2 or Section 5.5, as may be applicable. Payment of the purchase
price provided in the option shall be made in cash, in shares of the Company's
Common Stock, or in any combination of cash and shares of the Company's Common
Stock. Full or partial payment in shares of the Company's Common Stock shall be
deemed to be the equivalent of payment in cash of the fair market value of those
shares. For purposes of the preceding sentence and this Plan, "fair market
value" is defined as the average, if any, of the closing prices for the Common
Stock as of 4:00 p.m. Eastern Time on the date of exercise on the principal
trading exchange or national automated stock quotation system on which the
Common Stock is traded or quoted. Payment of the purchase price in shares of the
Company's Common Stock shall be subject to rules and procedures established by
the Committee including but not limited to any minimum holding period of the
shares used in payment of the purchase price.
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3.2 Holding Period:
Any Optionee who is an officer, director or ten percent (10%)
shareholder of the Company shall be precluded from selling or transferring any
Common Stock or other security of the Company underlying an option during the
six (6) months immediately following the grant of the option.
3.3 Substitutions and Assumptions:
The Committee shall have the right to substitute or assume options in
connection with mergers, reorganizations, separations or other "corporate
transactions" as that term is defined in and said substitutions and assumptions
are permitted by Section 425 of the Code, and the regulations promulgated
thereunder. The number of Shares reserved pursuant to Section 2.2 may be
increased by the corresponding number of options assumed and, in the case of a
substitution, by the net increase in the number of Shares subject to options
before and after the substitution.
3.4 Proceeds from Sale of Stock:
Proceeds of the purchase of optioned Shares by an Optionee shall be for
the general business purposes of the Company.
4. PROVISIONS APPLICABLE SOLELY TO NON-STATUTORY STOCK OPTIONS:
In addition to the provisions of Sections 2 and 3, the following
paragraphs shall apply to any options granted under this Plan which are not
Incentive Stock Options.
4.1 Option Price:
The option or purchase price of each Share optioned under this Plan
shall be determined by the Committee at the time the option is granted, provided
that the option price shall not be less than the fair market value of such
Shares on the date of grant.
4.2 Method of Exercise of Option:
The amount to be paid by the optionee upon exercise of a Non-Statutory
Option shall be the full purchase price thereof provided in the option, together
with the amount of federal, state or local taxes of any kind required to be
withheld by the Company. An Optionee may elect to pay his or her withholding
taxes by having the Company withhold shares of Company stock having a value
equal to the amount required to be withheld. The value of the shares to be
withheld is deemed to be equal to the fair market value of the shares on the day
the option is exercised. An election by an Optionee to have shares withheld for
this purpose will be subject to the following restrictions:
(a) if an Optionee has received multiple option grants, a
separate election must be made for each grant;
(b) the election must be made prior to the day the option is
exercised;
(c) the election will be irrevocable; and
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(d) the election will be subject to the disapproval of the
Committee.
5. PROVISIONS APPLICABLE SOLELY TO INCENTIVE STOCK OPTIONS:
In addition to the provisions of Sections 2 and 3, the following
paragraphs shall apply to any options granted under this Plan which are
Incentive Stock Options.
5.1 Conformance with Internal Revenue Code:
Options granted under this Plan which are "Incentive Stock Options"
shall conform to, be governed by and interpreted in accordance with, Section 422
of the Code and any regulations promulgated thereunder as well as any amendments
to the Code and such regulations.
5.2 Option Price:
The option or purchase price of each Share optioned under the Incentive
Stock Option provisions of this Plan shall be determined by the Committee at the
time of the action for the granting of the option but shall not, in any event,
be less than the fair market value of such Shares on the date of grant.
5.3 Limitation on Vesting of Incentive Stock Option:
The aggregate fair market value of the option Shares (determined on the
date of grant) with respect to which Incentive Stock Options are exercisable for
the first time by an Optionee during any calendar year (under this Plan and any
other plan of the Company or its subsidiaries which authorizes Incentive Stock
Options) shall not exceed $100,000.
5.4 Limitation on Grants to Substantial Shareholders:
An employee may not, immediately prior to the grant of an Incentive
Stock Option hereunder, own stock in the Company representing more than ten
percent (10%) of the voting power of all classes of stock of the Company unless
the per share option price specified by the Committee for the Incentive Stock
Options granted such an employee is at least one hundred ten percent (110%) of
the fair market value of the Company's stock on the date of grant and such
option, by its terms, is not exercisable after the expiration of five (5) years
from the date such option is granted.
5.5 Method of Exercise of Option:
The amount to be paid by the Optionee upon exercise of an Incentive
Stock Option shall be the full purchase price thereof provided in the option.
5.6 Time Limits on Grants and Exercises:
No Incentive Stock Option may be granted after October 26, 2004, and no
Incentive Stock Option may have a term of more than ten (10) years.
DATED as of this 26th day of October, 1994.
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PENWEST, LTD.
By /s/ Tod R. Hamachek
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Its President
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ATTEST:
/s/ Jeffrey T. Cook
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Its Secretary
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