1
EXHIBIT 10.1
FINE.COM CORPORATION
INCENTIVE STOCK OPTION PLAN
SECTION 1. Purpose. The purpose of this Incentive Stock Option Plan (this
"Plan") is to provide a means whereby fine.com Corporation (the "Company") or
any parent or subsidiary of the Company, as defined in Subsection 5.9 (the
"related Corporations"), may continue to attract, motivate and retain selected
employees, officers and independent contractors who can materially contribute to
the Company's growth and success, and to encourage stock ownership in the
Company through granting incentive stock options and/or nonqualified stock
options to purchase the Common Stock of the Company (as defined in Section 3),
so that such key employees will more closely identify their interests with those
of the Company and its shareholders.
SECTION 2. Administration. This Plan shall be administered by the
Board of Directors of the Company (the "Board") or, in the event the Board
shall appoint and/or authorize a committee to administer this Plan, by such
committee. The administrator of this Plan shall hereinafter be referred to
as the "Plan Administrator."
If the Company registers any of its equity securities pursuant to Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), then the following provisions shall apply to the administration of this
Plan with respect to grants made to officers or other optionees affected by
Section 16(b) of the Exchange Act. The Plan Administrator shall be constituted
at all times so as to meet the requirements of Section 16(b) of the Exchange
Act, as amended from time to time. Currently, the Plan Administrator shall be
the Board, of which all the Directors are disinterested, or may be a committee
which consists solely of two or more disinterested directors of the Company. The
members of any committee serving as Plan Administrator shall be appointed by the
Board for such term as the Board may determine. The Board may from time to time
remove members from, or add members to, the committee. Vacancies on the
committee, however caused, may be filled by the Board. If at any time an
insufficient number of disinterested directors is available to serve on such
committee, interested directors may serve on the committee; however, during such
time, no options shall be granted under this Plan to any person if the granting
of such option would not meet the requirements of Section 16(b) of the Exchange
Act.
For purposes of this Section 2, a disinterested director is a member of
the Board who meets the definition of "disinterested person" as set forth in the
rules and regulations promulgated under Section 16(b) of the Exchange Act, as
amended from time to time. Currently, a disinterested director for purposes of
this Section 2 is a member of the Board who for one year prior to service as an
administrator of this Plan has not been (and during service as a Plan
Administrator will not be) granted or awarded equity securities, including
options for equity securities, pursuant to this Plan or any other plan of the
Company or its affiliates, except for certain exclusions described in Rule
16b-
Page 1 - INCENTIVE STOCK OPTION PLAN
2
3.
2.1 Procedures. The Board may designate one of the members of the
Plan Administrator as chairperson. The Plan Administrator may hold meetings at
such times and places as it shall determine. The acts of a majority of the
members of the Plan Administrator present at meetings at which a quorum exists,
or acts reduced to or approved in writing by all Plan Administrator members,
shall be valid acts of the Plan Administrator.
2.2 Responsibilities. Except for the terms and conditions explicitly
set forth in this Plan, the Plan Administrator shall have the authority, in its
discretion, to determine all matters relating to the options to be granted under
this Plan, including selection of the individuals to be granted options, the
number of shares to be subject to each option, the exercise price, and all other
terms and conditions of the options. Grants under this Plan need not be
identical in any respect, even when made simultaneously. The interpretation and
construction by the Plan Administrator of any terms or provisions of this Plan
or any option issued under this Plan, or of any rule or regulation promulgated
in connection with this Plan, shall be conclusive and binding on all interested
parties, so long as such interpretation and construction with respect to
incentive stock options correspond to the requirements of Internal Revenue Code
(the "Code") Section 422, the regulations thereunder, and any amendments
thereto.
2.3 Section 16(b) Compliance and Bifurcation of Plan. It is the
intention of the Company that this Plan comply in all respects with Rule 16b-3
under the Exchange Act and, if any Plan provision is later found not to be in
compliance with such Section, the provision shall be deemed null and void, and
in all events the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3. Notwithstanding anything in the Plan to the
contrary, the Board, in its absolute discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to
participants who are officers and directors subject to Section 16(b) of the
Exchange Act without so restricting, limiting or conditioning the Plan with
respect to other participants.
SECTION 3. Stock Subject to This Plan. The stock subject to this Plan
shall be the Company's Common Stock (the "Common Stock"), presently authorized
but unissued or now held or subsequently acquired by the Company as treasury
shares. Subject to adjustment as provided in Section 7 of this Plan, the
aggregate amount of Common Stock to be delivered upon the exercise of all
options granted under this Plan shall not exceed 2,000,000 shares as such Common
Stock was constituted on the effective date of this Plan. If any option granted
under this Plan expires or is surrendered, canceled, terminated or exchanged for
another option, for any reason without having been exercised in full, the
unpurchased shares subject to such option shall again be available for purposes
of this Plan, including for replacement options which may be granted in exchange
for such surrendered, canceled or terminated options.
SECTION 4. Eligibility. An incentive stock option may be granted only to
an individual who, at the time the option is granted, is an employee of the
Company and who the Board may
Page 2 - INCENTIVE STOCK OPTION PLAN
3
from time to time select for participation in this Plan. Members of the Board
shall not be eligible for grants of incentive stock options unless they are also
employees of the Company. At the discretion of the Plan Administrator, employees
and independent contractors of the Company (excluding nonemployee directors) may
receive nonqualified stock options. Any party to whom an option is granted under
this Plan shall be referred to in this Plan as an "Optionee."
SECTION 5. Terms and Conditions of Options. Options granted under this
Plan shall be evidenced by written agreements which shall contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan. Notwithstanding the
foregoing, options shall include or incorporate by reference the following terms
and conditions:
5.1 Number of Shares. The maximum number of shares that may be
purchased pursuant to the exercise of each option shall be as established by the
Plan Administrator.
5.2 Price of Shares. The price per share at which each option is
exercisable (the "exercise price") shall be as established by the Plan
Administrator, provided that the Plan Administrator shall act in good faith to
establish the exercise price as follows:
5.2.1 Incentive Stock Options and Nonqualified Stock Options.
With respect to incentive stock options intended to qualify under Section 422 of
the Internal Revenue Code, and subject to Subsection 5.2.2 below, the exercise
price shall be not less than the fair market value per share of the Common Stock
at the time the option is granted. With respect to nonqualified stock options,
the exercise price shall be the amount set by the Plan Administrator, provided
that if the Company has registered any of its equity securities pursuant to
Section 12(b) or 12(g) of the Exchange Act, the exercise price shall not be less
than 85 percent of the fair market value of a share of the Common Stock at the
time the option is granted.
5.2.2 Incentive Stock Options to Greater than 10%
Shareholders. With respect to incentive stock options granted to greater than
10% shareholders of the Company, the exercise price shall be as required by
Section 6.
5.2.3 Fair Market Value. The fair market value per share of
the Common Stock for the purpose of determining the exercise price under this
Section 5.2 shall be determined by the Board in good faith at the time the
option is granted.
5.3 Term and Maturity. Subject to the restrictions contained in
Section 6 with respect to granting incentive stock options to greater than 10%
shareholders of the Company, the term of each incentive stock option shall be 10
years from the date it is granted unless a shorter period of time is established
by the Plan Administrator, but in no event shall the term of any incentive stock
option exceed 10 years. The term of each nonqualified stock option shall also be
10 years from the date it is granted unless a shorter period of time is
established by the Plan Administrator. To ensure that the Company or related
corporation will achieve the purpose and
Page 3 - INCENTIVE STOCK OPTION PLAN
4
receive the benefits contemplated in this Plan, any option granted to any
Optionee under this Plan shall, unless the condition of this sentence is waived
or modified in the agreement evidencing the option or by resolution adopted by
the Plan Administrator, be exercisable according to the following schedule:
Period of Optionee's
Continuous Relationship
With the Company or Related
Corporation From the Date Portion of Total Option
the Option Is Granted Which Is Exercisable
--------------------- --------------------
after 1 year 5%
after 2 years 15%
after 3 years 30%
after 4 years 50%
after 5 years 100%
5.4 Exercise. Subject to the vesting schedule described in
subsection 5.3 above and to any additional holding period required by applicable
law, each option may be exercised in whole or in part; provided, however, that
only whole shares will be issued pursuant to the exercise of any option and that
the exercise price shall not be less than the par value per share of the Common
Stock at the time the option is exercised. During an Optionee's lifetime, any
incentive stock options granted under this Plan are personal to him or her and
are exercisable solely by such Optionee. Options shall be exercised by delivery
to the Company of notice of the number of shares with respect to which the
option is exercised, together with payment of the exercise price.
5.5 Payment of Exercise Price. Payment of the option exercise price
shall be made in full at the time the notice of exercise of the option is
delivered to the Company and shall be in cash, bank certified or cashier's check
or personal check (unless at the time of exercise the Plan Administrator in a
particular case determines not to accept a personal check) for the Common Stock
being purchased.
The Plan Administrator can determine at the time the option is
granted for incentive stock options, or at any time before exercise for
nonqualified stock options, that additional forms of payment will be permitted,
including installment payments on such terms and over such period as the Plan
Administrator may determine in its discretion. To the extent permitted by the
Plan Administrator and applicable laws and regulations (including, but not
limited to, federal tax and securities laws and regulations and state corporate
law), an option may be exercised by:
(a) delivery of shares of stock of the Company held by an Optionee
having a fair market value equal to the exercise price, such fair market value
to be determined in good faith by the Plan Administrator;
Page 4 - INCENTIVE STOCK OPTION PLAN
5
(b) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the regulations of
the Federal Reserve Board, to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price and any federal, state or local
withholding tax obligations that may arise in connection with the exercise;
provided, that the Plan Administrator, in its sole discretion, may at any time
determine that this Subparagraph (c), to the extent the instructions to the
broker call for an immediate sale of the shares, shall not be applicable to any
Optionee who is subject to Section 16(b) of the Exchange Act if such transaction
would result in a violation of Section 16(b), or is not an employee at the time
of exercise; or
(c) delivery of a properly executed exercise notice together with
instructions to the Company to withhold from the shares that would otherwise be
issued upon exercise that number of shares having a fair market value equal to
the option exercise price.
5.6 Shareholders' Agreement. The Optionee shall agree to enter into
and be bound by the agreement which is in effect at the time an option is
exercised by the Optionee between the Company and its shareholders relating to
the repurchase by the Company of its outstanding Common Stock.
5.7 Withholding Tax Requirement. The Company or any related
corporation shall have the right to retain and withhold from any payment of cash
or Common Stock under this Plan the amount of taxes required by any government
to be withheld or otherwise deducted and paid with respect to such payment. At
its discretion, the Company may require an Optionee receiving shares of Common
Stock to reimburse the Company for any such taxes required to be withheld by the
Company and may withhold any distribution in whole or in part until the Company
is so reimbursed. In lieu of such withholding or reimbursement, the Company
shall have the right to withhold from any other cash amounts due or to become
due from the Company to the Optionee an amount equal to such taxes or to retain
and withhold a number of shares having a market value not less than the amount
of such taxes required to be withheld by the Company to reimburse the Company
for any such taxes and cancel (in whole or in part) any such shares so withheld.
If required by Section 16(b) of the Exchange Act, the election to pay
withholding taxes by delivery of shares held by any person who at the time of
exercise is subject to Section 16(b) of the Exchange Act, shall be made during
the quarterly 10-day window period required under Section 16(b) of the Exchange
Act for exercises of stock appreciation rights.
Page 5 - INCENTIVE STOCK OPTION PLAN
6
5.8 Nontransferability of Option. Options granted under this Plan
and the rights and privileges conferred by this Plan may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by the applicable laws of descent and
distribution, and shall not be subject to execution, attachment or similar
process. Any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of any option under this Plan or of any right or privilege conferred by
this Plan, contrary to the Code or to the provisions of this Plan, or the sale
or levy or any attachment or similar process upon the rights and privileges
conferred by this Plan shall be null and void. Notwithstanding the foregoing, an
Optionee may during the Optionee's lifetime, designate a person who may exercise
the option after the Optionee's death by giving written notice of such
designation to the Plan Administrator. Such designation may be changed from time
to time by the Optionee by giving written notice to the Plan Administrator
revoking any earlier designation and making a new designation.
5.9 Termination of Relationship. If the Optionee's relationship with
the Company or any related corporation ceases for any reason other than
termination for cause, death or total disability, and unless by its terms the
option sooner terminates or expires, then the Optionee may exercise, for a sixty
(60) day period after such cessation, that portion of the Optionee's option
which is exercisable at the time of such cessation. The Optionee's option,
however, shall terminate at the end of the sixty (60) day period following such
cessation as to all Shares for which it has not been exercised, unless such
provision is waived in the agreement evidencing the option or by resolution
adopted by the Plan Administrator. If, in the case of an incentive stock option,
an Optionee's relationship with the Company or related corporation changes
(i.e., from employee to nonemployee, such as a consultant), such change shall
constitute a termination of an Optionee's employment with the Company or related
corporation and the Optionee's incentive stock option shall terminate in
accordance with this subsection. Upon the expiration of the sixty (60) day
period following cessation of employment, the Plan Administrator shall have sole
discretion in a particular circumstance to extend the exercise period following
such cessation beyond that specified above. If, however, in the case of an
incentive stock option, the Optionee does not exercise the Optionee's option
within three months after cessation of employment, the option will no longer
qualify as an incentive stock option under the Code. Upon an Optionee's
termination of employment for cause, all of the optionee's outstanding (i.e.,
unexercised) options issued under this Plan shall immediately expire and no
longer be available for exercise.
If an Optionee's relationship with the Company or any related
corporation ceases because of a total disability, the Optionee's option shall
not terminate or, in the case of an incentive stock option, cease to be treated
as an incentive stock option until the end of the 12-month period following such
cessation (unless by its terms it sooner terminates and expires). As used in
this Plan, the term "total disability" refers to a mental or physical impairment
of the Optionee which is expected to result in death or which has lasted or is
expected to last for a continuous period of 12 months or more and which causes
the Optionee to be unable, in the opinion of the Company and two independent
physicians, to perform his or her duties for the Company and to be engaged in
any substantial gainful activity. Total disability shall be deemed to have
occurred on the first day after
Page 6 - INCENTIVE STOCK OPTION PLAN
7
the Company and the two independent physicians have furnished their opinion of
total disability to the Plan Administrator.
For purposes of this subsection 5.9, a transfer of relationship
between or among the Company and/or any related corporation shall not be deemed
to constitute a cessation of relationship with the Company or any of its related
corporations. For purposes of this subsection 5.9, with respect to incentive
stock options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first 90 days of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
As used in this Plan, the term "related corporation," when referring
to a subsidiary corporation, shall mean any corporation (other than the Company)
which, at the time of the granting of the option, is in an unbroken chain of
corporations ending with the Company, if stock possessing 50% or more of the
total combined voting power of all classes of stock of each of the corporations
other than the Company is owned by one of the other corporations in such chain.
When referring to a parent corporation, the term "related corporation" shall
mean any corporation in an unbroken chain of corporations ending with the
Company if, at the time of the granting of the option, each of the corporations
other than the Company owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
5.10 Death of Optionee. If an Optionee dies while he or she has a
relationship with the Company or any related corporation or dies within the
60-day period (or 12-month period in the case of totally disabled Optionees)
following cessation of such relationship, any option held by such Optionee to
the extent that the Optionee would have been entitled to exercise such option,
may be exercised within one year after his or her death by the personal
representative of his or her estate or by the person or persons to whom the
Optionee's rights under the option shall pass by will or by the applicable laws
of descent and distribution.
5.11 Status of Shareholder. Neither the Optionee nor any party to
which the Optionee's rights and privileges under the option may pass shall be,
or have any of the rights or privileges of, a shareholder of the Company with
respect to any of the shares issuable upon the exercise of any option granted
under this Plan unless and until such option has been exercised.
5.12 Continuation of Employment. Nothing in this Plan or in any
option granted pursuant to this Plan shall confer upon any Optionee any right to
continue in the employ of the Company or of a related corporation, or to
interfere in any way with the right of the Company or of any related corporation
to terminate his or her employment or other relationship with the Company at any
time.
5.13 Modification and Amendment of Option. Subject to the
requirements of Code Section 422 with respect to incentive stock options and to
the terms and conditions and within
Page 7 - INCENTIVE STOCK OPTION PLAN
8
the limitations of this Plan, the Plan Administrator may modify or amend
outstanding options granted under this Plan. The modification or amendment of an
outstanding option shall not, without the consent of the Optionee, impair or
diminish any of his or her rights or any of the obligations of the Company under
such option. Except as otherwise provided in this Plan, no outstanding option
shall be terminated without the consent of the Optionee. Unless the Optionee
agrees otherwise, any changes or adjustments made to outstanding incentive stock
options granted under this Plan shall be made in such a manner so as not to
constitute a "modification" as defined in Code Section 424(h) and so as not to
cause any incentive stock option issued hereunder to fail to continue to qualify
as an incentive stock option as defined in Code Section 422(b).
5.14 Limitation on Value for Incentive Stock Options. As to all
incentive stock options granted under the terms of this Plan, to the extent that
the aggregate fair market value (determined at the time the incentive stock
option is granted) of the stock with respect to which incentive stock options
are exercisable for the first time by the Optionee during any calendar year
(under this Plan and all other incentive stock option plans of the Company, a
related corporation or a predecessor corporation) exceeds $100,000, those
options (or the portion of an option) beyond the $100,000 threshold shall be
treated as nonqualified stock options. The previous sentence shall not apply if
the Internal Revenue Service publicly rules, issues a private ruling to the
Company, any Optionee, or any legatee, personal representative or distributee of
an Optionee or issues regulations changing or eliminating such annual limit.
SECTION 6. Greater Than 10% Shareholders.
6.1 Exercise Price and Term of Incentive Stock Options. If incentive
stock options are granted under this Plan to employees who own more than 10% of
the total combined voting power of all classes of stock of the Company or any
related corporation, the term of such incentive stock options shall not exceed
five years and the exercise price shall be not less than 110% of the fair market
value of the Common Stock at the time the incentive stock option is granted.
This provision shall control notwithstanding any contrary terms contained in an
option agreement or any other document.
6.2 Attribution Rule. For purposes of subsection 6.1, in determining
stock ownership, an employee shall be deemed to own the stock owned, directly or
indirectly, by or for his brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be deemed to be owned proportionately by or
for its shareholders, partners or beneficiaries. If an employee or a person
related to the employee owns an unexercised option or warrant to purchase stock
of the Company, the stock subject to that portion of the option or warrant which
is unexercised shall not be counted in determining stock ownership. For purposes
of this Section 6, stock owned by an employee shall include all stock actually
issued and outstanding immediately before the grant of the incentive stock
option to the employee.
SECTION 7. Adjustments Upon Changes in Capitalization. The aggregate
number and
Page 8 - INCENTIVE STOCK OPTION PLAN
9
class of shares for which options may be granted under this Plan, the number and
class of shares covered by each outstanding option and the exercise price per
share thereof (but not the total price), and each such option, shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a split-up or consolidation
of shares or any like capital adjustment, or the payment of any stock dividend.
7.1 Effect of Liquidation, Reorganization or Change in Control.
7.1.1 Cash, Stock or Other Property for Stock. Except as
provided in subsection 7.1.2, upon a merger (other than a merger of the Company
in which the holders of Common Stock immediately prior to the merger have the
same proportionate ownership of Common Stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or stock,
separation, reorganization (other than a mere reincorporation or the creation of
a holding company) or liquidation of the Company, as a result of which the
shareholders of the Company receive cash, stock or other property in exchange
for or in connection with their shares of Common Stock, any option granted under
this Plan shall terminate. Notwithstanding the foregoing, the Optionee shall
have the right immediately prior to any such merger, consolidation, acquisition
of property or stock, separation, reorganization or liquidation to exercise such
option in whole or in part, to the extent the vesting requirements set forth in
this Plan have been satisfied, unless stated otherwise in the optionee's
individual option agreement.
7.1.2 Conversion of Options on Stock for Stock Exchange. If
the shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), all options granted under this Plan shall be converted into
options to purchase shares of Exchange Stock unless the Company and the
corporation issuing the Exchange Stock, in their sole discretion, determine that
any or all such options granted under this Plan shall not be converted into
options to purchase shares of Exchange Stock, but instead shall terminate in
accordance with the provisions of subsection 7.1.1. The amount and price of
converted options shall be determined by adjusting the amount and price of the
options granted under this Plan in the same proportion as used for determining
the number of shares of Exchange Stock the holders of the Common Stock receive
in such merger, consolidation, acquisition of property or stock, separation or
reorganization. Unless accelerated by the Board, the vesting schedule set forth
in the option agreement shall continue to apply for the Exchange Stock.
7.1.3 Change in Control. In the event of a "Change in
Control", as defined in Section 7.1.4 below, of the Company after the Company
has registered any of its equity securities pursuant to Section 12(b) or 12(g)
of the Exchange Act, unless otherwise determined by the Board prior to the
occurrence of such Change in Control, any options or portions of such options
outstanding as of the date such Change in Control is determined to have occurred
that are
Page 9 - INCENTIVE STOCK OPTION PLAN
10
not yet fully vested on such date shall become immediately exercisable in full.
7.1.4 Definition of "Change in Control." For purposes of this
Plan, a "Change in Control" shall mean (a) the first approval by the Board or by
the stockholders of the Company of an Extraordinary Event, (b) a Purchase, or
(c) a Board Change.
For purposes of the Plan, an "Extraordinary Event" shall mean any of the
following actions:
(i) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares
of Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of
Common Stock immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately after
the merger;
(ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, the
assets of the Company; or
(iii) the adoption of any plan or proposal for liquidation or
dissolution of the Company.
For purposes of the Plan, a "Purchase" shall mean the acquisition by any
person (as such term is defined in Section 13(d) of the Exchange Act) of any
shares of Common Stock or securities convertible into Common Stock) without the
prior approval of a majority of the Continuing Directors (as defined below) of
the Company, if after making such acquisition such person is the beneficial
owner (as such term is defined in Rule 13d-3 under the Exchange Act) directly or
indirectly of securities of the Company representing 20% or more of the combined
voting power of the Company's then outstanding securities (calculated as
provided in paragraph (d) of such Rule 13d-3).
For purposes of the Plan, a "Board Change" shall have occurred if
individuals who constitute the Board of the Company at the time of adoption of
this Plan (the "Continuing Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a Director
subsequent to the date of adoption of this Plan whose nomination for election
was approved by a vote of at least a majority of the Continuing Directors (other
than a nomination of an individual whose initial assumption of office is in
connection with an actual threatened election contest relating to the election
of the Directors of the Company, as such terms are used in Rule 14a-11 of
Regulation 14A under the Exchange Act) shall be deemed to be a Continuing
Director.
7.2 Fractional Shares. In the event of any adjustment in the number
of shares covered by any option, any fractional shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full shares resulting from such adjustment.
Page 10 - INCENTIVE STOCK OPTION PLAN
11
7.3 Determination of Board to Be Final. All Section 7 adjustments
shall be made by the Board, and its determination as to what adjustments shall
be made, and the extent of such adjustments, shall be final, binding and
conclusive. Unless an Optionee agrees otherwise, any change or adjustment to an
incentive stock option shall be made in such a manner so as not to constitute a
"modification" as defined in Code Section 424(h) and so as not to cause his or
her incentive stock option issued under this Plan to fail to continue to qualify
as an incentive stock option as defined in Code Section 422(b).
SECTION 8. Securities Regulation. Shares shall not be issued with respect
to an option granted under this Plan unless the exercise of such option and the
issuance and delivery of such shares pursuant to the exercise of such option
shall comply with all relevant provisions of law, including, without limitation,
any applicable state securities laws, the Securities Act of 1933, as amended,
the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance, including the availability of an exemption from registration
for the issuance and sale of any shares under this Plan. Inability of the
Company to obtain from any regulatory body having jurisdiction, the authority
deemed by the Company's counsel to be necessary for the lawful issuance and sale
of any shares under this Plan or the unavailability of an exemption from
registration for the issuance and sale of any shares under this Plan shall
relieve the Company of any liability in respect of the nonissuance or sale of
such shares as to which such requisite authority shall not have been obtained.
As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order against
any shares of stock may be placed on the official stock books and records of the
Company, and a legend indicating that the stock may not be pledged, sold or
otherwise transferred unless an opinion of counsel is provided (concurred in by
counsel for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order to
assure exemption from registration. The Plan Administrator may also require such
other action or agreement by the Optionees as may from time to time be necessary
to comply with the federal and state securities laws. THIS PROVISION SHALL NOT
OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK
HEREUNDER.
Should any of the Company's capital stock of the same class as the stock
subject to options granted under this Plan be listed on a national securities
exchange, all stock issued under this Plan if not previously listed on such
exchange shall be authorized by that exchange for listing on such exchange prior
to the issuance of such stock.
SECTION 9. Amendment and Termination.
Page 11 - INCENTIVE STOCK OPTION PLAN
12
9.1 Board Action. The Board may at any time suspend, amend or
terminate this Plan, provided that except as set forth in Section 7, the
approval of the Company's shareholders is necessary within 12 months before or
after the adoption by the Board of any amendment which will:
(a) increase the number of shares which are to be reserved
for the issuance of options under this Plan;
(b) permit the granting of stock options to a class of persons
other than those presently permitted to receive stock options under this Plan;
or
(c) require shareholder approval under applicable law,
including Section 16(b) of the Exchange Act.
Any amendment made to this Plan which would constitute a "modification" to
incentive stock options outstanding on the date of such amendment, shall not be
applicable to such outstanding incentive stock options, but shall have
prospective effect only, unless the Optionee agrees otherwise.
9.2 Automatic Termination. Unless sooner terminated by the Board,
this Plan shall terminate ten years from the earlier of (a) the date on which
this Plan is adopted by the Board or (b) the date on which this Plan is approved
by the shareholders of the Company. No option may be granted after such
termination or during any suspension of this Plan. The amendment or termination
of this Plan shall not, without the consent of the option holder, alter or
impair any rights or obligations under any option previously granted under this
Plan.
SECTION 10. Effectiveness of This Plan. This Plan shall become effective
upon adoption by the Board so long as it is approved by the Company's
shareholders any time within 12 months before or after the adoption of this
Plan.
Adopted by the Board of Directors on _______________ , 1996 and approved by
the shareholders on _______________ , 1996.
Page 12 - INCENTIVE STOCK OPTION PLAN