Exhibit 4.1
EFFECTIVE MANAGEMENT SYSTEMS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I--PURPOSE
The Effective Management Systems, Inc. 1998 Employee Stock
Purchase Plan (the "Plan") has been established by Effective Management
Systems, Inc., a Wisconsin corporation (the "Company"), to allow employees
of the Company and its subsidiaries to purchase shares of Common Stock of
the Company ("Common Stock") and thereby share in the ownership of the
Company. The Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code"). The provisions of the Plan shall be construed so as to
extend and limit participation in a manner consistent with the applicable
requirements of the Code and the regulations thereunder.
ARTICLE II--DEFINITIONS
2.01. Committee.
"Committee" shall mean the committee of directors described in
Section 10.01.
2.02. Compensation.
"Compensation" shall mean the Employee's wages, salaries, and
other amounts received for personal services actually rendered in the
course of employment by the Company, including, but not limited to,
bonuses, commissions, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums and tips.
2.03. Employee.
"Employee" means any person who is customarily employed on a
full-time or part-time basis by the Company, who is regularly scheduled to
work more than 20 hours per week and whose customary employment is for at
least five months in any calendar year.
2.04. Plan Administrator.
"Plan Administrator" shall mean the individual appointed by the
Committee pursuant to Section 10.04.
2.05. Subsidiary Corporation.
"Subsidiary Corporation" shall mean any present or future
corporation which (a) would be a "subsidiary corporation" of the Company
as that term is defined in Section 424(f) of the Code and (b) is
designated as a participant in the Plan by the Committee.
ARTICLE III--ELIGIBILITY AND PARTICIPATION
3.01. Initial Eligibility.
Any employee who shall have completed one (1) year of continuous
employment and shall be employed by the Company or a Subsidiary
Corporation on the date his participation in the Plan is to become
effective shall be eligible to participate in offerings under the Plan
that commence on or after such period has concluded.
3.02. Leave of Absence.
For purposes of participation in the Plan, a person on leave of
absence shall be deemed to be an Employee for the first 90 days of such
leave of absence and such employee's employment shall be deemed to have
terminated at the close of business on the 90th day of such leave of
absence unless such employee shall have returned to regular full-time or
part-time employment (as the case may be) prior to the close of business
on such 90th day. Termination by the Company or a Subsidiary Corporation,
as the case may be, of any employee's leave of absence, other than
termination of such leave of absence on return to full-time or part-time
employment, shall terminate an employee's employment for all purposes of
the Plan and shall terminate such employee's participation in the Plan and
right to exercise any option.
3.03. Restrictions on Participation.
Notwithstanding any provisions of the Plan to the contrary, no
Employee shall be granted an option to participate in the Plan:
(a) if, immediately after the grant, such Employee would own
stock, and/or hold outstanding options to purchase stock, possessing 5% or
more of the total combined voting power or value of all classes of stock
of the Company or any Subsidiary Corporation (for purposes of this
paragraph, the rules of Sections 423(b)(3) and 424(d) of the Code shall
apply in determining stock ownership of any Employee); or
(b) which permits his rights to purchase stock under all
employee stock purchase plans of the Company to accrue at a rate which
exceeds $25,000 in fair market value of the Common Stock (determined at
the time such option is granted) for each calendar year in which such
purchase rights are outstanding.
ARTICLE IV--OFFERINGS
4.01. Semi-Annual Offerings.
The Plan will be implemented by eight semi-annual offerings of
Common Stock (the "Offerings") beginning on the first day of July in each
of the years 1998, 1999, 2000 and 2001 and on the first day of January in
each of the years 1999, 2000, 2001 and 2002, each Offering terminating on
December 31 of the same year in the case of a July 1 Offering and on June
30 of the same year in the case of a January 1 Offering. The maximum
number of shares issued in each of the respective Offerings shall be
12,500 shares of Common Stock plus unissued shares from the prior
Offerings, whether offered or not.
As used in the Plan, "Offering Commencement Date" means the
January 1 or July 1, as the case may be, on which the particular Offering
begins, "Offering Termination Date" means the June 30 or December 31, as
the case may be, on which the particular Offering terminates and "Offering
Period" shall be the period that begins on the Offering Commencement Date
and ends on the Offering Termination Date of the same Offering.
4.02. Discretionary Three-Month Offerings.
Each semi-annual Offering may, in the discretion of the
Committee exercised prior to the commencement thereof, be divided into two
three-month Offerings. The maximum number of shares issued in each of the
respective three-month Offerings shall be 6,250 shares plus unissued
shares from the prior Offerings, whether offered or not. If the Committee
authorizes the division of the six-month Offerings into three-month
Offerings, the defined terms set forth in Section 4.01 and the number of
option shares calculated pursuant to Section 6.01 shall be appropriately
modified.
ARTICLE V--PAYROLL DEDUCTIONS
5.01. Amount of Deduction.
At the time an Employee files his authorization for payroll
deduction, he shall elect to have deductions made from his Compensation on
each payroll date during the time he is an Employee participating in an
Offering at the rate of any whole percent selected by the Employee that is
less than or equal to 5% of his Compensation payable during the Offering
Period.
5.02. Employee's Account.
All payroll deductions made for an Employee shall be credited to
his account under the Plan. An Employee may not make any separate cash
payment into such account except when on leave of absence and then only as
provided in Section 5.04.
5.03. Changes in Payroll Deductions.
An Employee may discontinue his participation in the Plan as
provided in Article VIII, but no other change can be made during an
Offering, including any change in the amount of his payroll deductions for
that Offering.
5.04. Leave of Absence.
If an Employee is granted a leave of absence from employment by
the Company, such Employee shall have the right to elect either to (a)
withdraw the balance in his account pursuant to Section 7.02, (b)
discontinue contributions to the Plan but remain a participant in the
Plan, or (c) remain a participant in the Plan during such leave of
absence, authorizing deductions to be made from payments by the Company to
the Employee during such leave of absence and undertaking to make cash
payments to the Plan at the end of each payroll period to the extent that
amounts payable by the Company to such Employee are insufficient to meet
such Employee's authorized Plan deductions.
5.05. Interest on Account.
No interest shall be paid by the Company on any funds held by
the Company in any account established pursuant to Section 5.02, whether
such funds are used to purchase Common Stock pursuant to Section 7.01 or
are subsequently withdrawn pursuant to Section 7.02.
ARTICLE VI--GRANTING OF OPTION
6.01. Number of Option Shares.
On each Offering Commencement Date, a participating Employee
shall be deemed to have been granted an option to purchase a maximum
number of shares of Common Stock equal to (a) that percentage of the
Employee's Compensation which he has elected to have withheld, multiplied
by (b) the Employee's Compensation during the last thirteen complete
biweekly payroll periods ending immediately prior to the Offering
Commencement Date, divided by (c) 85% of the fair market value of the
Common Stock on the applicable Offering Commencement Date. The fair
market value of the Common Stock shall be determined as provided in
paragraph (a) of Section 6.02.
6.02. Option Price.
The option price of Common Stock purchased with payroll
deductions made during an Offering Period shall be the lesser of:
(a) 85% of the closing price of the Common Stock on the
Offering Commencement Date or the nearest prior business day on which
trading occurred on the NASDAQ National Market System; or
(b) 85% of the closing price of the Common Stock on the
Offering Termination Date or the nearest prior business day on which
trading occurred on the NASDAQ National Market System.
If the Common Stock is not admitted to trading on any of the aforesaid
dates for which closing prices of the Common Stock are to be determined,
then reference shall be made to the fair market value of the stock on that
date, as determined on such basis as shall be established or specified for
the purpose by the Committee. Notwithstanding the foregoing, the option
price per share of Common Stock shall in no event be less than the par
value of such share.
ARTICLE VII--EXERCISE OF OPTIONS
7.01. Automatic Exercise.
Unless an Employee gives written notice to the Company as
provided in Section 7.02, the Employee's option to purchase Common Stock
with payroll deductions made during any Offering Period will be deemed to
have been exercised automatically on the Offering Termination Date
applicable to such Offering, for the purchase of the number of full shares
of Common Stock which the accumulated payroll deductions in his account at
that time will purchase at the applicable option price (but not in excess
of the number of shares for which options have been granted to the
Employee pursuant to Section 6.01 and subject to a pro rata reduction
pursuant to Section 9.01), and any excess in his account will be returned
to the Employee. Notwithstanding the foregoing, no Employee shall be
entitled to exercise his option to purchase Common Stock for fewer than
the Applicable Minimum Number, as defined in Section 7.04, of shares of
Common Stock.
7.02. Withdrawal of Account.
At any time prior to the Offering Termination Date applicable to
any Offering, an Employee may, by written notice to the Company, elect to
withdraw all of the accumulated payroll deductions in his account at such
time.
7.03. Fractional Shares.
Fractional shares of Common Stock will not be issued under the
Plan. Any accumulated payroll deductions that would have been used to
purchase fractional shares will be returned to any Employee promptly
following the termination of the Offering, without interest.
7.04. Applicable Minimum Number.
The "Applicable Minimum Number" of shares of Common Stock that
may be purchased during an Offering Period shall be such number of shares
as the Committee, in its discretion, may determine for the purpose of
minimizing the cost and expense to the Company of issuing stock
certificates and maintaining shareholder account records. Notwithstanding
the foregoing, in no event shall the Applicable Minimum Number with
respect to an Employee be greater than the number of shares of Common
Stock that the Employee is offered in a single Offering pursuant to
Section 6.01.
7.05. Stock Certificates.
Certificates covering the shares of Common Stock purchased under
the Plan shall be issued as soon as reasonably practicable after the
exercise of the option to purchase. Shares of Common Stock to be
delivered to an Employee under the Plan will be registered in the name of
the Employee, subject to the provisions of Section 11.02. The Company
will pay all stamp taxes and the like, and all fees, in connection with
such issue.
ARTICLE VIII--WITHDRAWAL FROM PARTICIPATION
8.01. In General.
Pursuant to Section 7.02, an Employee may withdraw payroll
deductions credited to his account under the Plan at any time before the
Offering Termination Date by giving written notice to the Company. All of
the Employee's payroll deductions credited to his account shall be paid to
him promptly after receipt of the Employee's notice of withdrawal, and no
further payroll deductions will be made from the Employee's Compensation
during such Offering. The Company may, at its option, treat any attempt
to borrow by an Employee on the security of his accumulated payroll
deductions as an election under Section 7.02 to withdraw such deductions.
8.02. Effect on Subsequent Participation.
An Employee's withdrawal from any Offering will not have any
effect upon his eligibility to participate in any subsequent Offering or
in any similar plan that may hereafter be adopted by the Company.
8.03. Termination of Employment.
Upon termination of an Employee's employment for any reason,
including retirement (but excluding death while in the employ of the
Company or continuation of a leave of absence for a period exceeding 90
days), the payroll deductions credited to the Employee's account will be
returned to him, or, in the case of his death subsequent to the
termination of his employment, to the person or persons entitled thereto
under Section 11.02.
8.04. Termination of Employment Due to Death.
Upon termination of an Employee's employment because of his
death, his beneficiary shall have the right to elect, by written notice
given to the Company prior to the earlier of the Offering Termination Date
or the 60th day after the date of death of the Employee, either:
(a) to withdraw all of the payroll deductions credited to the
Employee's account under the Plan, or
(b) to exercise the Employee's option for the purchase of
Common Stock on the Offering Termination Date next following the date of
the Employee's death for the purchase of the number of full shares of
Common Stock that the accumulated payroll deductions in the Employee's
account will purchase at the applicable option price, and any excess in
such account will be returned to the beneficiary, without interest.
In the event that no such written notice of election shall be duly
received by the Company, the beneficiary shall automatically be deemed to
have elected, pursuant to paragraph (b), to exercise the Employee's
option.
8.05. Leave of Absence.
An Employee on leave of absence shall, subject to the election
made by the Employee pursuant to Section 5.04, continue to be a
participant in the Plan so long as such Employee is on continuous leave of
absence. An individual who has been on leave of absence for more than 90
days and who therefore is not an Employee for the purpose of the Plan
shall not be entitled to participate in any Offering commencing after the
90th day of such leave of absence. Notwithstanding any other provision of
the Plan, unless a participant on leave of absence returns to regular
full-time or part-time employment with the Company at the termination of
such leave of absence, the participant's participation in the Plan shall
terminate on the termination of the leave of absence.
ARTICLE IX--STOCK
9.01. Maximum Number of Shares.
The maximum number of shares which shall be issued under the
Plan, subject to adjustment upon changes in capitalization of the Company
as provided in Section 11.04, shall be 12,500 shares in each semi-annual
Offering (6,250 shares in each three-month Offering) plus, with respect to
each Offering, all unissued shares from prior Offerings, whether offered
or not, not to exceed 100,000 shares for all Offerings. If the total
number of shares of Common Stock for which options are exercised on any
Offering Termination Date in accordance with Article VI exceeds the
maximum number of shares issuable in such Offering, the Company shall make
a pro rata allocation of the shares available for delivery and
distribution in as nearly a uniform manner as shall be practicable and as
it shall determine to be equitable, and the balance of payroll deductions
credited to the account of each Employee shall be returned to him as
promptly as possible.
9.02. Employee's Interest in Stock.
The Employee will have no interest in Common Stock covered by
his option until such option has been exercised.
9.03. Restrictions on Exercise.
Purchase rights granted under the Plan shall not become
exercisable until such time as the shares of Common Stock, which may be
issued pursuant to the Plan (a) have been registered under the Securities
Act of 1933, as amended (the "Act"), and any applicable state and foreign
securities laws; or (b) in the opinion of the Company's counsel, may be
issued pursuant to an exemption from registration under the Act and in
compliance with any applicable state and foreign securities laws.
ARTICLE X--ADMINISTRATION
10.01. Membership of Committee.
The Plan shall be administered by the Compensation Committee of
the Board of Directors of the Company (the "Committee") consisting of not
less than two (2) directors appointed for such purpose who are "non-
employee directors" as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended.
10.02. Conduct of Committee.
A majority of the members of the Committee shall constitute a
quorum. All determinations of the Committee shall be made by at least a
majority of its members. Any decision or determination reduced to writing
and signed by all of the members of the Committee shall be fully as
effective as it if had been made by a unanimous vote at a meeting duly
called and held.
10.03. Authority of Committee.
In accordance with the provisions of the Plan, the Committee
shall establish such terms and conditions for the grant of purchase rights
as the Committee may deem necessary or advisable, adopt such rules or
regulations which may become necessary or advisable for the operation of
the Plan, and make such determinations, and take such other actions, as
are expressly authorized or contemplated in the Plan or as may be required
for the proper administration of the Plan in accordance with its terms.
The interpretation of any provision of the Plan by the Committee and any
determination on the matters referred to in this Article X shall be final.
10.04. Plan Administrator.
The Committee, in its discretion, may appoint an individual (the
"Plan Administrator") to assist the Committee in corresponding with
Employees, with record keeping and in performing other administrative
functions in connection with the Plan; provided, however, that the Plan
Administrator shall exercise no discretion with respect to the
interpretation of the Plan or the grant of options to purchase shares of
Common Stock pursuant to the Plan.
ARTICLE XI--MISCELLANEOUS
11.01. Tax Withholding.
The Company may withhold the issuance of certificates for shares
of Common Stock to an Employee pursuant to Section 7.05 until such time as
the Employee has made arrangements satisfactory to the Company to permit
the Company to comply with any applicable requirement for withholding of
federal, state or local income or FICA taxes or any other amounts required
by law to be withheld. In the absence of such arrangements, the Company
may deduct and withhold from any cash otherwise payable to the Employee
(whether payable as salary, bonus or other compensation) for the purpose
of satisfying such requirements.
11.02. Designation of Beneficiary.
An Employee may file a written designation of a beneficiary who
is to receive any Common Stock that may be issued on the exercise of
purchase rights hereunder after the death of the Employee or cash in the
Employee's account. Such designation of beneficiary may be changed by the
Employee at any time by written notice to the Plan Administrator. Upon
the death of an Employee and upon receipt by the Company of proof of
identity and existence at the Employee's death of a beneficiary validly
designated by him under the Plan, the Company shall deliver such Common
Stock and/or cash to such beneficiary. In the event of the death of an
Employee and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Employee's death, the Company shall
deliver such Common Stock and/or cash to the executor or administrator of
the estate of the Employee, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such Common Stock and/or cash to the spouse or to
any one or more dependents of the Employee as the Company may designate.
No beneficiary shall, by virtue of the provisions of this Section 11.02,
acquire any interest at any time in the Common Stock issued to the
Employee prior to the death of the Employee, and no beneficiary shall,
prior to the death of the Employee by whom he has been designated, acquire
any interest in the Common Stock (if any) to be issued to the Employee
and/or cash in the account under the Plan after the death of the Employee.
11.03. Transferability.
Subject to the provisions of Section 11.02, an Employee's right
to exercise an option under the Plan (a) shall not be transferable by such
Employee, (b) may be exercised only by the Employee, and (c) may not be
sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, except by will or the laws of descent and distribution.
11.04. Adjustments Upon Changes in Capitalization.
In order to prevent dilution or enlargement of purchase rights,
in the event of reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation or other change in
shares of Common Stock after the Board of Directors has adopted the Plan,
the Committee shall make appropriate changes in the number of shares of
Common Stock which may be purchased pursuant to the Plan, and the number
of shares of Common Stock covered by, and the purchase price under, each
outstanding option, and such other changes in the Plan and outstanding
options as the Committee may deem appropriate under the circumstances. No
rights to purchase a fractional share of Common Stock shall result from
any such change, and any fractional share resulting from such change shall
be rounded to the nearest whole number.
11.05. Amendment and Termination.
The Board of Directors may amend or terminate the Plan at any
time, provided, however, that the Board of Directors may not, without the
approval of the shareholders of the Company, amend the Plan (a) if
shareholder approval is required by (i) the Code, or any rules promulgated
thereunder; or (ii) the quotation or listing requirements of NASDAQ or any
principal securities exchange on which the Common Stock is then traded (in
order to maintain the Common Stock's quotation or listing thereon); or (b)
if such amendment would (i) increase the maximum number of shares of
Common Stock which may be purchased pursuant to the Plan (except as
provided in Section 11.04); (ii) modify the requirements as to eligibility
for participation in the Plan; (iii) change the class of corporations
whose employees will be granted purchase rights under the Plan; or (iv)
materially increase the benefits to Employees under the Plan. Any
amendment of the Plan shall not, without the consent of the Employee,
alter or impair any of the rights or obligations under any option
previously granted to the Employee.
11.06. Other Restrictions on Transfer.
The Committee may impose such non-discriminatory restrictions on
the transfer of any shares of Common Stock acquired pursuant to the
exercise of a purchase right under the Plan as it may deem advisable,
including, without limitation, restrictions under applicable federal
securities law, under the requirements of any stock exchange upon which
such shares of Common Stock are then listed, if any, and under any state
and foreign securities laws applicable to such shares.
11.07. No Employment Rights.
The Plan does not, directly or indirectly, create any right for
the benefit of any Employee or class of Employees to purchase any shares
under the Plan, or create in any Employee or class of Employees any right
with respect to continuation of employment by the Company, and it shall
not be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, an Employee's employment at any time.
11.08. Effect of Plan.
The provisions of the Plan shall, in accordance with its terms,
be binding upon, and inure to the benefit of, all successors of each
Employee participating in the Plan, including, without limitation, such
Employee's estate and the executors, administrators or trustees thereof,
heirs and legatees, and any receiver, trustee in bankruptcy or
representative of creditors of such Employee.
11.09. Applicable Law.
The plan shall, to the extent not inconsistent with applicable
federal law, be construed under the laws of the State of Wisconsin.
11.10. Effective Date.
The Plan shall become effective as of the date of its adoption
by the Board of Directors of the Company, subject to approval of the Plan
by the shareholders within twelve months of such effective date. Purchase
rights may be granted prior to such approval; provided, however, that such
purchase rights shall be subject to such approval and shall not be
exercised until after such approval.