Exhibit 10.4
INTELLIGENT CONTROLS, INC.
1998 EMPLOYEE STOCK OPTION PLAN
1. PURPOSE. The purpose of the 1998 Employee Stock Option Plan is to
provide Employees of Intelligent Controls, Inc. with additional incentives
to contribute to the success of the Company and to attract, reward and
retain Employees of outstanding ability.
2. DEFINITIONS. As used in this Plan, the following words and phrases
wherever capitalized shall have the following meanings, unless the context
clearly indicates that a different meaning is intended:
(a) "Award" shall mean any Option or Stock Appreciation Right granted
pursuant to the Plan.
(b) "Award Agreement" shall mean an Option Agreement or SAR Agreement,
which specifies the terms, conditions and restrictions of an Award,
incorporates the applicable provisions of the Plan, and includes such
additional provisions not inconsistent therewith as the Committee shall
determine.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as from time
to time amended.
(e) "Committee" shall mean the committee described in Section 3, which
shall have the authority to control and manage the administration of the
Plan.
(f) "Common Stock" shall mean common stock, no par value, of the
Company.
(g) "Company" shall mean Intelligent Controls, Inc. and any Subsidiary
thereof.
(h) "Disability" shall mean an Employee's inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than twelve (12) months. An Employee shall not be considered disabled
unless he or she furnishes proof of the existence of such Disability in such
form and manner, and at such times, as the Committee may require.
(i) "Employee" shall mean any person who is employed by the Company or
any Parent or Subsidiary.
(j) "Fair Market Value" shall mean, with respect to Shares, the
closing price of the Shares (or the average of the last-quoted bid and ask
price, as the case may be) on the principal stock exchange or over-the-
counter market on which the Shares are traded; provided, however, that the
Committee in its discretion may instead use the average closing price (or
bid-ask price) over the past five (5) trading days as the Fair Market Value
on the last of such days; and provided further, however, that the Fair
Market Value of the Shares to be issued under any Incentive Stock Option
shall in any event be determined by the Committee in a manner that complies
with the applicable requirements of subsections 422(b)(4) and (c)(7) of the
Code and the regulations issued thereunder.
(k) "Incentive Stock Option" shall mean an option granted to an
individual for any reason connected with his or her employment by a
corporation, if granted by the employer corporation or its Parent or
Subsidiary corporation, to purchase stock of any of such corporations, but
only if such option meets the requirements of Section 422 of the Code.
(l) "Nonqualified Stock Option" shall mean an Option granted under the
Plan that is not an Incentive Stock Option.
(m) "Option" shall mean a right granted under the Plan to purchase
Shares.
(n) "Optionee" shall mean an Employee who is granted an Option.
(o) "Parent" shall mean, for purposes of the Incentive Stock Option
provisions of the Plan, a parent company within the meaning of subsections
424(e) and (g) of the Code.
(p) "Plan" shall mean the 1998 Employee Stock Option Plan.
(q) "Share" shall mean a share of Common Stock of the Company, as
adjusted in accordance with subsection 4(b).
(r) "Stock Appreciation Right" shall mean a right granted under
Section 8 to receive a payment, the amount of which shall be determined by
reference to the value of a Share.
(s) "Subsidiary" shall mean, for purposes of the Incentive Stock
Option provisions of the Plan, a subsidiary company within the meaning of
subsections 424(f) and (g) of the Code, and for all other purposes of the
Plan, a company of which Intelligent Controls, Inc. owns directly or
indirectly at least fifty percent (50%) of the total combined voting power
of all classes of stock entitled to vote.
3. ADMINISTRATION.
(a) COMMITTEE MEMBERS. The Plan shall be administered by the members
of the Compensation Committee of the Board. Although not a requirement of
the Plan, it is contemplated that the Committee will consist solely or
primarily of persons who are not employees of the Company or any Parent or
Subsidiary and who otherwise qualify as "non-employee directors" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
and as "outside directors" within the meaning of Code Section 162(m), as
amended, and the regulations thereunder. A majority of the members of the
Committee shall constitute a quorum, and the action of a majority of the
members present at any meeting at which a quorum is present shall be deemed
the action of the Committee. Any member may participate in a meeting of the
Committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other. Further, any action of the Committee may be taken without
a meeting if all of the members of the Committee sign written consents,
setting forth the action taken or to be taken, at any time before or after
the intended effective date of such action.
(b) POWERS. The Committee shall have the complete authority and
discretion to administer the Plan, including the following powers which
shall be exercised in accordance with the terms of the Plan:
(1) to determine the Employees to whom Awards shall be granted;
(2) to determine the time or times at which Awards shall be
granted;
(3) to determine the type or types of Awards to be granted;
(4) to determine the terms, conditions and restrictions of each
Award;
(5) to make adjustments in accordance with subsection 4(b);
(6) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(7) to interpret the Plan and make all other determinations
deemed necessary or advisable for the administration of the Plan; and
(8) to delegate to any officer of the Company the authority to
act for the Committee in such matters as the Committee may specify.
Each determination, interpretation or other action taken pursuant to
the Plan by the Committee (or an officer of the Company acting under a
delegation of authority by the Committee) shall be final and conclusive for
all purposes and binding upon all persons, including the Company, the Board,
the Committee, the Employees and their respective successors in interest.
(c) SIGNATURES. The Committee may authorize any member thereof to
execute all instruments required in the administration of the Plan, and such
instruments may be executed by facsimile signature.
4. STOCK SUBJECT TO THE PLAN.
(a) LIMITATIONS. Subject to the provisions of subsection (b), a
maximum of 300,000 Shares will be available for grant under the Plan.
In the event that any Shares subject to an Award are forfeited, such
Shares shall, unless the Plan has been terminated, become available again
for grant and shall not be counted again for purposes of the foregoing share
limitation. In the event that any Option granted under the Plan expires or
terminates without the issuance of Shares or payment of other consideration
in lieu of such Shares, the unissued Shares subject to such Option shall,
unless the Plan has been terminated, become available for other Awards,
including other Options.
In the event that an Employee transfers stock issued by the Company in
full or partial payment of the option price of an Option granted under the
Plan, only the difference between (i) the number of Shares issued upon
exercise of the Option and (ii) the number of Shares transferred in payment
of the option price shall be counted for purposes of the foregoing
limitation on the maximum number of Shares available for grant under the
Plan. Notwithstanding the foregoing, in no event shall more than 300,000
Shares be issued pursuant to the exercise of Incentive Stock Options under
this Plan; Shares delivered in payment for Incentive Stock Options shall
not be credited against this special limitation on the number of Shares
issued pursuant to Incentive Stock Options.
(b) ADJUSTMENTS. If the number of Shares outstanding changes as a
result of a stock split or stock dividend, the Committee shall
proportionately adjust: (i) the maximum number of Shares available for
grant and the maximum aggregate number of Shares which may be issued under
Incentive Stock Options; (ii) the number of Shares to be issued under
Awards; (iii) the option price with respect to Shares subject to Options;
and (iv) the grant price with respect to Stock Appreciation Rights.
In the event of a merger or consolidation in which the Company is the
surviving company, or the acquisition by the Company of property or stock of
another company, or any reorganization, the Committee shall appropriately
adjust: (i) the number and class of Shares to be issued under Awards; (ii)
the option price of Shares subject to Options; and (iii) the grant price
with respect to Stock Appreciation Rights. Any adjustments under this
subsection (b) affecting Incentive Stock Options shall be made so as to
comply with the applicable provisions of Sections 422 and 424 of the Code.
5. ELIGIBILITY.
The Committee may, from time to time, designate Employees to whom
Options or Stock Appreciation Rights may be granted in accordance with the
terms of the Plan.
6. GRANTING OF AWARDS.
The Committee may grant more than one Award and more than one type of
Award to any Employee; provided that no Incentive Stock Option shall be
granted to any Employee who, at the time the Option is granted, owns stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary. For
purposes of applying the percentage limitation of the preceding sentence,
the ownership principles of subsection 424(d) of the Code shall apply. The
terms and conditions of Awards need not be the same with respect to each
Employee. An Employee who has been granted an Award may, if he or she is
otherwise eligible, be granted additional Awards before the exercising of
such prior Award.
The Committee may condition the grant of an Award and the exercise of
an Option or Stock Appreciation Right on the attainment of performance
goals. Performance goals may be expressed in terms of earnings per Share,
stock price, total shareholder return, return on equity, or any similar
quantifiable measures.
7. OPTIONS.
(a) OPTION AGREEMENT. Each Option granted by the Committee shall be
evidenced by an agreement (the "Option Agreement"), specifying the Option
price, the number of Shares subject to the Option and such other terms,
conditions and restrictions as the Committee shall determine. Each Option
shall be clearly identified as either an Incentive Stock Option or a
Nonqualified Stock Option.
(b) TERM OF OPTION. The term of each Option shall be set forth in the
Option Agreement, but in no event shall an Option be exercisable after the
expiration of ten (10) years from the date such Option is granted.
(c) OPTION PRICE. The option price for Shares to be issued under any
Option shall not be less than one hundred percent (100%) of the Fair Market
Value of such Shares on the date the Option is granted.
(d) NONTRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner, other than
by will or by the laws of descent and distribution, and may be exercised
during the lifetime of the Optionee only by such Optionee. Notwithstanding
the preceding sentence to the contrary, the Committee may permit the
transfer of Nonqualified Stock Options to family members or family trusts
(and exercise by the transferee) to the extent Rule 16b-3 under the
Securities Exchange Act of 1934 permits such transfers.
(e) MANNER OF EXERCISE. An Option granted under the Plan shall be
exercisable at such times and under such circumstances as shall be
permissible under the terms of the Plan and of the Option Agreement. An
Option shall be deemed to be exercised when the Optionee gives written
notice of such exercise to the Company in accordance with the terms of the
Option Agreement and the Company receives full payment for the Shares with
respect to which the Option is exercised. Payment shall be made by check
payable to the Company, delivery of stock issued by the Company or a
combination thereof, subject to the terms of the Option Agreement, or in
such other manner as the Committee shall approve.
Stock transferred to the Company in full or partial payment for Shares
shall be valued at Fair Market Value on the date that such transfer is
recorded upon the books of the Company, following actual or constructive
delivery of such stock to the Company in a form suitable for transfer.
(f) TERMINATION OF EMPLOYMENT. In the event an Optionee ceases to be
employed by the Company or any Parent or Subsidiary, and is no longer
employed by any of them, for any reason other than death or Disability, such
Optionee may, subject to the terms of the Option Agreement, exercise an
Option at any time prior to the expiration date of such Option (or, in the
case of an Incentive Stock Option, within three (3) months after the date
the Optionee's employment ceases, whichever is earlier), but only to the
extent the Optionee had the right to exercise such Option at the date his or
her employment ceased. An Optionee's employment with a Parent or Subsidiary
of the Company shall be deemed terminated on the date such Optionee's
employer ceases to be a Parent or Subsidiary.
(g) DISABLED OPTIONEE. In the event an Optionee who is disabled
ceases to be employed by the Company or any Parent or Subsidiary by reason
of such Disability, and is no longer employed by any of them, such Optionee
may, subject to the terms of the Option Agreement, exercise an Option at any
time prior to the expiration date of such Option (or, in the case of an
Incentive Stock Option, within one (1) year after the date such Optionee's
employment ceases, whichever is earlier), but only to the extent the
Optionee had the right to exercise such Option at the date his or her
employment ceased.
(h) DEATH OF OPTIONEE. In the event an Optionee dies while in the
employ of the Company or any Parent or Subsidiary, then to the extent that
the Optionee would have been entitled to exercise an Option immediately
prior to his or her death, such Option may be exercised by the estate of
such Optionee or by such person or persons to whom such Optionee's rights
pass by will or by the laws of descent and distribution at any time prior to
the expiration date of such Option or within one (1) year after the death of
the Optionee, whichever is earlier.
8. STOCK APPRECIATION RIGHTS.
(a) SAR AGREEMENT. Any Stock Appreciation Rights granted by the
Committee shall be evidenced by an agreement (the "SAR Agreement"),
specifying the grant price, the number of such rights, and such other terms,
conditions and restrictions as the Committee shall determine; provided,
however, that the terms of a Stock Appreciation Right that relates to an
Option may instead be set forth in the Option Agreement or any amendment
thereto.
(b) TERM. The term of each Stock Appreciation Right shall be set
forth in the SAR Agreement, but in no event shall a Stock Appreciation Right
be exercisable after the expiration of ten (10) years from the date such
right is granted.
(c) AMOUNT OF PAYMENT. An Employee to whom a Stock Appreciation Right
has been granted shall be entitled to receive payment of an amount equal to
the excess of (i) the Fair Market Value of one (1) Share on the date of
exercise of such right over (ii) the grant price of the right; provided that
the Fair Market Value of one (1) share with respect to a Stock Appreciation
Right that is not related to an Incentive Stock Option may be determined at
any time during a period before the date of exercise if so specified in the
SAR Agreement.
(d) GRANT PRICE. The grant price of a Stock Appreciation Right shall
not be less than one hundred percent (100%) of the Fair Market Value of one
(1) Share on the date that the Stock Appreciation Right is granted.
(e) NONTRANSFERABILITY OF RIGHTS. Stock Appreciation Rights may not
be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner, other than by will or by the laws of descent and distribution, and
may be exercised during the lifetime of the Employee only by such Employee.
(f) MANNER OF EXERCISE. A Stock Appreciation Right granted under the
Plan shall be exercisable at such times and under such circumstances as
shall be permissible under the terms of the Plan and of the SAR Agreement.
A Stock Appreciation Right shall be deemed exercised when an Employee gives
written notice of such exercise to the Company in accordance with the terms
of the SAR Agreement.
(g) FORM OF PAYMENT. Payment with respect to the exercise of a Stock
Appreciation Right may be made in cash, Shares or a combination thereof,
subject to the terms of the SAR Agreement, or in such other manner as the
Committee shall approve. To the extent that such payment is made in Shares,
the Shares shall be valued at Fair Market Value on the date of payment.
(h) RELATED OPTIONS. A Stock Appreciation Right may, but need not,
relate to an Option granted under Section 7. A Stock Appreciation Right
related to a Nonqualified Stock Option may be granted simultaneously with
the granting of such Option or at any time thereafter before the exercise or
termination of such Option. A Stock Appreciation Right related to an
Incentive Stock Option shall be granted at the same time such Option is
granted.
A Stock Appreciation Right related to the full number of Shares
subject to an Option shall terminate upon exercise or termination of the
Option to the extent such Option is exercised or terminated. A Stock
Appreciation Right related to less than the full number of Shares subject to
an Option shall not be affected by the exercise or termination of the Option
until such exercise or termination exceeds the number of Shares not related
to the Stock Appreciation Right; thereafter such right shall terminate to
the extent such Option is further exercised or terminated.
To the extent that a Stock Appreciation Right related to an Option has
been exercised, such Option shall no longer be exercisable.
9. DEFERRED SHARES. An Employee may elect, in such manner and subject to
such terms and conditions as the Committee may prescribe, to defer the
receipt of Profit Shares purchased by transferring previously acquired
Shares upon the exercise of a Nonqualified Stock Option. For purposes of
the Plan, "Profit Shares" shall mean Shares representing the difference
between the number of previously acquired Shares transferred and the number
of Shares purchased.
10. CANCELLATION OF AWARDS. Notwithstanding any provision of the Plan to
the contrary, the Committee may cancel any award, whether vested or not, if
at any time an Employee is not in compliance with the applicable terms of
the Award Agreement or in the event of a serious breach of conduct,
including but not limited to failure to comply with the terms of an
agreement not to compete with the Company or a failure to maintain the
confidentiality of Company trade secrets or proprietary or confidential
information.
11. AMENDMENT AND TERMINATION.
(a) AMENDMENT. The Committee, without further approval of the
shareholders of the Company, may amend the Plan from time to time in such
respects as the Committee deems advisable, provided that no amendment shall
become effective prior to ratification by the Board if such amendment:
(i) increases the maximum aggregate number of shares which may
be issued under the Plan or that may be issued hereunder pursuant to
Incentive Stock Options; or
(ii) expands the classes of persons eligible to receive Awards
under the Plan.
(b) TERMINATION. The Board, without further approval of the
shareholders of the Company, may at any time terminate the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any amendment or termination
of the Plan shall not adversely affect Awards already granted without the
written consent of the affected individual, and such Awards shall remain in
full force and effect as if the Plan had not been amended or terminated.
13. EFFECTIVE DATE OF PLAN. The Plan shall be effective upon its approval
by the shareholders of the Company.
14. TERM OF PLAN. No Award shall be granted pursuant to the Plan after ten
(10) years from the date the Plan is approved by shareholders. Awards
granted prior to the end of such period may extend beyond such period,
except as otherwise provided herein or in the Award Agreement.
15. ARBITRATION. Arbitration as hereinafter provided shall be the
exclusive remedy for resolving any claim or dispute arising under the Plan.
(a) Any arbitration under the Plan, and any related judicial
proceeding, shall be initiated and shall proceed pursuant to the provisions
of the Maine Uniform Arbitration Act (the "Act") and, to the extent
consistent with the Act, the then prevailing rules of the American
Arbitration Association (the "Association") for labor and employment
contracts. To initiate arbitration, demand shall be given in writing to the
Association and the other party no later than one year after the claim
arises. Any claim for which such demand is not made in writing within one
year after the claim arises shall be barred and discharged absolutely.
(b) Any arbitration under the Plan shall occur in Portland, Maine (or
such other location as the parties consent to in writing) before a single
arbitrator. An award in such arbitration may include only damages that the
arbitrator determines to be due under the express provisions of the Plan and
applicable Award Agreement. The arbitrator shall have no authority to award
any other damages, including without limitation, consequential and exemplary
damages. Each award shall set forth briefly in writing the rationale of the
decision and those facts considered by the arbitrator to be material to such
decision. Any award in arbitration shall be subject to enforcement and
appeal pursuant to the Act.
(c) The Company and the Employee shall share equally all costs and
fees charged by the Association or the arbitrator.
16. MISCELLANEOUS.
(a) AWARD AGREEMENT. Upon executing an Award Agreement, an Employee
shall be bound by such Agreement and by the applicable provisions of the
Plan.
(b) EMPLOYMENT. The granting of an Award to an Employee shall not
give the Employee any right to be retained in the employ of the Company or
any Parent or Subsidiary, nor shall the existence of the Plan impair the
right of the Company or any Parent or Subsidiary to discharge or otherwise
deal with an Employee.
(c) TAX WITHHOLDING. The Company shall be authorized to withhold from
any Award granted, or payment due, under the Plan the amount of any taxes
required by law to be withheld because of such Award or payment and to take
such other action as may be necessary in the opinion of the Company to
satisfy all obligations for the payment of such taxes.
(d) GOVERNING LAW. The Plan is established under and shall be
construed according to the laws of the State of Maine.
(e) HEADINGS. Paragraph headings are included solely for convenience
and shall in no event affect, or be used in connection with, the
interpretation of the Plan.
(f) 1984 PLAN. The Employee Stock Option Plan of the Company, as
adopted in 1984 and amended and restated in 1994, shall terminate as of the
effective date of the 1998 Employee Stock Option Plan. Termination of the
Employee Stock Option Plan shall not adversely affect awards previously
granted under such plan or the authority of the Board or Committee to make
determinations with regard to such prior awards.