PHOTOWORKS, INC.
1999 STOCK INCENTIVE COMPENSATION PLAN
1. PURPOSES
1.1 The purpose of the Seattle Filmworks, Inc. 1999 Stock Incentive
Compensation Plan (the "Plan") is to enhance the long-term shareholder value of
Seattle Filmworks, Inc., a Washington corporation (the "Company"), by offering
opportunities to employees, persons to whom offers of employment have been
extended, directors, officers, consultants, agents, advisors and independent
contractors of the Company and its Subsidiaries (as defined in Section 2) to
participate in the Company's growth and success, and to encourage them to remain
in the service of the Company and its Subsidiaries and to acquire and maintain
stock ownership in the Company.
2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below:
2.1 Acquired Entities.
"Acquired Entities" has the meaning given in Section 6.2.
2.2 Acquisition Transaction.
"Acquisition Transaction" has the meaning given in Section 6.2.
2.3 Award.
"Award" means a grant made to a Participant pursuant to the Plan,
including, without limitation, grants of Options, Stock Appreciation Rights,
Stock Awards, Other Stock-Based Awards or any combination of the foregoing.
2.4 Board.
"Board" means the Board of Directors of the Company.
2.5 Cause.
"Cause" means dishonesty, fraud, misconduct, disclosure of confidential
information, conviction of, or a plea of guilty or no contest to, a felony under
the laws of the United States or any state thereof, habitual absence from work
for reasons other than illness, intentional conduct which causes significant
injury to the Company, habitual abuse of alcohol or a controlled substance, in
each case as determined by the Plan Administrator, and its determination shall
be conclusive and binding.
2.6 Change in Control.
"Change in Control" means (i) the consummation of a merger or
consolidation of the Company with or into another entity or any other corporate
reorganization, if more than 50% of the combined voting power of the continuing
or surviving entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
shareholders of the Company immediately prior to such merger, consolidation or
other reorganization or (ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets. A transaction shall not constitute a
Change in Control if its sole purpose is to change the state of the Company's
incorporation or to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company's securities
immediately before such transaction.
2.7 Code.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.8 Common Stock.
"Common Stock" means the common stock, par value $.01, of the Company.
2.9 Disability.
"Disability" means a medically determinable mental or physical
impairment or condition of the Holder which is expected to result in death or
which has lasted or is expected to last for a continuous period of twelve (12)
months or more and which causes the Holder to be unable, in the opinion of the
Plan Administrator on the basis of evidence acceptable to it, to perform his or
her duties for the Company and, in the case of a determination of Disability for
purposes of determining the exercise period for an Incentive Stock Option, to be
engaged in any substantial gainful activity. Upon making a determination of
Disability, the Plan Administrator shall, for purposes of the Plan, determine
the date of the Holder's termination of employment, service or contractual
relationship.
2.10 Exchange Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.11 Fair Market Value.
"Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the closing sales price for the Common Stock as reported by the Nasdaq
National Market for a single trading day or (b) if the Common Stock is listed on
the New York Stock Exchange or the American Stock Exchange, the closing sales
price for the Common Stock as such price is officially quoted in the composite
tape of transactions on such exchange for a single trading day. If there is no
such reported price for the Common Stock for the date in question, then such
price on the last preceding date for which such price exists shall be
determinative of Fair Market Value.
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2.12 Grant Date.
"Grant Date" means the date the Plan Administrator adopted the granting
resolution or a later date designated in a resolution of the Plan Administrator
as the date an Award is to be granted.
2.13 Holder.
"Holder" means the Participant to whom an Award is granted or the
personal representative of a Holder who has died.
2.14 Incentive Stock Option.
"Incentive Stock Option" means an Option to purchase Common Stock
granted under Section 7 with the intention that it qualify as an "incentive
stock option" as that term is defined in Section 422 of the Code.
2.15 Involuntary Termination.
"Involuntary Termination" means termination of the Holder's service to
the Company (or the parent or subsidiary company employing such Holder) or the
other party to the transaction constituting a Change in Control by reason of (i)
the involuntary discharge of such Holder by the Company (or the parent or
subsidiary company employing such Holder) or the other party to the transaction
constituting a Change in Control for reasons other than Cause or (ii) the
voluntary resignation of the Holder following (A) a change in such Holder's
position with the Company (or its successor or the parent or subsidiary company
that employs such Holder) or the other party to the transaction constituting a
Change in Control that materially reduces such Holder's level of authority or
responsibility or (B) a reduction in such Holder's compensation (including base
salary, fringe benefits and participation in bonus or incentive programs based
on corporate performance) by more than 20%.
2.16 Nonqualified Stock Option.
"Nonqualified Stock Option" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.
2.17 Option.
"Option" means the right to purchase Common Stock granted under Section
7.
2.18 Option Shares.
"Option Shares" means the shares of Common Stock issuable upon a
Holder's exercise of an Option granted under the Plan.
2.19 Other Stock-Based Award.
"Other Stock-Based Award" means an Award granted under Section 11.
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2.20 Participant.
"Participant" means an individual who is a Holder of an Award or, as
the context may require, any employee, director (including directors who are not
employees), officer, consultant, agent, advisor or independent contractor of the
Company or a Subsidiary who has been designated by the Plan Administrator as
eligible to participate in the Plan.
2.21 Plan Administrator.
"Plan Administrator" means the Board or any committee designated to
administer the Plan under Section 3.1.
2.22 Restricted Stock.
"Restricted Stock" means shares of Common Stock granted pursuant to a
Stock Award under Section 10, the rights of ownership of which are subject to
restrictions prescribed by the Plan Administrator.
2.23 Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
2.24 Stock Appreciation Right.
"Stock Appreciation Right" means an Award granted under Section 9.
2.25 Stock Award.
"Stock Award" means an Award granted under Section 10.
2.26 Subsidiary.
"Subsidiary," except as expressly provided otherwise, means any entity
that is directly or indirectly controlled by the Company or in which the Company
has a significant ownership interest, as determined by the Plan Administrator,
and any entity that may become a direct or indirect parent of the Company.
3. ADMINISTRATION
3.1 Plan Administrator.
The Plan shall be administered by the Board or a committee or
committees (which term includes subcommittees) appointed by, and consisting of
two or more members of, the Board. Any such committee shall have the powers and
authority vested in the Board hereunder (including the power and authority to
interpret any provision of the Plan or of any Award). The Board, or any
committee thereof appointed to administer the Plan, is referred to herein as the
"Plan Administrator." If and so long as the Common Stock is registered under
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Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in
selecting the Plan Administrator and the membership of any committee acting as
Plan Administrator for any persons subject or likely to become subject to
Section 16 under the Exchange Act the provisions regarding (a) "outside
directors" as contemplated by Section 162(m) of the Code and (b) "Non-Employee
Directors" as contemplated by Rule 16b-3 under the Exchange Act. The Board or
Plan Administrator may delegate the responsibility for administering the Plan
with respect to designated classes of eligible Participants to one or more
senior executive officers or committees thereof, the members of which need not
be members of the Board, subject to such limitations as the Board deems
appropriate. Committee members shall serve for such term as the Board may
determine, subject to removal by the Board at any time.
3.2 Administration and Interpretation by the Plan Administrator.
Except for the terms, conditions and limitations explicitly set forth
in the Plan, the Plan Administrator shall have exclusive authority, in its
absolute discretion, to determine all matters relating to Awards under the Plan,
including the selection of individuals to be granted Awards, the type of Awards,
the number of shares of Common Stock subject to an Award, all terms, conditions,
restrictions and limitations, if any, of an Award and the terms of any
instrument that evidences the Award. The Plan Administrator shall also have
exclusive authority to interpret the Plan and may from time to time adopt,
change and rescind rules and regulations of general application for the Plan's
administration. This authority shall include the sole authority to correct any
defect, supply any omission or reconcile any inconsistency in this Plan and make
all other determinations necessary or advisable for the administration of the
Plan and do everything necessary or appropriate to administer the Plan. The Plan
Administrator's interpretation of the Plan and its rules and regulations, and
all actions taken and determinations made by the Plan Administrator pursuant to
the Plan, shall be conclusive and binding on all parties involved or affected.
The Plan Administrator may delegate administrative duties to such of the
Company's officers as it so determines.
4. STOCK SUBJECT TO THE PLAN
4.1 Authorized Number of Shares.
Subject to adjustment from time to time as provided in Section 14.1, a
maximum of 800,000 shares of Common Stock shall be available for issuance under
the Plan. Shares issued under the Plan shall be drawn from authorized and
unissued shares.
4.2 Limitations.
(a) Subject to adjustment from time to time as provided in Section
14.1, not more than 375,000 shares of Common Stock may be made subject to Awards
under the Plan to any individual Participant in the aggregate in any one (1)
calendar year, except that the Company may make additional one-time grants to
newly hired Participants of up to 375,000 shares per such Participant; such
limitation shall be applied in a manner consistent with the requirements of, and
only to the extent required for compliance with, the exclusion from the
limitation on deductibility of compensation under Section 162(m) of the Code.
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(b) Subject to adjustment from time to time as provided in Section
14.1, not more than 50,000 shares of Common Stock may be made subject to Awards
to any non-employee director in the aggregate in any one calendar year.
4.3 Reuse of Shares.
Any shares of Common Stock that have been made subject to an Award that
cease to be subject to the Award (other than by reason of exercise or payment of
the Award to the extent it is exercised for or settled in shares) and any shares
repurchased by the Company from a Holder upon exercise of a right of repurchase
shall again be available for issuance in connection with future grants of Awards
under the Plan; provided, however, that any such shares shall be counted in
accordance with the requirements of Section 162(m) of the Code if and to the
extent applicable. Shares that are subject to tandem Awards shall be counted
only once. Also, upon a stock-for-stock exercise only the net number of shares
will be deemed to have been used under this Plan.
5. ELIGIBILITY
Awards may be granted under the Plan to those officers, directors and
key employees of the Company and its Subsidiaries as the Plan Administrator from
time to time selects. Awards may also be made to consultants, agents, advisors
and independent contractors who provide services to the Company and its
Subsidiaries.
6. AWARDS
6.1 Form and Grant of Awards.
The Plan Administrator shall have the authority, in its sole
discretion, to determine the type or types of Awards to be made under the Plan.
Such Awards may include, but are not limited to, Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights, Stock Awards and Other
Stock-Based Awards. Awards may be granted singly, in combination or in tandem so
that the settlement or payment of one automatically reduces or cancels the
other. Awards may also be made in combination or in tandem with, in replacement
of, as alternatives to, or as the payment form for, grants or rights under any
other employee or compensation plan of the Company.
6.2 Acquired Company Awards.
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if
the other plans are or were plans of other acquired entities ("Acquired
Entities") (or the parent of the Acquired Entity) and the new Award is
substituted, or the old Award is assumed, by reason of a merger, consolidation,
acquisition of property or of stock, reorganization or liquidation (an
"Acquisition Transaction"). If a written agreement pursuant to which an
Acquisition Transaction is completed is approved by the Board and said agreement
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sets forth the terms and conditions of the substitution for or assumption of
outstanding awards of the Acquired Entity, said terms and conditions shall be
deemed to be the action of the Plan Administrator without any further action by
the Plan Administrator, except as may be required for compliance with Rule 16b-3
under the Exchange Act, and the persons holding such Awards shall be deemed to
be Participants and Holders.
7. AWARDS OF OPTIONS
7.1 Grant of Options.
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.
7.2 Option Exercise Price.
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options.
7.3 Term of Options.
The term of each Option shall be as established by the Plan
Administrator or, if not so established, shall be five (5) years from the Grant
Date.
7.4 Exercise of Options.
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which or the installments in which the
Option shall become exercisable, which provisions may be waived or modified by
the Plan Administrator at any time. If not so established in the instrument
evidencing the Option or otherwise set at the time of grant, the Option will be
subject to the following: (a) 25% of the Option shall vest and become
exercisable one year after the Grant Date; (b) the balance of the Option shall
vest and become exercisable in a series of twelve (12) successive quarterly
installments for each additional quarter thereafter; (c) in no event shall any
additional Option Shares vest after termination of Holder's employment by or
service to the Company; and (d) the Plan Administrator may waive or modify the
foregoing schedule at any time.
To the extent that the right to purchase shares has accrued thereunder,
an Option may be exercised from time to time by written notice to the Company,
in accordance with procedures established by the Plan Administrator, setting
forth the number of shares with respect to which the Option is being exercised
and accompanied by payment in full as described in Section 7.5. An Option may
not be exercised as to less than 100 shares at any one time (or the lesser
number of remaining shares covered by the Option).
7.5 Payment of Exercise Price.
The exercise price for shares purchased under an Option shall be paid
in full to the Company by delivery of consideration equal to the product of the
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Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or check (unless, at the time of exercise, the Plan
Administrator determines not to accept a personal check), except that the Plan
Administrator, in its sole discretion, may, either at the time the Option is
granted or at any time before it is exercised and subject to such limitations as
the Plan Administrator may determine, authorize payment in cash and/or one or
more of the following alternative forms: (a) tendering (either actually or, if
and so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, by attestation) Common Stock already owned by the Holder for
at least six months (or any shorter period necessary to avoid a charge to the
Company's earnings for financial reporting purposes) having a Fair Market Value
on the day prior to the exercise date equal to the aggregate Option exercise
price; (b) a promissory note delivered pursuant to Section 12; (c) if and so
long as the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, delivery of a properly executed exercise notice, together with
irrevocable instructions, to (i) a third party designated by the Company to
deliver promptly to the Company the aggregate amount of sale or loan proceeds to
pay the Option exercise price and any withholding tax obligations that may arise
in connection with the exercise and (ii) the Company to deliver the certificates
for such purchased shares directly to such third party, all in accordance with
the regulations of the Federal Reserve Board; or (d) such other consideration as
the Plan Administrator may permit.
7.6 Post-Termination Exercises.
The Plan Administrator may establish and set forth in each instrument
that evidences an Option whether the Option will continue to be exercisable, and
the terms and conditions of such exercise, if a Holder ceases to be employed by,
or to provide services to, the Company or its Subsidiaries, which provisions may
be waived or modified by the Plan Administrator at any time.
If not so established in the instrument evidencing the Option, the
Option will be exercisable according to the following terms and conditions,
which may be waived or modified by the Plan Administrator at any time.
In case of termination of the Holder's employment or services other
than by reason of death or Cause, the Option shall be exercisable, to the extent
of the number of shares purchasable by the Holder at the date of such
termination, only (a) within one (1) year if the termination of the Holder's
employment or services are coincident with Disability or (b) within three (3)
months after the date the Holder ceases to be an employee, director, officer,
consultant, agent, advisor or independent contractor of the Company or a
Subsidiary if termination of the Holder's employment or services is for any
reason other than death or Disability, but in no event later than the remaining
term of the Option. Any Option exercisable at the time of the Holder's death may
be exercised, to the extent of the number of shares purchasable by the Holder at
the date of the Holder's death, by the personal representative of the Holder's
estate entitled thereto at any time or from time to time within one (1) year
after the date of death, but in no event later than the remaining term of the
Option. In case of termination of the Holder's employment or services for Cause,
the Option shall automatically terminate upon first discovery by the Company of
any reason for such termination and the Holder shall have no right to purchase
any Shares pursuant to such Option, unless the Plan Administrator determines
otherwise. If a Holder's employment or services with the Company are suspended
pending an investigation of whether the Holder shall be terminated for Cause,
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all the Holder's rights under any Option likewise shall be suspended during the
period of investigation.
A transfer of employment or services between or among the Company and
its Subsidiaries shall not be considered a termination of employment or
services. The effect of a Company-approved leave of absence or short-term break
in service on the terms and conditions of an Option shall be determined by the
Plan Administrator, in its sole discretion.
8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock
Options shall be subject to the following additional terms and conditions:
8.1 Dollar Limitation.
To the extent the aggregate Fair Market Value (determined as of the
Grant Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event
the Participant holds two (2) or more such Options that become exercisable for
the first time in the same calendar year, such limitation shall be applied on
the basis of the order in which such Options were granted.
8.2 10% Shareholders.
If a Participant owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option term shall not exceed five (5)
years. The determination of 10% ownership shall be made in accordance with
Section 422 of the Code.
8.3 Eligible Employees.
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.
8.4 Term.
The term of an Incentive Stock Option shall not exceed ten (10) years.
8.5 Exercisability.
To qualify for Incentive Stock Option tax treatment, an Option
designated as an Incentive Stock Option must be exercised within three (3)
months after termination of employment for reasons other than death, except
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that, in the case of termination of employment due to total Disability, such
Option must be exercised within one (1) year after such termination. Employment
shall not be deemed to continue beyond the first 90 days of a leave of absence
unless the Participant's reemployment rights are guaranteed by statute or
contract.
8.6 Taxation of Incentive Stock Options.
In order to obtain certain tax benefits afforded to Incentive Stock
Options under Section 422 of the Code, the Participant must hold the shares
issued upon the exercise of an Incentive Stock Option for two (2) years after
the Grant Date of the Incentive Stock Option and one (1) year from the date the
shares are transferred to the Participant. A Participant may be subject to the
alternative minimum tax at the time of exercise of an Incentive Stock Option.
The Participant shall give the Company prompt notice of any disposition of
shares acquired by the exercise of an Incentive Stock Option prior to the
expiration of such holding periods.
8.7 Promissory Notes.
The amount of any promissory note delivered pursuant to Section 12 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator but in no case less than the rate required
to avoid imputation of interest (taking into account any exceptions to the
imputed interest rules) for federal income tax purposes.
8.8 Incorporation of Other Provisions.
With respect to Incentive Stock Options, if this Plan does not contain
any provision required to be included herein under Section 422 of the Code, such
provision shall be deemed to be incorporated herein with the same force and
effect as if such provision had been set out in full herein; provided, however,
that to the extent any Option that is intended to qualify as an Incentive Stock
Option cannot so qualify, the Option, to that extent, shall be deemed to be a
Nonqualified Stock Option for all purposes of this Plan.
9. STOCK APPRECIATION RIGHTS
9.1 Grant of Stock Appreciation Rights.
The Plan Administrator may grant a Stock Appreciation Right separately
or in tandem with a related Option.
9.2 Tandem Stock Appreciation Rights.
A Stock Appreciation Right granted in tandem with a related Option will
give the Holder the right to surrender to the Company all or a portion of the
related Option and to receive an appreciation distribution (in shares of Common
Stock or cash or any combination of shares and cash, as the Plan Administrator,
in its sole discretion, shall determine at any time) in an amount equal to the
excess of the Fair Market Value for the date the Stock Appreciation Right is
exercised over the exercise price per share of the right, which shall be the
same as the exercise price of the related Option. A tandem Stock Appreciation
Right will have the same other terms and provisions as the related Option. Upon
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and to the extent a tandem Stock Appreciation Right is exercised, the related
Option will terminate.
9.3 Stand-Alone Stock Appreciation Rights.
A Stock Appreciation Right granted separately and not in tandem with an
Option will give the Holder the right to receive an appreciation distribution in
an amount equal to the excess of the Fair Market Value for the date the Stock
Appreciation Right is exercised over the exercise price per share of the right.
A stand-alone Stock Appreciation Right will have such terms as the Plan
Administrator may determine, except that the term of the right, if not otherwise
established by the Plan Administrator, shall be ten (10) years from the Grant
Date.
9.4 Exercise of Stock Appreciation Rights.
Unless otherwise provided by the Plan Administrator in the instrument
that evidences the Stock Appreciation Right, the provisions of Section 7.6
relating to the termination of a Holder's employment or services shall apply
equally, to the extent applicable, to the Holder of a Stock Appreciation Right.
10. STOCK AWARDS
10.1 Grant of Stock Awards.
The Plan Administrator is authorized to make Awards of Common Stock or
of rights to receive shares of Common Stock to Participants on such terms and
conditions and subject to such restrictions, if any (which may be based on
continuous service with the Company or the achievement of performance goals
related to (i) sales, gross margin, operating profits or profits, (ii) growth in
sales, gross margin, operating profits or profits, (iii) return ratios related
to sales, gross margin, operating profits or profits, (iv) cash flow, (v) asset
management (including inventory management), or (vi) total shareholder return,
where such goals may be stated in absolute terms or relative to comparison
companies), as the Plan Administrator shall determine, in its sole discretion,
which terms, conditions and restrictions shall be set forth in the instrument
evidencing the Award. The terms, conditions and restrictions that the Plan
Administrator shall have the power to determine shall include, without
limitation, the manner in which shares subject to Stock Awards are held during
the periods they are subject to restrictions and the circumstances under which
forfeiture of Restricted Stock shall occur by reason of termination of the
Holder's services or upon the occurrence of other events.
10.2 Issuance of Shares.
Upon the satisfaction of any terms, conditions and restrictions
prescribed with respect to a Stock Award, or upon the Holder's release from any
terms, conditions and restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall transfer, as soon as practicable, to the Holder
or, in the case of the Holder's death, to the personal representative of the
Holder's estate or as the appropriate court directs, the appropriate number of
shares of Common Stock covered by the Award.
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10.3 Waiver of Restrictions.
Notwithstanding any other provisions of the Plan, the Plan
Administrator may, in its sole discretion, waive the forfeiture period and any
other terms, conditions or restrictions on any Restricted Stock under such
circumstances and subject to such terms and conditions as the Plan Administrator
shall deem appropriate.
11. OTHER STOCK-BASED AWARDS
The Plan Administrator may grant other Awards under the Plan pursuant
to which shares of Common Stock (which may, but need not, be shares of
Restricted Stock pursuant to Section 10) are or may in the future be acquired,
or Awards denominated in stock units, including ones valued using measures other
than market value. Such Other Stock-Based Awards may be granted alone or in
addition to or in tandem with any Award of any type granted under the Plan and
must be consistent with the Plan's purpose.
12. LOANS, INSTALLMENT PAYMENTS AND LOAN GUARANTEES
To assist a Holder (including a Holder who is an officer or director of
the Company) in acquiring shares of Common Stock pursuant to an Award granted
under the Plan, the Plan Administrator, in its sole discretion, may authorize,
either at the Grant Date or at any time before the acquisition of Common Stock
pursuant to the Award, (a) the extension of a loan to the Holder by the Company,
(b) the payment by the Holder of the purchase price, if any, of the Common Stock
in installments, or (c) the guarantee by the Company of a loan obtained by the
grantee from a third party. The terms of any loans, installment payments or loan
guarantees, including the interest rate and terms of and security for repayment,
will be subject to the Plan Administrator's discretion; provided, however, that
repayment of any Company loan to the Holder shall be secured by delivery of a
full-recourse promissory note for the loan amount executed by the Holder,
together with any other form of security determined by the Plan Administrator.
The maximum credit available is the purchase price, if any, of the Common Stock
acquired, plus the maximum federal and state income and employment tax liability
that may be incurred in connection with the acquisition.
13. ASSIGNABILITY
Except as otherwise specified or approved by the Plan Administrator at
the time of grant of an Award or any time prior to its exercise, no Award
granted under the Plan may be assigned, pledged or transferred by the Holder
other than by will or by the laws of descent and distribution, and during the
Holder's lifetime, such Awards may be exercised only by the Holder.
Notwithstanding the foregoing, and to the extent permitted by Section 422 of the
Code, the Plan Administrator, in its sole discretion, may permit such
assignment, transfer and exercisability and may permit a Holder of such Awards
to designate a beneficiary who may exercise the Award or receive compensation
under the Award after the Holder's death; provided, however, that (i) any Award
so assigned or transferred shall be subject to all the same terms and conditions
contained in the instrument evidencing the Award, (ii) the original Holder shall
remain subject to withholding taxes upon exercise, (iii) any subsequent transfer
of an Award shall be prohibited and (iv) the events of termination of employment
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or contractual relationship set forth in subsection 7.6 shall continue to apply
with respect to the original transferor-Holder.
14. ADJUSTMENTS
14.1 Adjustment of Shares.
In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (b) new, different or
additional securities of the Company or of any other corporation being received
by the holders of shares of Common Stock of the Company, then the Plan
Administrator, in its sole discretion, shall make such equitable adjustments as
it shall deem appropriate in the circumstances in (i) the maximum number and
class of securities subject to the Plan as set forth in Section 4.1, (ii) the
maximum number and class of securities that may be made subject to Awards to any
individual Participant as set forth in Section 4.2, and (iii) the number and
class of securities that are subject to any outstanding Award and the per share
price of such securities, without any change in the aggregate price to be paid
therefor. The determination by the Plan Administrator as to the terms of any of
the foregoing adjustments shall be conclusive and binding.
14.2 Dissolution, Liquidation or Change in Control Transactions.
(a) In the event of the proposed dissolution or liquidation of the
Company, the Company shall notify each Holder at least fifteen (15) days prior
to such proposed action. To the extent not previously exercised, all Awards will
terminate immediately prior to the consummation of such proposed action.
(b) If, in connection with a Change in Control, an Option does not
remain outstanding and either such Option is not assumed by the surviving entity
or its parent, or the surviving entity or its parent does not substitute options
with substantially the same terms for such Option, such Option shall, unless the
applicable agreement representing an Option provides otherwise, or unless the
Plan Administrator determines otherwise in its sole and absolute discretion,
become exercisable in full, whether or not the vesting requirements set forth in
the Option Agreement have been satisfied, for a period prior to the effective
date of such Change in Control of a duration specified by the Plan
Administrator, and thereafter the Option shall terminate.
(c) Unless the applicable agreement representing an Award provides
otherwise, or unless the Plan Administrator determines otherwise in its sole and
absolute discretion in connection with any Change in Control, the vesting of
Shares shall be accelerated, and the Company's repurchase right with respect to
such shares shall lapse, in connection with a Change in Control which becomes
effective before such Holder's service to the Company terminates as follows:
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(i) If Options were outstanding at the effective time of the
Change in Control and they are accelerated in full pursuant to Subsection (b)
above or otherwise, the vesting of all Shares shall be accelerated in full, and
the Company's repurchase right with respect to all such shares shall lapse in
full, whether or not the vesting requirements set forth in the applicable Award
agreement have been satisfied.
(d) Notwithstanding Subsections (b) and (c) above, if the Company and
the other party to the transaction constituting a Change in Control agree that
such transaction is to be treated as a "pooling of interests" for financial
reporting purposes, and if the Company's independent public accountants and such
other party's independent public accountants separately determine in good faith
that the transaction constituting a Change in Control would qualify for
treatment as a "pooling of interests" but for the acceleration of vesting
provided for in Subsections (b) and (c) above, then the acceleration of
exercisability or the lapse of the Company's right to repurchase shall not occur
to the extent that the Company's independent public accountants and such other
party's independent public accountants separately determine in good faith that
such acceleration would preclude the use of "pooling of interests" accounting
for such transaction.
14.3 Further Adjustment of Awards.
Subject to the preceding Section 14.2, the Plan Administrator shall
have the discretion, exercisable at any time before a sale, merger,
consolidation, reorganization, dissolution, liquidation or Change in Control of
the Company, as defined by the Plan Administrator, to take such further action
as it determines to be necessary or advisable, and fair and equitable to
Participants, with respect to Awards. Such authorized action may include (but
shall not be limited to) establishing, amending or waiving the type, terms,
conditions or duration of, or restrictions on, Awards so as to provide for
earlier, later, extended or additional time for exercise, payment or settlement
or lifting restrictions, differing methods for calculating payments or
settlements, alternate forms and amounts of payments and settlements and other
modifications, and the Plan Administrator may take such actions with respect to
all Participants, to certain categories of Participants or only to individual
Participants. The Plan Administrator may take such actions before or after
granting Awards to which the action relates and before or after any public
announcement with respect to such sale, merger, consolidation, reorganization,
dissolution, liquidation or Change in Control that is the reason for such
action. Without limiting the generality of the foregoing, if the Company is a
party to a merger or consolidation, outstanding Awards shall be subject to the
agreement of merger or consolidation. Such agreement, without the Holder's
consent, may provide for:
(a) the continuation of such outstanding Award by the Company (if the
Company is the surviving corporation);
(b) the assumption of the Plan and some or all outstanding Awards by
the surviving corporation or its parent;
(c) the substitution by the surviving corporation or its parent of
Awards with substantially the same terms for such outstanding Awards; or
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(d) the cancellation of such outstanding Awards with or without payment
of any consideration.
14.4 Limitations.
The grant of Awards will in no way affect the Company's right 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.
14.5 Fractional Shares.
In the event of any adjustment in the number of shares covered by any
Option, any fractional shares resulting from such adjustment shall be
disregarded and each such Option shall cover only the number of full shares
resulting from such adjustment.
15. WITHHOLDING
The Company may require the Holder to pay to the Company in cash the
amount of any withholding taxes that the Company is required to withhold with
respect to the grant, exercise, payment or settlement of any Award. The Company
shall have the right to withhold from any Award or any shares of Common Stock
issuable pursuant to an Award or from any cash amounts otherwise due or to
become due from the Company to the Participant an amount equal to such taxes.
The Company may also deduct from any Award any other amounts due from the
Participant to the Company or a Subsidiary.
16. AMENDMENT AND TERMINATION OF PLAN
16.1 Amendment of Plan.
The Plan may be amended by the Board in such respects as it shall deem
advisable including, without limitation, such modifications or amendments as are
necessary to maintain compliance with applicable statutes, rules or regulations;
however, to the extent required for compliance with Section 422 of the Code or
any applicable law or regulation, shareholder approval will be required for any
amendment that will increase the aggregate number of shares as to which
Incentive Stock Options may be granted or change the class of persons eligible
to participate. Amendments made to the Plan which would constitute
"modifications" to Incentive Stock Options outstanding on the date of such
Amendments shall not be applicable to such outstanding Incentive Stock Options
but shall have prospective effect only. The Board may condition the
effectiveness of any amendment on the receipt of shareholder approval at such
time and in such manner as the Board may consider necessary for the Company to
comply with or to avail the Company, the Holders or both of the benefits of any
securities, tax, market listing or other administrative or regulatory
requirement which the Board determines to be desirable. Whenever shareholder
approval is sought, and unless required otherwise by applicable law or exchange
requirements, the proposed action shall require the affirmative vote of holders
of a majority of the shares present, entitled to vote and voting on the matter
without including abstentions or broker non-votes in the denominator.
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16.2 Termination Of Plan.
The Company's shareholders or the Board may suspend or terminate the
Plan at any time. The Plan will have no fixed expiration date; provided,
however, that no Incentive Stock Options may be granted more than ten (10) years
after the earlier of the Plan's adoption by the Board or approval by the
shareholders.
17. GENERAL
17.1 Award Agreements.
Awards granted under the Plan shall be evidenced by a written agreement
which shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and which are not inconsistent with the
Plan.
17.2 Continued Employment or Services; Rights In Awards.
None of the Plan, participation in the Plan as a Participant or any
action of the Plan Administrator taken under the Plan shall be construed as
giving any Participant or employee of the Company any right to be retained in
the employ of the Company or limit the Company's right to terminate the
employment or services of the Participant.
17.3 Registration; Certificates For Shares.
The Company shall be under no obligation to any Participant to register
for offering or resale or to qualify for exemption under the Securities Act, or
to register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.
Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.
17.4 No Rights As A Shareholder.
No Option, Stock Appreciation Right or Other Stock-Based Award shall
entitle the Holder to any cash dividend, voting or other right of a shareholder
unless and until the date of issuance under the Plan of the shares that are the
subject of such Award, free of all applicable restrictions.
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17.5 Compliance With Laws And Regulations.
In interpreting and applying the provisions of the Plan, any Option
granted as an Incentive Stock Option pursuant to the Plan shall, to the extent
permitted by law, be construed as an "incentive stock option" within the meaning
of Section 422 of the Code.
17.6 No Trust Or Fund.
The Plan is intended to constitute an "unfunded" plan. Nothing
contained herein shall require the Company to segregate any monies or other
property, or shares of Common Stock, or to create any trusts, or to make any
special deposits for any immediate or deferred amounts payable to any
Participant, and no Participant shall have any rights that are greater than
those of a general unsecured creditor of the Company.
17.7 Severability.
If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and any such Award shall remain
in full force and effect.
18. EFFECTIVE DATE
The Plan's effective date is the date on which it is adopted by the
Board, so long as it is approved by the Company's shareholders at any time
within twelve (12) months of such adoption.
Original Plan adopted by the Board on November 23, 1999 and approved by
the Company's shareholders on February 15, 2000.
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PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS
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Date of Date of
Adoption/ Shareholder
Amendment/ Approval
Adjustment Section Effect of Amendment (if applicable)
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