EXHIBIT 4.1
CNS, INC.
1989 EMPLOYEE STOCK PURCHASE PLAN
1. Establishment of Plan. CNS, Inc. (hereinafter referred to as the "Company")
proposes to grant to certain employees of the Company the opportunity to
purchase common stock of the Company. Such common stock shall be purchased
pursuant to the plan herein set forth, which shall be known as the "CNS
1989 EMPLOYEE STOCK PURCHASE PLAN" (hereinafter referred to as the "Plan").
The Company intends that the Plan shall qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended, and shall be construed in a manner consistent with the
requirements of said Section 423 and the regulations thereunder.
2. Purpose. The Plan is intended to encourage stock ownership by all employees
of the Company, and as an incentive to them to remain in employment,
improve operations, increase profits, and contribute more significantly to
the Company's success.
3. Administration. The Plan shall be administered by a stock purchase
committee (hereinafter referred to as the "Committee") consisting of not
less than three directors or employees of the Company, as designated by the
Board of Directors of the Company (hereinafter referred to as the "Board of
Directors"). The Board of Directors shall fill all vacancies in the
Committee and may remove any member of the Committee at any time, with or
without cause. The Committee shall select its own chairman and hold its
meetings at such times and places as it may determine. All determinations
of the Committee shall be made by a majority of its members. Any decision
that is made in writing and signed by a majority of the members of the
Committee shall be effective as fully as though made by a majority vote at
a meeting duly called and held. The determinations of the Committee shall
be made in accordance with its judgment as to the best interests of the
Company, its employees and its shareholders and in accordance with the
purposes of the Plan; provided, however, that the provisions of the Plan
shall be construed in a manner consistent with the requirements of Section
423 of the Internal Revenue Code, as amended. Such determination shall be
binding upon the Company and the participants in the Plan unless otherwise
determined by the Board of Directors. The Company shall pay all expenses of
administering the Plan. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any option granted under it.
4. Duration and Phases of the Plan.
a) The Plan was originally effective and commenced on July 1, 1989;
effective as of July 1, 1999 the Plan is extended and will thereafter
terminate July 1, 2009, except that any phase commenced prior to such
termination shall, if necessary, be allowed to continue beyond such
termination until completion. Notwithstanding the foregoing, this Plan
shall be considered of no force or effect and any options granted
shall be considered null and
void unless the holders of a majority of all of the issued and
outstanding shares of the common stock of the Company approve the Plan
within twelve (12) months before or after the date of its adoption by
the board of Directors.
b) The Plan shall be carried out in one or more phases, each phase being
for a period of six months. No phase shall run concurrently, but a
phase may commence immediately after the termination of the preceding
phase. The existence and date of commencement of a phase (the
"Commencement Date") shall be determined by the Committee, provided
that the commencement of the first phase shall be within twelve (12)
months before or after the date of approval of the Plan by the
shareholders of the Company. In the event all of the stock reserved
for grant of options hereunder is issued pursuant to the terms hereof
prior to the commencement of one or more phases scheduled by the
Committee or the number of shares remaining is so small, in the
opinion of the Committee, as to render administration of any
succeeding phase impracticable, such phase or phases shall be
cancelled. Phases shall be numbered successively Phase 1, Phase 2,
Phase 3, etc.
5. Eligibility. Effective July 1, 1999, all Employees, as defined in Paragraph
19 hereof, who are employed by the Company on the Commencement Date of a
phase shall be eligible to participate in such phase. Prior to July 1,
1999, all Employees, as defined in Paragraph 19 hereof, who were employed
for a period of six months prior to the Commencement Date of a phase, were
eligible to participate in such phase.
6. Participation. Participation in the Plan is voluntary. An eligible Employee
may elect to participate in any phase of the Plan, and thereby become a
`Participant" in the Plan, by completing the Plan payroll deduction form
provided by the Company and delivering it to the Company or its designated
representative prior to the Commencement Date or that phase. Payroll
deductions for a Participant shall commence on the first payday after the
Commencement Date of the phase and shall terminate on the last payday
immediately prior to or coinciding with the termination date of that phase
unless sooner terminated by the Participant as provided in Paragraph 9
hereof.
7. Payroll Deductions.
a) Upon enrollment, a Participant shall elect to make contributions to
the Plan by payroll deductions (in full dollar amounts and in amounts
calculated to be as uniform as practicable throughout the period of
the phase), in the aggregate amount not in excess of 10% of such
Participant's Base Pay for the term of the phase, as determined
according to Paragraph 19 hereof.
The minimum authorized payroll deduction must aggregate at least $10
per month.
b) In the event that the Participant's compensation for any pay period is
terminated or reduced from the compensation rate for such a period as
of the Commencement Date of the phase for any reason so that the
amount actually withheld on behalf of the Participant as of the
termination date of the phase is less than the amount anticipated to
be withheld over the phase year as determined on the Commencement Date
of the phase, then the
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extent to which the participant may exercise his or her option shall
be based on the amount actually withheld on his or her behalf. In the
event of a change in the pay period of any Participant, such as from
bi-weekly to monthly, an appropriate adjustment shall be made to the
deduction in each new pay period so as to ensure the deduction of the
proper amount authorized by the Participant.
c) All payroll deductions made for Participants shall be credited to
their accounts under the Plan. The Participant may not make any
separate cash payments into such account.
d) Except for his or her right to discontinue participation in the Plans
as provided in Paragraph 9, no Participant shall be entitled to
increase or decrease the amount to be deducted in a given phase after
the Commencement Date.
8. Options.
a) Grant of Option.
i) A Participant who is employed by the Company as of the
Commencement Date of a phase shall be granted an option as of
such date to purchase a number of full shares of Company common
stock to be determined by dividing the total amount to be
credited to that Participant's account under Paragraph 7 hereof
by the option price set forth in Paragraph 8(a)(ii) hereof (not
to exceed 15,000 shares per Participant), subject to the
limitations of Paragraph 10 hereof.
ii) The option price for such shares of common stock shall be the
lower of:
A. Eighty-five percent (85%) of the fair market value of such
shares of common stock on the Commencement Date of the
phase; or
B. Eighty-five percent (85%) of the fair market value of such
shares of common stock on the termination date of the phase.
iii) The fair market value of shares of common stock of the Company
shall be determined by the Committee for each valuation date in a
manner acceptable under Section 423, Internal Revenue Code of
1986, as amended.
iv) Anything herein to the contrary notwithstanding, no Employee
shall be granted an option hereunder:
A. Which permits his or her rights to purchase stock under all
employee stock purchase plans of the Company, its
subsidiaries or its parent, if any, to accrue at a rate
which exceeds Twenty-Five Thousand Dollars ($25,000) of the
fair market value of such stock (determined at the time such
option is granted) for each calendar year in which such
option is outstanding at any time;
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B. If immediately after the grant such Employee would own
and/or hold outstanding options to purchase stock possessing
five percent (5%) or more of the total combined voting power
or value of all classes of stock of the Company, its parent,
if any, or of any subsidiary of the Company. For purposes of
determining stock ownership under this Paragraph, the rules
of Section 425(d) of the Internal Revenue Code of 1986, as
amended, shall apply; or
C. Which can be exercised after the expiration of 27 months
from the date the option is granted.
b) Exercise of Option.
i) Unless a Participant gives written notice to the Company pursuant to
Paragraph 8(b) (ii) or Paragraph 9 prior to the termination date of a
phase, his or her option for the purchase of shares will be exercised
automatically as of such termination date for the purchase of the
number of full shares of Company common stock which the accumulated
payroll deductions in his or her account at that time will purchase at
the applicable option price, subject to the limitations set forth in
Paragraph 10 hereof.
ii) A Participant may, by written notice to the Company at any time during
the thirty (30) day period immediately preceding the termination date
of a phase, elect, effective as of the termination date of that phase,
to exercise his or her option for a specified number of full shares
less than the maximum number which may be purchased hereunder his or
her option.
iii) As promptly as practicable after the termination date of any phase,
the Company will deliver to each Participation herein the common stock
purchase upon the exercise of his or her option, together with a cash
payment equal to the balance, if any, of his or her account which was
not used for the purchase of common stock without interest thereon.
9. Withdrawal or Termination of Participation.
a) A Participant may, at any time prior to the termination date of a
phase, withdraw all payroll deductions then credited to his or her
account by giving written notice to the Company. Promptly upon receipt
of such notice of withdrawal, all payroll deductions credited to the
Participant's account will be paid to him or her without interest
thereon and no further payroll deductions will be made during that
phase. In such event, the option granted the Participant under that
phase of the Plan shall lapse immediately. Partial withdrawals of
payroll deductions hereunder may not be made.
b) In the event of the death of a Participant, the person or persons
specified in Paragraph 14 may give notice to the Company within sixty
(60) days of the death of the Participant electing to purchase the
number of full shares which the accumulated payroll deductions in the
account of such deceased Participant will purchase at the option price
specified in Paragraph 8(a)(ii) and have the balance in the account
distributed in cash without interest
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thereon. If no such notice is received by the Company within said
sixty (60) days, the accumulated payroll deductions will be
distributed in full in cash without interest thereon.
10. Stock Reserved for Options.
a) As of July 1, 1989, one hundred thousand (100,000) shares of the
Company's no par value common stock which may be authorized by
unissued or treasury shares of the Company (or the number and kind of
securities to which said one hundred thousand (100,000) shares may be
adjusted in accordance with Paragraph 12 hereof) are reserved for
issuance upon the exercise of options to be granted under the Plan.
Shares subject to the unexercised portion of any lapsed or expired
option may again be subject to option under the Plan.
b) If the total number of shares of Company common stock for which
options are to be granted for a given phase as specified in Paragraph
8 exceeds the number of shares then remaining available under the Plan
(after deductions of all shares for which options have been exercised
or are then outstanding) and if the Committee does not elect to cancel
such phase pursuant to Paragraph 4, the Committee shall make a pro
rata allocation of the shares remaining available in as uniform and
equitable a manner as it shall consider practicable. In such even, the
options to be granted and the payroll deductions to be made pursuant
to the Plan, which would otherwise be effected, may, in the discretion
of the Committee, be reduced accordingly. The Committee shall give
written notice of such reduction to each Participant affected.
c) The Participant and a joint tenant named pursuant to Paragraph 10(d)
hereof shall have no rights as a shareholder with respect to any
shares subject to the Participant's option until the date of the
issuance of a stock certificate evidencing such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for
which the record date is prior to the date such stock certificate is
actually issued, except as otherwise provided in Paragraph 12 hereof.
d) The shares of Company common stock to be delivered to a Participant
pursuant to the exercise of an option under the Plan will be
registered in the name of the Participant or, if the Participant so
directs by written notice to the Committee prior to the termination
date of that phase of the Plan, in the names of the participant and
one other person the Participant may designate as his joint tenant
with rights of survivorship, to the extent permitted by law.
11. Accounting and Use of Funds. Payroll deductions for each participant shall
be credited to an account established for him or her under the Plan. A
Participant may not make any separate cash payments into such account. Such
account shall be solely for bookkeeping purposes and no separate fund or
trust shall be established hereunder and the Company shall not be obligated
to segregate such funds. All funds from payroll deductions received or held
by the Company under the Plan may be used, without limitation, for any
corporate purpose by the Company.
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12. Adjustment Provision.
a) Subject to any required action by the shareholders of the Company, the
number of shares covered by each outstanding option, and the price per
share thereof in each such option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of the
Company common stock resulting from a subdivision or consolidation of
shares or the payment of a shared dividend (but only on the shares) or
any other increase or decrease in the number of such shares effected
without receipt of consideration by the Company.
b) Upon merger or consolidation of the Company with any other corporation
whereby the Company is not the surviving entity, any options
outstanding under this Plan shall be convertible, at the sole election
of each Participant, into either: (I) stock options representing
shares of the surviving corporation, providing for an option price,
time of exercise, and other rights and benefits equivalent to the
unexercised pre-merger or pre-consolidation options held by the
Participant; or (ii) cash payment, equal to the fair market value of
the shares of Company common stock subject to options outstanding
hereunder as calculated on the day prior to the effective date of the
merger or consolidation, with such payment to be made on the scheduled
termination date of the phase under the Plan. The Company is bound to
provide the foregoing protection to the Participants in the event of a
merger or consolidation after which it would not be the surviving
entity.
c) In the event of a change in the shares of the Company as presently
constituted, which is limited to a change of all its authorized shares
with par value into the same number of shares with a different par
value or without par value, the shares resulting from any such change
shall be deemed to be the shares within the meaning of this Plan.
13. Non-Transferability of Options.
a) Options granted under any phase of the Plan shall not be transferable
except under the laws of descent and distribution and shall be
exercisable only the Participant during his or her lifetime and after
his or her death only by his or her beneficiary of the representative
of his or her estate as provided in Paragraph 9(b) hereof.
b) Neither payroll deductions credited to a Participant's account, nor
any rights with regard to the exercise of an option or to receive
common stock under any phase of the Plan may be assigned, transferred,
pledged or otherwise disposed of in any way by the Participant. Any
such attempted assignment, transfer, pledge or other disposition shall
be null and void and without effect, except that the Company may, at
its option, treat such act as an election to withdraw funds in
accordance with Paragraph 9.
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14. Designation of Beneficiary. A Participant may file a written designation of
a beneficiary who is to receive any cash to the Participant's credit under
any phase of the Plan in the event of such Participant's death prior to
exercise of his or her option pursuant to Paragraph 9(b) hereof, or to
exercise his or her option and become entitled to any stock and/or cash
upon such exercise in the event of the Participant's death prior to
exercise of the option pursuant to Paragraph 9(b) hereof. The beneficiary
designation may be changed by the Participant at any time by written notice
to the Company.
Upon the death of a Participant and upon receipt by the Company of proof
deemed adequate by it of the identity and existence at the Participant's
death of a beneficiary validly designated under the Plan, the Company shall
in the event of the Participant's death under the circumstances described
in Paragraph 9(b) hereof, allow such beneficiary to exercise the
Participant's option pursuant to Paragraph 9(b) if such beneficiary is
living on the termination date of the phase and deliver to such beneficiary
the appropriate stock and/or cash after exercise of the option. In the
event there is no validly designated beneficiary under the Plan who is
living at the time of the Participant's death under the circumstances
described in Paragraph 9(b) or in the event the option lapses, the Company
shall deliver the cash credited to the account of the Participant without
interest to the executor or administrator of the estate of the Participant,
or if no such executor or administrator has been appointed to the knowledge
of the Company, it may, in its discretion, deliver such cash to the spouse
or to any one or more dependents or relatives of the Participant, or if no
spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate. The Company will not be responsible
for or be required to give effect to the disposition of any cash or stock
or the exercise of any option in accordance with any will or other
testamentary disposition made by such Participant or in accordance with the
provision of any law concerning intestacy, or otherwise. No designated
beneficiary shall, prior to the death of a Participant by whom he or she
has been designated, acquire any interest in any stock or in any option or
in the cash credited to the participant under any phase of the Plan.
15. Amendment and Termination. The Plan may be terminated at any time by the
Board of Directors provided that, except as permitted in Paragraph 12
hereof, no such termination will take effect with respect to any options
then outstanding. Also, the Board may, from time to time, amend the Plan as
it may deem proper and in the best interests of the Company or as may be
necessary to comply with Section 423 of the Internal Revenue Code of 1986,
as amended, or other applicable laws or regulations; provided, however,
that no such amendment shall, without prior approval of the shareholders of
the Company (1) increase the total number of shares for which options may
be granted under the Plan (except as provided in paragraph 12 herein), (2)
permit aggregate payroll deductions in excess of ten percent (10%) of a
Participant's compensation as of the Commencement Date of a phase, or (3)
impair any outstanding option.
16. Interest. The Plan does not provide for the payment of interest on a
Participant's payroll deductions.
17. Notices. All notices or other communications in connection with the Plan or
any phase thereof shall be in the form specified by the Committee and shall
be deemed to have been
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duly given when received by the Participant or his designated personal
representative or beneficiary or by the Company or its designated
representative, as the case may be.
18. Participation of Subsidiaries. The Board of Directors may, by written
resolution, authorize the employees of any of its subsidiaries to
participate hereunder. Effective as of the date of coverage of any such
subsidiary, any references herein to the "Company" shall be interpreted as
referring to such subsidiary as well as to CNS, Inc.
In the event that any subsidiary which is covered under the Plan ceases to
be a subsidiary of CNS, Inc., the employees of such subsidiary shall be
considered to have terminated their employment for purposes of Paragraph 9
hereof as of the date such subsidiary ceases to be such a subsidiary.
19. Definitions.
a) Subsidiary" shall include any corporation defined as a subsidiary of
the Company in Section 425 (f) of the Internal Revenue Code of 1986,
as amended.
b) "Employee" shall mean any employee, including an officer, of the
Company who as of the Commencement Date of a phase is customarily
employed by the Company for more than fifteen (15) hours per week and
more than five (5) months per year.
c) Base Pay" is the regular pay for employment for each employee as
annualized for a twelve (12) month period, exclusive of overtime,
commissions, bonuses, disability payments, shift differentials,
incentives and other similar payments, determined as of the
Commencement Date of each phase.
Adopted by Board of Directors: January 27, 1989
Ratified and approved by shareholders: April 26, 1989
Extension and amendment by Board of Directors: July 1, 1999
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