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EXHIBIT 99.1
CORVEL CORPORATION
RESTATED 1988 EXECUTIVE STOCK OPTION PLAN
AS RESTATED AND AMENDED THROUGH AUGUST 7, 1997
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ARTICLE ONE
GENERAL
I. PURPOSES OF THE PLAN
A. This Restated 1988 Executive Stock Option Plan (the "Plan"),
as restated through August 7, 1997, is intended to promote the interests of
CorVel Corporation, a Delaware corporation (the "Company")(1), by providing a
method whereby (i) key employees (including officers and directors) of the
Company (or its parent or subsidiary corporations) responsible for the
management, growth and financial success of the Company (or its parent or
subsidiary corporations), (ii) the non-employee members of the Company's Board
of Directors (the "Board"), and (iii) consultants and independent contractors
who provide valuable services to the Company (or its parent or subsidiary
corporations) are to be offered equity incentives and rewards intended to
encourage such individuals to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Company and to continue to render
services to the Company or its parent or subsidiary corporations.
B. For purposes of the Plan, the following definitions shall be
in effect:
COMMON STOCK: The Common Stock issuable under the Plan
shall be shares of the Company's common stock, $.0001 par value.
EMPLOYEE: An individual shall be considered to be an
Employee for so long as such individual remains in the employ of the
Company or one or more of its parent or subsidiary corporations, subject
to the control and direction of the employer entity as to both the work
to be performed and the method and manner of performance.
FAIR MARKET VALUE: The Fair Market Value per share of
Common Stock on any relevant date under the Plan shall be the closing
selling price per share of Common Stock on such date, as quoted by the
National Association of Securities Dealers through the Nasdaq National
Market (or any successor system). Should the Common Stock become traded
on a national securities exchange, then the Fair Market Value per share
shall be the closing selling price on such exchange on the date in
question, as such price is quoted on the composite tape of transactions
on such exchange. If there is no closing selling price of Common Stock
on the Nasdaq National Market (or national securities
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(1) The Company was previously known as FORTIS Corporation and assumed all of
the rights and responsibilities of FORTIS Corporation, a Minnesota corporation
("FORTIS Minnesota"), with respect to the Plan pursuant to the Agreement and
Plan of Merger by and between the Company and FORTIS Minnesota, effective May
16, 1991, under which FORTIS Minnesota changed its state of incorporation from
Minnesota to Delaware by merging with and into the Company which was a wholly
owned subsidiary of FORTIS Minnesota.
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exchange) on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
OPTIONEE: Any person to whom an option is granted under
the Discretionary Option Grant Program of Article Two or the Automatic
Option Grant Program of Article Three of this Plan.
PARENT: A corporation shall be deemed to be a parent of
the Company if it is a corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, provided each
such corporation in the unbroken chain (other than the Company) owns, at
the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
SECTION 16(b) INSIDER: An individual shall be considered
to be a Section 16(b) Insider on any relevant date under the Plan if
such individual is at the time subject to the short-swing profit
restrictions of Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") by reason of his or her affiliation with
the Company.
SERVICE PROVIDER: An individual shall be deemed to be a
Service Provider for the Company for so long as such individual renders
service on a periodic basis to the Company or one or more of its parent
or subsidiary corporations as an Employee.
SUBSIDIARY: A corporation shall be deemed to be a
subsidiary of the Company if it is one of the corporations (other than
the Company) in an unbroken chain of corporations beginning with the
Company, provided each such corporation (other than the last corporation
in the unbroken chain) owns, at the time of determination, stock
possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain. For purposes of all non-statutory option grants under the Plan
and all Corporate Transaction provisions of the Plan, the term
"subsidiary" shall also include any partnership, joint venture or other
business entity of which the Company owns, directly or indirectly
through another subsidiary corporation, more than a fifty percent (50%)
interest in voting power, capital or profits.
C. Stock option grants made to any individual under the
Discretionary Option Grant Program of Article Two shall not in any way affect,
limit or restrict such individual's eligibility to participate in any other
stock plan or other compensation or benefit plan, arrangement or practice now or
hereafter maintained by the Company or any parent or subsidiary corporation.
II. STRUCTURE OF THE PLAN
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A. Stock Programs. The Plan shall be divided into two separate
components: the Discretionary Option Grant Program specified in Article Two and
the Automatic Option Grant Program specified in Article Three. Under the
Discretionary Option Grant Program, eligible individuals may, at the discretion
of the Committee, be granted options to purchase shares of Common Stock in
accordance with the provisions of Article Two. Under the Automatic Option Grant
Program, non-employee members of the Board will receive at periodic intervals
special option grants to purchase shares of Common Stock in accordance with the
provisions of Article Three.
B. General Provisions. Unless the context clearly indicates
otherwise, the provisions of Articles One and Four shall apply to both the
Discretionary Option Grant Program and the Automatic Option Grant Program and
shall accordingly govern the interests of all individuals under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Company's Compensation
Committee (the "Committee") consisting of two (2) or more members of the Board
appointed by the Board. Members of the Committee shall serve for such period of
time as the Board may determine and shall be subject to removal by the Board at
any time.
B. Subject to the express provisions of the Plan, the Committee
shall have the sole and exclusive authority with respect to the Discretionary
Option Grant Program:
(i) to make option grants to any and all eligible
individuals;
(ii) to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, and to make all other determinations
deemed necessary or advisable in administering the Discretionary Option Grant
Program; and
(iii) to change the terms and conditions of any outstanding
option grant under this Article Two, provided such action does not, without the
consent of the holder, adversely affect the rights and obligations such
individual may have under the outstanding grant.
C. Determinations of the Committee on all matters relating to the
Plan and any option grants or stock issuances made hereunder shall be final,
binding and conclusive on all persons having any interest in the Plan or any
options granted or shares issued under the Plan.
D. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the express terms and conditions of Article
Three, and the Committee shall exercise no discretionary functions with respect
to option grants made pursuant to that program.
IV. ELIGIBILITY
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A. The persons eligible to receive option grants under the
Discretionary Option Grant Program are as follows:
(i) key employees of the Company (or its parent or
subsidiary corporations) who are members of the management team and who render
services which contribute directly to the success and growth of the Company (or
its parent or subsidiary corporations) or which may reasonably be anticipated to
directly contribute to the future success and growth of the Company (or its
parent or subsidiary corporations);
(ii) non-employee members of the Board or of the board of
directors of any Parent or Subsidiary, and
(iii) those consultants or independent advisors who provide
valuable services to the Company (or its parent or subsidiary corporations).
V. STOCK SUBJECT TO THE PLAN
A. The Common Stock issuable under the Plan shall be made
available either from authorized but unissued shares of Common Stock or from
shares of Common Stock reacquired by the Company on the open market. The
aggregate number of shares of Common Stock issuable over the term of this Plan
shall not exceed 1,635,000 shares, including an increase of 100,000 shares of
Common Stock which was authorized by the Board in June 1997, subject to
stockholder approval at the 1997 Annual Meeting. Such share reserve is subject
to adjustment from time to time in accordance with paragraph V.C. below.
B. Should an option granted under this Plan expire or terminate
for any reason prior to exercise or surrender in full (including options
cancelled in accordance with the cancellation-regrant provisions of Section V of
Article Two), the shares subject to the portion of the option not so exercised
or surrendered shall be available for subsequent option grants under this Plan.
In addition, unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation, at the original option exercise price paid per
share, pursuant to the Corporation's repurchase rights under the Plan shall be
added back to the number of shares of Common Stock reserved for issuance under
the Plan and shall accordingly be available for reissuance through one or more
subsequent option grants under the Plan. However, shares subject to stock
appreciation rights exercised in accordance with the provisions of Section II of
Article Two and Section III of Article Three shall reduce on a share-for-share
basis the number of shares of Common Stock available for subsequent option
grants under this Plan. Should the exercise price of an outstanding option under
the Plan be paid with shares of Common Stock or should shares of Common Stock
otherwise issuable under the Plan be withheld by the Company in satisfaction of
the withholding taxes incurred in connection with the exercise of an outstanding
option under the Plan, then the number of shares of Common Stock available for
issuance under the Plan shall be reduced by the gross number of shares for which
the option is exercised, and not by the net number of shares of Common Stock
actually issued to the option holder.
C. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock dividend, stock split, combination of
shares, exchange of shares or
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other change affecting the outstanding Common Stock as a class without the
Company's receipt of consideration, then appropriate adjustments shall be made
by the Committee to (i) the aggregate number and/or class of securities issuable
under the Plan, to reflect the effect of such change upon the Company's capital
structure, (ii) the maximum number and/or class of securities for which any one
individual participating in the Plan may be granted stock options and separately
exercisable stock appreciation rights over the term of the Plan, (iii) the
number and/or class of securities for which automatic option grants are to be
subsequently made to non-employee Board members under the Automatic Option Grant
Program, (iv) the number and/or class of securities and the exercise price per
share of the stock subject to each option outstanding under the Plan in order to
preclude the dilution or enlargement of benefits thereunder and (v) the number
and/or class of securities and the exercise price per share in effect under each
outstanding stock appreciation right in order to preclude the dilution or
enlargement of benefits thereunder. All adjustments made by the Committee
pursuant to this paragraph V.C. shall be final, binding and conclusive.
D. In the event that (i) the Company is the surviving entity in
any Corporate Transaction which does not result in the termination of
outstanding options pursuant to the Corporate Transaction provisions of the Plan
or (ii) the outstanding options under the Plan are to be assumed in connection
with such Corporate Transaction, then each such continuing or assumed option
shall, immediately after such Corporate Transaction, be appropriately adjusted
to apply and pertain to the number and class of securities which would have been
issuable, in consummation of such Corporate Transaction, to an actual holder of
the same number of shares of Common Stock as are subject to such option
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the exercise price payable per share, provided the aggregate
option price shall remain the same. In addition, the number and class of
securities which remain issuable under this Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
E. From and after January 1, 1994, in no event may any one
individual participating in the Plan be granted stock options and separately
exercisable stock appreciation rights exceeding 800,000 shares in the aggregate
over the term of the Plan, subject to adjustment from time to time in accordance
with the provisions of Section V.C.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
A. The Committee shall have sole and exclusive authority (subject
to the express provisions of the Plan) to determine which eligible individuals
are to be granted options under the Discretionary Option Grant Program, the
number of shares to be covered by each such option, the status of the granted
option as either an incentive stock option which meets the requirements of
Section 422 of the Internal Revenue Code ("Incentive Option") or a non-statutory
option not intended to meet such requirements ("Non-Statutory Option"), the time
or times at which such option is to become exercisable and the maximum term for
which the option is to remain outstanding.
B. The granted options shall be evidenced by instruments in such
form as the Committee shall from time to time approve; provided, however, that
each such instrument shall comply with the terms and conditions specified below.
1. Option Price.
a. The option price per share shall be fixed by the
Committee, but in no event shall the option price per share be less than
eighty-five percent (85%) of the Fair Market Value per share of Common Stock on
the date of the option grant.
b. The option price shall become immediately due upon
exercise of the option and shall, subject to the loan provisions of Section I of
Article Four, be payable in one of the alternative forms specified below:
1. full payment in cash or check payable to the
Company's order; or
2. full payment in shares of Common Stock held by
the Optionee for the requisite period necessary to avoid a charge to the
Company's reported earnings (which in any event shall not be less than six (6)
months) and valued at Fair Market Value on the Exercise Date (as such term is
defined below); or
3. full payment in a combination of shares of
Common Stock held by the Optionee for the requisite period necessary to avoid a
charge to the Company's reported earnings (which in any event shall not be less
than six (6) months) and valued at Fair Market Value on the Exercise Date and
cash or check payable to the Company's order, equal in the aggregate to the
option price; or
4. full payment through a special sale and
remittance procedure pursuant to which the Optionee is to provide irrevocable
written instructions (i) to a designated
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brokerage firm to effect the immediate sale of the purchased shares and remit to
the Company, out of the sale proceeds available on the settlement date, an
amount sufficient to cover the aggregate option price payable for the purchased
shares plus all applicable Federal and State income and employment taxes
required to be withheld by the Company by reason of such purchase and (ii) to
the Company to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale transaction.
c. The Exercise Date shall be the date on which written
notice of the option exercise is delivered to the Company. Except to the extent
the sale and remittance procedure specified in clause 4 of subparagraph b. is
utilized in connection with the option exercise, payment of the option price for
the purchased shares must accompany such notice.
2. Term and Exercise of Options.
(i) Each option granted under the Discretionary
Option Grant Program shall be exercisable in one or more installments as shall
be determined by the Committee and set forth in the instrument evidencing such
option; provided, however, no such option shall have a maximum term in excess of
ten (10) years.
(ii) During the lifetime of the Optionee, Incentive
Options shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following the Optionee's death. However, a Non-Statutory Option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
3. Termination of Service.
(i) Should an Optionee cease to be a Service Provider
for any reason including death or permanent disability as defined in Section
22(e)(3) of the Internal Revenue Code (other than termination set forth in
subparagraph (iii) below) while the holder of one or more outstanding options
under this Article Two, then such options shall not be exercisable at any time
after the earlier of (i) the specified expiration date of the option term or
(ii) the expiration of the limited period of time (not to exceed twelve (12)
months after the Optionee ceases to be a Service Provider) specified by the
Committee in the option agreement. Each such option shall, during such twelve
(12)-month or shorter period following cessation of Service Provider status, be
exercisable only to the extent of the number of shares (if any) in which the
Optionee is vested on the date of such cessation of Service Provider status.
(ii) Any option granted to an Optionee under this
Article Two and outstanding in whole or in part on the date of the Optionee's
death may be subsequently
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exercised, but only to the extent of the number of shares (if any) in which the
Optionee is vested on the date the Optionee ceases to be a Service Provider
(less any of those shares subsequently purchased by the Optionee prior to
death), by the personal representative of the Optionee's estate or by the person
or persons to whom the option is transferred pursuant to the Optionee's will or
in accordance with the laws of descent and distribution. Any such exercise must
occur prior to the earlier of (i) the expiration date of the option term or (ii)
the first anniversary of the date of the Optionee's death.
(iii) If the Optionee's Service Provider status is
terminated for any of the following reasons, then all outstanding options
granted the Optionee under this Article Two shall immediately terminate and
cease to be exercisable immediately upon such termination:
(1) Optionee's intentional misconduct or continuing
gross neglect of duties which materially and adversely affects the business and
operations of the Company or any parent or subsidiary corporation employing
Optionee;
(2) Optionee's unauthorized use or disclosure (or
attempt thereat) of confidential information or trade secrets of the Company or
its parent or subsidiary corporations; or
(3) Optionee's commission of an act involving
embezzlement, theft, fraud, falsification of records, destruction of property or
commission of a crime or other offense involving money or other property of the
Company or any parent or subsidiary corporation employing Optionee.
The reasons for termination of Optionee as a Service
Provider set forth in this subparagraph (iii) are not intended to be, and are
not inclusive, of all acts or omissions which the Company may deem to constitute
misconduct or other grounds for terminating the Optionee (or any other
individual).
(iv) The Committee shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited period of
exercisability following cessation of Service Provider status, not only with
respect to the number of shares in which the Optionee is vested at the time of
such cessation of Service Provider status but also with respect to one or more
subsequent installments of purchasable shares in which the Optionee would
otherwise have vested had the Optionee continued as a Service Provider.
(v) If the option is granted to an individual who is
not an Employee of the Company, then the option agreement evidencing the granted
option shall include provisions comparable to those set forth in subparagraphs
(i), (ii) and (iii) above, and may include
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provisions comparable to subparagraph (iv) above, with respect to the Optionee's
termination of service with the Company or its parent or subsidiary
corporations.
4. Stockholder Rights.
An option holder shall have none of the rights of a
stockholder with respect to any shares covered by the option until such
individual shall have exercised the option, paid the option price and satisfied
all other conditions precedent to the issuance of certificates for the purchased
shares.
5. Repurchase Rights. The shares of Common Stock acquired upon
the exercise of any Article Two option grant may be subject to one or more
repurchase rights of the Company in accordance with the following provisions:
(i) The Committee shall have the discretion to authorize the
issuance of unvested shares of Common Stock under this Article Two. Should the
Optionee cease Service Provider status while holding such unvested shares, the
Company shall have the right to repurchase any or all of those unvested shares
at the option price paid per share. The terms and conditions upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Committee and set forth in the instrument evidencing such
repurchase right.
(ii) All of the Company's outstanding repurchase rights shall
automatically terminate, and all shares subject to such terminated rights shall
immediately vest in full, upon the occurrence of any Corporate Transaction under
Section III of Article Two of this Plan, except to the extent: (i) any such
repurchase right is expressly assigned to the successor corporation (or parent
thereof) in connection with the Corporate Transaction or (ii) such termination
is precluded by other limitations imposed by the Committee at the time the
repurchase right is issued.
(iii) The Committee shall have the discretionary authority,
exercisable either before or after the Optionee's cessation of Service Provider
status, to cancel the Company's outstanding repurchase rights with respect to
one or more shares purchased or purchasable by the Optionee under this Article
Two and thereby accelerate the vesting of such shares in whole or in part at any
time.
II. STOCK APPRECIATION RIGHTS
A. The Committee shall have full power and authority, exercisable
in its sole discretion, to grant selected Optionees tandem stock appreciation
rights ("Tandem Rights") and/or limited stock appreciation rights ("Limited
Rights") pertaining to all or part of the shares of Common Stock subject to one
or more of their option grants under this Article Two.
B. Tandem Rights may be granted at the same time the underlying
option is granted or any time thereafter while the option remains outstanding.
The Optionee may exercise
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such Tandem Right by surrendering the underlying option in whole or in part to
the Company, to the extent such option is at the time exercisable for vested
shares of Common Stock. In exchange for the surrendered option, the Optionee
shall receive a distribution from the Company in an amount equal to the excess
of (i) the Fair Market Value (on the option surrender date) of the number of
shares in which the Optionee is at the time vested under the surrendered option
(or surrendered portion) over (ii) the aggregate option price payable for such
vested shares. However, the exercise of the Tandem Right shall be effective only
if approved by the Committee. If so approved, the distribution to which the
Optionee shall accordingly become entitled with respect to the surrendered
option may be made in shares of Common Stock valued at Fair Market Value on the
option surrender date, in cash, or partly in shares and partly in cash, as the
Committee shall in its sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Committee,
then the Optionee shall retain whatever rights the Optionee had under the
surrendered option (or surrendered portion) on the option surrender date and may
exercise such rights at any time prior to the later of (i) five (5) business
days after the receipt of the rejection notice or (ii) the last day on which the
option is otherwise exercisable in accordance with the terms of the instrument
evidencing such option, but in no event may such rights be exercised more than
ten (10) years after the date of the option grant.
D. One or more Section 16(b) Insiders may, in the Committee's
sole discretion, be granted Limited Rights(2) in conjunction with their
outstanding options under this Article Two. Upon the occurrence of a Hostile
Take-Over, each outstanding option with such a Limited Right shall automatically
be cancelled, to the extent such option is at the time exercisable for
fully-vested shares of Common Stock. The Optionee shall in return be entitled to
a cash distribution from the Company in an amount equal to the excess of (i) the
Take-Over Price of the vested shares of Common Stock at the time subject to the
cancelled option (or cancelled portion of such option) over (ii) the aggregate
exercise price payable for such shares. The cash distribution payable upon such
cancellation shall be made within five (5) days following the consummation of
the Hostile Take-Over. The Committee shall pre-approve, at the time the limited
right is granted, the subsequent exercise of that right in accordance with its
terms. No additional approval of the Committee or the Board shall be required at
the time of the actual option cancellation and cash distribution. The balance of
the option (if any) shall continue to remain outstanding and exercisable in
accordance with the terms and conditions of the instrument evidencing such
option.
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(2) Options granted to Section 16(b) Insiders prior to the effective date of the
June 15, 1992 Restatement contain a different form of Limited Right. Such right
will provide each Section 16(b) Insider with a thirty (30)-day election period,
following the successful completion of a hostile tender offer for fifty percent
(50%) or more of the Company's outstanding voting securities, to surrender the
underlying option for a cash distribution from the Company in an amount per
share of Common Stock in which the Section 16(b) Insider is at the time vested
under the surrendered option equal to the excess of the highest price per share
paid in effecting such tender offer over the exercise price payable per share
under the surrendered option.
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E. For purposes of subparagraph D. above, the following
definitions shall be in effect:
A HOSTILE TAKE-OVER shall be the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Company) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant
to a tender or exchange offer made directly to the Company's
stockholders which the Board does not recommend such stockholders to
accept.
The TAKE-OVER PRICE per share shall be deemed to be equal
to the greater of (a) the Fair Market Value per share on the option
cancellation date or (b) the highest reported price per share paid by
the acquiring entity in effecting such Hostile Take-Over. However, if
the cancelled option is an Incentive Option, the Take-Over Price shall
not exceed the clause (a) price per share.
F. The shares of Common Stock subject to any option surrendered
or cancelled for an appreciation distribution pursuant to this Section II shall
NOT be available for subsequent option grant under the Plan.
III. CORPORATE TRANSACTION
A. Upon the occurrence of any of the following transactions (a
"Corporate Transaction") for which the approval of the Company's stockholders is
obtained:
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company to any entity other than a parent
or subsidiary of the Company, or
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(iii) any reverse merger in which the Company is the surviving
entity but in which fifty percent (50%) or more of the Company's outstanding
voting stock is transferred to holders different from those who held such fifty
percent (50%) or greater interest immediately prior to such merger,
then the exercisability of each option outstanding under
this Article Two shall be automatically accelerated so that each such option
shall, immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for all
or any portion of such shares. However, an outstanding option under this Article
Two shall not be so accelerated if and to the extent: (i) such option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation or parent thereof or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation or parent
thereof, or (ii) such option is to be replaced with a cash incentive program of
the successor corporation designed to preserve the option spread existing at the
time of the Corporate Transaction and incorporating the same vesting schedule
applicable to such option, or (iii) the acceleration of such option is subject
to other applicable limitations imposed by the Committee at the time of grant.
The determination of comparability under clause (i) above shall be made by the
Committee, and its determination shall be final, binding and conclusive.
B. The Committee shall have the discretion, exercisable either in
advance of any actually-anticipated Corporate Transaction or at the time of an
actual Corporate Transaction, to provide (upon such terms and conditions as it
may deem appropriate) for either the automatic acceleration of one or more
assumed or replaced options which do not accelerate in connection with the
Corporate Transaction or for the automatic vesting of any cash incentive
programs implemented in replacement of such options, in the event the Optionee's
employment should subsequently terminate within a designated period following
the effective date of such Corporate Transaction.
C. The exercisability as incentive stock options under the
Federal tax laws of any options accelerated under this Section III in connection
with a Corporate Transaction shall remain subject to the applicable dollar
limitation of Section IV.A.(iii) of this Article Two below.
D. Upon the consummation of the Corporate Transaction, all
outstanding options under this Article Two shall, to the extent not previously
exercised or assumed by the successor corporation or its parent company,
terminate and cease to be outstanding.
E. The grant of options under this Article Two shall in no way
affect the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
IV. INCENTIVE OPTIONS
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A. The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Options which are
specifically designated as "non-statutory" options when issued under this
Article Two shall not be subject to such terms and conditions.
(i) Option Price. The option price per share of the Common
Stock subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the grant
date.
(ii) 10% Stockholder. If any individual to whom an Incentive
Option is to be granted pursuant to the provisions of this Article Two is on the
grant date the owner of stock (as determined under Section 424(d) of the
Internal Revenue Code) possessing 10% or more of the total combined voting power
of all classes of stock of the Company or any one of its parent or subsidiary
corporations (such person to be herein referred to as a 10% Stockholder), then
(i) the option price per share shall not be less than one hundred and ten
percent (110%) of the Fair Market Value per share of Common Stock on the grant
date and (ii) the maximum term of the option shall not exceed five (5) years
from the grant date.
(iii) Dollar Limitation. The aggregate fair market value
(determined on the basis of the Fair Market Value in effect on the respective
date or dates of grant) of the Common Stock for which one or more options
granted to any Employee under this Plan (or any other option plan of the Company
or its parent or subsidiary corporations) may for the first time become
exercisable as incentive stock options under the Federal tax laws during any one
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability thereof as incentive stock options under the
Federal tax laws shall be applied on the basis of the order in which such
options are granted.
B. Except as modified by the preceding provisions of this
Incentive Options section, all the provisions of the Plan shall be applicable to
the Incentive Options granted hereunder.
V. CANCELLATION AND RE-GRANT OF OPTIONS
The Committee shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under this Article Two and to
grant in substitution therefor new options under this Article Two covering the
same or different numbers of shares of Common Stock but having an option price
per share not less than (i) eighty-five percent (85%) of the Fair Market Value
per share of Common Stock on the new grant date, (ii) one hundred percent (100%)
of such Fair Market Value for an Incentive Option, or (iii) one hundred and ten
percent (110%) of such Fair Market Value in the case of a 10% Stockholder.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. Eligible Directors. The individuals eligible to receive
automatic option grants pursuant to the provisions of this Article Three program
shall be limited to (i) those individuals who are serving as non-employee Board
members on August 5, 1993, the effective date of this Automatic Option Grant
Program (the "Effective Date"), and (ii) those individuals who are first elected
or appointed as non-employee Board members on or after the Effective Date,
whether through appointment by the Board or election by the Company's
stockholders. Any non-employee Board member eligible to participate in the
Automatic Option Grant Program pursuant to the foregoing criteria shall be
designated an Eligible Director for purposes of this Plan.
B. Limitation. Except for the option grants to be made pursuant
to the provisions of this Automatic Option Grant Program, an Eligible Director
serving on the Committee shall not be eligible during such period of service to
receive any additional option grants or stock issuances under this Plan or any
other stock plan of the Company (or its parent or subsidiaries).
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants shall be made under this Article
Three on the dates specified below:
(i) Each Eligible Director who first becomes a
non-employee Board member on or after the Effective Date of this
Automatic Option Grant Program, whether through election by the
Company's stockholders or appointment by the Board and who has not at
any time been in the prior employ of the Company (or any parent or
subsidiary corporation), shall automatically be granted, at the time of
such initial election or appointment, a non-statutory stock option to
purchase 5,000 shares of Common Stock upon the terms and conditions of
this Article Three.
(ii) On the date of each Annual Stockholders Meeting,
commencing with the 1993 Annual Stockholders Meeting, each individual
who is at the time serving as an Eligible Director shall automatically
be granted at that meeting, whether or not such individual is standing
for re-election as a Board member at that particular meeting and whether
or not such individual has at any time been in the prior employ of the
Company (or any parent or subsidiary
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corporation), a non-statutory stock option to purchase 1,500 shares of
Common Stock upon the terms and conditions of this Article Three,
provided he or she has served as a non-employee Board member for at
least six (6) months prior to the date of such meeting. There shall be
no limit on the number of 1,500-share option grants any one Eligible
Director may receive over his or her period of Board service.
The number of shares for which the automatic grants are to be
made to each newly-elected or continuing Eligible Director shall be subject to
periodic adjustment pursuant to the applicable provisions of Section V.C of
Article One.
Stockholder approval of the restatement of the Plan at the 1997
Annual Meeting shall constitute pre-approval of each option subsequently granted
pursuant to the express terms of this Automatic Option Grant Program and the
subsequent exercise of that option in accordance with its terms.
B. Exercise Price. The exercise price per share of Common Stock
subject to each automatic option grant made under this Article Three shall be
equal to one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the automatic grant date.
C. Payment.
The exercise price shall be payable in one of the alternative
forms specified below:
(i) full payment in cash or check payable to the
Company's order; or
(ii) full payment in shares of Common Stock held for
the requisite period necessary to avoid a charge to the Company's
reported earnings (which in any event shall not be less than six (6)
months) and valued at Fair Market Value on the Exercise Date (as such
term is defined below); or
(iii) full payment in a combination of shares of Common
Stock held for the requisite period necessary to avoid a charge to the
Company's reported earnings (which in any event shall not be less than
six (6) months) and valued at Fair Market Value on the Exercise Date and
cash or check payable to the Company's order, equal in aggregate to the
option price; or
(iv) full payment through a sale and remittance
procedure pursuant to which the non-employee Board member is to provide
irrevocable written instructions (I) to a designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds available on the settlement date, an
amount sufficient to cover the aggregate option
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price payable for the purchased shares and (II) to the Company to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
The Exercise Date shall be the date on which written notice of
the option exercise is delivered to the Company. Except to the extent the sale
and remittance procedure specified in clause (iv) is utilized in connection with
the option exercise, payment of the option price for the purchased shares must
accompany such notice.
D. Option Term. Each automatic grant under this Article Three
shall have a maximum term of ten (10) years measured from the automatic grant
date.
E. Exercisability. Each automatic grant shall become exercisable
in a series of four (4) equal and successive annual installments over the
Optionee's period of service on the Board, with the first such installment to
become exercisable twelve (12) months after the automatic grant date. The
exercisability of each automatic grant shall be subject to acceleration in
accordance with the provisions of Section II.G and Section III of this Article
Three.
F. Limited Transferability. During the lifetime of the Optionee,
each automatic option grant may, in connection with the Optionee's estate plan,
be assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established exclusively
for one or more such family members. The assigned portion may only be exercised
by the person or persons who acquire a proprietary interest in the option
pursuant to the assignment. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
G. Termination of Board Service.
1. Should the Optionee's service as a Board member cease
for any reason (other than death or permanent disability) while holding one or
more automatic option grants under this Article Three, then such individual
shall have a six (6)-month period following the date of such cessation of Board
service in which to exercise each such option for any or all of the shares of
Common Stock for which the option is exercisable at the time of such cessation
of Board service. However, each such option shall immediately terminate and
cease to be outstanding, at the time of such cessation of Board service, with
respect to any shares for which the option is not otherwise at that time
exercisable.
2. Should the Optionee die within six (6) months after
cessation of Board service, then each outstanding automatic option grant held by
the Optionee at the time of death may subsequently be exercised, for any or all
of the shares of Common Stock for which such option is exercisable at the time
of the Optionee's cessation of Board service (less any option shares
subsequently purchased by the Optionee prior to death), by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and
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distribution. Any such exercise must occur within twelve (12) months after the
date of the Optionee's death.
3. Should the Optionee die or become permanently disabled
while serving as a Board member, then each automatic option grant held by such
Optionee under this Article Three shall accelerate in full, and the Optionee (or
the representative of the Optionee's estate or the person or persons to whom the
option is transferred upon the Optionee's death) shall have a twelve (12)-month
period following the date of the Optionee's cessation of Board service in which
to exercise each such option for any or all of the shares of Common Stock
subject to that option at the time of such cessation of Board service.
4. In no event shall any automatic grant under this
Article Three remain exercisable after the specified expiration date of the ten
(10)-year option term. Upon the expiration of the applicable post-service
exercise period under subparagraph 1, 2 or 3 above or (if earlier) upon the
expiration of the ten (10)-year option term, the automatic grant shall terminate
and cease to be outstanding for any unexercised shares for which the option was
otherwise exercisable at the time of the Optionee's cessation of Board service.
H. Stockholder Rights. The holder of an automatic option grant
under this Article Three shall have none of the rights of a stockholder with
respect to any shares subject to such option until such individual shall have
exercised the option and paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the prototype Non-Statutory
Stock Option Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, each automatic
option grant at the time outstanding under this Article Three shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Corporate Transaction, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to such option and may be exercised for all or any portion of such
shares. Upon the consummation of the Corporate Transaction, all automatic option
grants under this Article Three shall terminate and cease to be outstanding.
B. In connection with any Change in Control of the Company, each
automatic option grant at the time outstanding under this Article Three shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Change in Control, become fully exercisable
with respect to the total number of shares of Common Stock at the time subject
to such option and may be exercised for all or any portion of such shares. For
purposes of this Article Three, a Change in Control shall be deemed to occur in
the event:
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(i) any person or related group of persons (other
than the Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule
13d-3 of the Exchange Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer which the
Board does not recommend the Company's stockholders to accept; or
(ii) there is a change in the composition of the Board
over a period of twenty-four (24) consecutive months or less such that a
majority of the Board members (rounded up to the next whole number)
cease, by reason of one or more proxy contests for the election of Board
members, to be comprised of individuals who either (I) have been Board
members continuously since the beginning of such period or (II) have
been elected or nominated for election as Board members during such
period by at least two-thirds of the Board members described in clause
(I) who were still in office at the time such election or nomination was
approved by the Board.
C. A Limited Right shall be granted with respect to each
automatic option granted under this Article Three. Upon the occurrence of a
Hostile Take-Over, each such option shall automatically be cancelled, to the
extent such option is at the time exercisable for fully-vested shares of Common
Stock. The Optionee shall in return be entitled to a cash distribution from the
Company in an amount equal to the excess of (i) the Take-Over Price of the
vested shares of Common Stock at the time subject to the cancelled option (or
cancelled portion of such option) over (ii) the aggregate exercise price payable
for such shares. The cash distribution payable upon such cancellation shall be
paid within five (5) days following the consummation of the Hostile Take-Over.
The Committee shall pre-approve, at the time the limited right is granted, the
subsequent exercise of that right in accordance with its terms. No additional
approval of the Committee or the Board shall be required at the time of the
actual option cancellation and cash distribution. The balance of the option (if
any) shall continue to remain outstanding and exercisable in accordance with the
terms and conditions of the instrument evidencing such option.
D. The shares of Common Stock subject to each option surrendered
in connection with the Hostile Take-Over shall NOT be available for subsequent
option grant under this Plan.
E. The automatic option grants outstanding under this Article
Three shall in no way affect the right of the Company to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
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ARTICLE FOUR
MISCELLANEOUS
I. LOANS OR GUARANTEE OF LOANS
The Committee may assist any Optionee (including any officer or
director) in the exercise of one or more outstanding options under the
Discretionary Option Grant Program by (a) authorizing the extension of a loan to
such Optionee from the Company, (b) permitting the Optionee to pay the option
price for the purchased Common Stock in installments over a period of years or
(c) authorizing a guarantee by the Company of a third-party loan to the
Optionee. The terms of any loan, installment method of payment or guarantee
(including the interest rate and terms of repayment) shall be established by the
Committee in its sole discretion. Loans, installment payments and guarantees may
be granted without security or collateral, but the maximum credit available to
the Optionee shall not exceed the sum of (i) the aggregate option price of the
purchased shares (less the par value) plus (ii) any Federal and State income and
employment tax liability incurred by the Optionee in connection with the
exercise of the option.
II. TAX WITHHOLDING
A. The Company's obligation to deliver shares or cash upon the
exercise or surrender of stock options or stock appreciation rights granted
under the Plan shall be subject to the satisfaction by the Optionee of all
applicable Federal, State and local income and employment tax withholding
requirements.
B. The Committee may, in its discretion and upon such terms and
conditions as it may deem appropriate (including the applicable safe-harbor
provisions of Securities and Exchange Commission ("SEC") Rule 16b-3 or any
successor rule or regulation) provide any or all holders of outstanding option
grants under the Plan (other than automatic option grants made pursuant to the
provisions of Article Three) with the election to have the Company withhold,
from the shares of Common Stock otherwise issuable upon the exercise of such
options, a portion of such shares with an aggregate Fair Market Value equal to
the designated percentage (any multiple of five percent (5%) specified by the
Optionee) of the Federal and state income taxes ("Taxes") incurred in connection
with the acquisition of such shares. In lieu of such direct withholding, one or
more Optionees may also be granted the right to deliver pre-existing shares of
Common Stock to the Company in satisfaction of such Taxes. The withheld or
delivered shares shall be valued at the Fair Market Value on the applicable
determination date for such Taxes or such other date required by the applicable
safe-harbor provisions of SEC Rule 16b-3.
III. EXTENSION OF EXERCISE PERIOD
The Committee shall have full power and authority to extend the
period of time for which any option granted under the Discretionary Option Grant
Program is to remain exercisable following the Optionee's termination of service
from the twelve (12)-month or shorter period set forth in the option agreement
to such greater period of time as the Committee shall
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deem appropriate; provided, however, that in no event shall such option be
exercisable after the specified expiration date of the option term.
IV. AMENDMENT OF THE PLAN
The Board shall have the complete and exclusive authority to
amend or modify the Plan in any or all respects whatsoever. However, (i) no such
amendment or modification shall, without the consent of the holders, adversely
affect rights and obligations with respect to any stock options or stock
appreciation rights at the time outstanding under the Plan and (ii) any
amendment made to the Automatic Option Grant Program (or to any options
outstanding thereunder) shall be in compliance with the limitation of Section IV
of Article Three. In addition, certain amendments may require stockholder
approval pursuant to applicable laws or regulations.
V. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan was initially adopted by the Board and approved by
the Company's sole stockholder on August 1, 1988. The Board and sole stockholder
amended and restated the Plan effective May 15, 1991 to (i) increase the number
of shares issuable pursuant to the Plan, (ii) conform the provisions of the Plan
to the SEC rules under Section 16 of the Exchange Act applicable to certain
transactions effected under the Plan by Section 16(b) Insiders and (iii) provide
for the grant of Incentive Options. The Plan was further restated on June 15,
1992 (the "1992 Restatement") to (i) increase the number of shares of Common
Stock authorized for issuance under the Plan by an additional 200,000 shares,
(ii) bring the Plan into compliance with revisions to SEC Rule 16b-3 which
became effective on September 1, 1993 and exempts certain officer and director
transactions under the Plan from the short-swing liability provisions of the
federal securities laws and (iii) effect certain technical revisions to the
provisions of the Plan to facilitate plan administration and interpretation. The
1992 Restatement was approved by the Company's stockholders at the 1992 Annual
Meeting. The Plan was further restated and amended by the Board in June, 1993
(the "1993 Restatement") to add the Automatic Option Grant Program. The 1993
Restatement was approved by the Company's stockholders at the 1993 Annual
Meeting. On May 4, 1994, the Board approved an amendment to the Plan to (i)
increase the aggregate number of shares issuable over the term thereof by
200,000 shares to a total of 1,335,000 shares and (ii) impose a limitation of
800,000 shares on the maximum number of shares of Common Stock for which any one
participant may be granted stock options and separately exercisable stock
appreciation rights over the remaining term of the Plan. The amendment was
approved by the Company's stockholders at the 1994 Annual Meeting.
On June 21, 1996, the Board approved an amendment to the Plan to
(i) increase the aggregate number of shares issuable over the term thereof by
200,000 shares to 1,535,000 shares, and (ii) extend the expiration date of the
Plan to June 30, 2006. These amendments were approved by the Company's
stockholders at the 1996 Annual Meeting. In June 1997, the Board further amended
and restated the Plan (the "1997 Restatement") to effect the following
revisions: (i) increase the number of shares of Common Stock reserved for
issuance over the term of the Plan by an additional 100,000 shares to 1,635,000
shares, (ii) render the non-employee Board
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members eligible to receive option grants under the Discretionary Option Grant
Program, (iii) allow unvested shares issued under the Plan and subsequently
repurchased by the Corporation at the option exercise price paid per share to be
reissued under the Plan, (iv) remove certain restrictions on the eligibility of
non-employee Board members to serve as Plan Administrator and (v) effect a
series of additional changes to the provisions of the Plan in order to take
advantage of the recent amendments to SEC Rule 16b-3.
The 1997 Restatement is subject to stockholder approval at the
1997 Annual Meeting, and no option grants made on the basis of the 100,000-share
increase under the 1997 Restatement shall become exercisable in whole or in part
unless and until the 1997 Restatement is approved by the stockholders. Should
such stockholder approval not be obtained, then each option grant made pursuant
to the 100,000-share increase shall terminate and cease to remain outstanding
without ever becoming exercisable for those shares, and no additional option
grants shall be made on the basis of that share increase. Subject to the
foregoing limitations, the Plan Administrator may make option grants under the
Plan at any time before the date fixed herein for the termination of the Plan.
B. The provisions of the Restatements apply only to stock options
and stock appreciation rights granted under the Plan from and after the
respective effective dates of such Restatements. All stock options and stock
appreciation rights issued and outstanding under the Plan immediately prior to
such effective dates of the Restatements shall continue to be governed by the
terms and conditions of the Plan (and the instrument evidencing each such option
or stock appreciation right) as in effect on the date each such option or stock
appreciation was previously granted, and nothing in the Restatements shall be
deemed to affect or otherwise modify the rights or obligations of the holders of
such options or stock appreciation rights with respect to the acquisition of
shares of Common Stock thereunder or the exercise of their outstanding stock
appreciation rights.
C. The sale and remittance procedure authorized for the exercise
of outstanding options shall be available for all options granted under the Plan
from and after November 6, 1991 and for all Non-Statutory Options outstanding on
such date. The Committee may also allow such procedure to be utilized in
connection with one or more disqualifying dispositions of incentive stock option
shares effected on or after November 6, 1991, whether or not the option was
granted on or before such date.
D. The Plan shall in all events terminate upon the earlier of (i)
June 30, 2006 or (ii) the date on which all shares available for issuance under
the Plan shall have been issued or cancelled pursuant to the exercise or
surrender of stock options and/or stock appreciation rights under the Plan. If
the date of termination is determined under clause (i) above, then any stock
options and stock appreciation rights at the time outstanding under the Plan
shall continue to have force and effect in accordance with the provisions of the
instruments evidencing such grants.
E. Options may be granted under the Discretionary Option Grant
Program to purchase shares of Common Stock in excess of the number of shares
then available for issuance under the Plan, provided (i) an amendment to
increase the maximum number of shares issuable
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under the Plan is adopted by the Board prior to the initial grant of any such
option and within one year thereafter such amendment is approved by the
Company's stockholders and (ii) each option granted is not to become
exercisable, in whole or in part, at any time prior to the obtaining of such
stockholder approval.
VI. MISCELLANEOUS
A. Any cash proceeds received by the Company from the issuance of
shares hereunder shall be used for general corporate purposes.
B. The implementation of the Plan, the granting of any stock
option, and the issuance of Common Stock hereunder, shall be subject to the
Company's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, and the stock options granted
under it and the Common Stock issued pursuant to it.
C. Neither the action of the Company in establishing the Plan,
nor any action taken by the Board or the Committee hereunder, nor any provision
of the Plan itself shall be construed so as to grant any individual the right to
remain in the employ or service of the Company or any of its parent or
subsidiary corporations for any period of specific duration, and the Company (or
any parent or subsidiary retaining the services of such individual) may
terminate such individual's employment or service at any time and for any
reason, with or without cause.
D. Nothing contained in the Plan shall be construed to limit the
authority of the Company to exercise its corporate rights and powers, including
(without limitation) the right of the Company (a) to grant options for proper
corporate purposes otherwise than under this Plan to any Employee or other
person, firm or company or association or (b) to grant options to, or assume the
option of, any person in connection with the acquisition (by purchase, lease,
merger, consolidation or otherwise) of the business and assets (in whole or in
part) of any person, firm, company or association.
23.