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EXHIBIT 4.1
APPLIED EPI, INC.
1993 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Applied Epi, Inc. 1993 Stock Option Plan
is to promote the success of Applied Epi, Inc. (the "Corporation") and of any
subsidiary of the Corporation (a "Subsidiary") by facilitating the employment
and retention of key personnel and by furnishing continuing, long-term incentive
to officers and other key employees upon whose efforts the success of the
Corporation depends to a large degree. In addition, the Plan is intended to
provide key employees on whom rests the major responsibility for the present and
future success of the Corporation with an opportunity to acquire a proprietary
interest in the Corporation and thereby to develop a stronger incentive to
expend maximum effort for the continued success and growth of the Corporation.
2. DEFINITIONS. The following words and phrases as used herein shall
have the meanings set forth below:
2.1 "Board" shall mean the Board of Directors of the Corporation.
2.2 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.3 "Committee" shall mean the Compensation Committee of the Board, if
any, or such other committee of the Board as may be designated by the Board,
from time to time, for the purpose of administering this Plan as contemplated by
Article 4 hereof.
2.4 "Common Stock" shall mean the common stock, $.0l par value, of the
Corporation.
2.5 "Corporation" shall mean Applied Epi, Inc., a Minnesota
corporation.
2.6 "Director" shall mean any member of the Board.
2.7 "Fair Market Value" of a share of Common Stock on any given date
shall be determined by the Committee as follows:
(a) if the Common Stock is listed for trading on one or more
national securities exchanges (including the Nasdaq National
Market), the reported last sales price on the principal such
exchange on the date in question, or if the Common Stock shall not
have been traded on such exchange on such date, the reported last
sales price on such exchange on the first day prior thereto on
which the Common Stock was so traded; or
(b) if the Common Stock is not listed for trading on a national
securities exchange (including the Nasdaq National Market) but is
traded
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in the over-the-counter market (including the Nasdaq Small Cap
Market), the average of the highest and lowest bid prices for such
Common Stock on the date in question, or if there are no such bid
prices for such Common Stock on such date, the average of the
highest and lowest bid prices on the first day prior thereto on
which such prices existed; or
(c) if neither (a) nor (b) is applicable, by any means deemed fair
and reasonable by the Committee, which determination shall be final
and binding on all parties.
2.8 "ISO" shall mean any stock option granted pursuant to this Plan as
an "incentive stock option" within the meaning of Section 422 of the Code.
2.9 "Non-Employee Director" shall mean a "Non-Employee Director" within
the meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of 1934.
2.10 "NQO" shall mean any stock option granted pursuant to this Plan
which is not an ISO.
2.11 "Option" shall mean any stock option granted pursuant to this
Plan, whether an ISO or an NQO.
2.12 "Optionee" shall mean any person who is the holder of an Option
granted pursuant to this Plan.
2.13 "Option Agreement" shall mean the Stock Option Agreement entered
into between the Corporation and an employee granted an Option hereunder,
evidencing the grant of the Option and setting forth the terms and conditions
applicable thereto.
2.14 "Outside Director" shall mean a Director who: (a) is not a current
employee of the Corporation or any member of an affiliated group which includes
the Corporation; (b) is not a former employee of the Corporation who receives
compensation for prior services (other than benefits under a tax-qualified
retirement plan) during the taxable year; (c) has not been an officer of the
Corporation; and (d) does not receive remuneration from the Corporation, either
directly or indirectly, in any capacity other than as a Director, except as
otherwise permitted under Code Section 162(m) and regulations thereunder. For
this purpose, remuneration includes any payment in exchange for goods or
services. This definition shall be further governed by the provisions of Code
Section 162(m) and regulations promulgated thereunder.
2.15 "Plan" shall mean this 1993 Stock Option Plan of the Corporation.
2.16 "Subsidiary" shall mean any corporation which at the time
qualifies as a subsidiary of the Corporation under Section 424(f) of the Code.
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3. SHARES AVAILABLE UNDER PLAN. The number of shares which may be
issued pursuant to Options granted under this Plan shall not exceed 1,500,000
shares of the Common Stock of the Corporation; provided, however, that shares
which become available as a result of canceled, unexercised, lapsed or
terminated Options granted under this Plan shall be available for issuance
pursuant to Options subsequently granted under this Plan. The shares issued upon
exercise of Options granted under this Plan may be authorized and unissued
shares or shares previously acquired or to be acquired by the Corporation.
4. ADMINISTRATION.
4.1 The Plan shall be administered by the Board, or at the Board's
discretion, by a Committee appointed by the Board. The Committee shall consist
of at least two Directors, all of whom shall be Outside Directors and
Non-Employee Directors, who shall serve at the pleasure of the Board. Other than
references in this Section 4.1, references to the "Committee" in this Plan shall
be deemed to refer to the Board where the Board has not designated a Committee
to administer the Plan.
4.2 The Committee shall have plenary authority, subject to provisions
of the Plan, to determine when and to whom Options will be granted, the term of
each Option, the number of shares covered by it, the participation by the
Optionee in other plans, and any other terms or conditions of each Option. The
Committee shall determine with respect to each grant of an Option whether a
participant shall receive an ISO or an NQO. The number of shares, the term and
the other terms and conditions of a particular kind of Option need not be the
same, even as to Options granted at the same time. The Committee's
recommendations regarding Option grants and terms and conditions thereof shall
be conclusive.
4.3 The Committee shall have the sole responsibility for construing and
interpreting the Plan, for establishing and amending any rules and regulations
as it deems necessary or desirable for the proper administration of the Plan,
and for resolving all questions arising under the Plan. Any decision or action
taken by the Committee arising out of or about the construction, administration,
interpretation and effect of the Plan and of its rules and regulations shall, to
the extent permitted by law, be within its absolute discretion, except as
otherwise specifically provided herein, and shall be conclusive and binding on
all Optionees, all successors, and any other person, whether that person is
claiming under or through any Optionee or otherwise.
4.4 No member of the Committee shall be liable, in the absence of bad
faith, for any act or omission with respect to his services on the Committee.
Service on the Committee shall constitute service as a member of the Board, so
that the members of the Committee shall be entitled to indemnification and
reimbursement as Board members pursuant to its Bylaws.
4.5 The Committee shall regularly inform the Board as to its actions
with respect to all Options granted under the Plan and the terms and conditions
and any such Options in a manner, at any times, and in any form as the Board may
reasonably request.
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5. PARTICIPANTS.
5.1 Participation in this Plan shall be limited to key personnel of the
Corporation or of a Subsidiary, who are salaried employees of the Corporation or
of a Subsidiary.
5.2 Subject to other provisions of this Plan, Options may be granted to
the same participants on more than one occasion.
5.3 The Committee's determination under the Plan, including, without
limitation, determination of the persons to receive Options, the form, amount
and type of such Options, and the terms and provisions of Options need not be
uniform and may be made selectively among otherwise eligible participants,
whether or not the participants are similarly situated.
6. TERMS AND CONDITIONS.
6.1 Each Option granted under the Plan shall be evidenced by a written
agreement, which shall be subject to the provisions of this Plan and to such
other terms and conditions as the Corporation may deem appropriate.
6.2 The term of each Option shall be fixed by the Committee and shall
be specified in each Option Agreement, but no ISO shall be exercisable more than
ten years after the date the Option is granted. The term of any ISO granted to
an Optionee that owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than ten percent (10%) of the combined voting
power of all classes of stock of the Corporation or any Subsidiary, shall be no
more than five years from the date of grant.
6.3 The exercise price per share shall be determined by the Committee
at the time any Option is granted and shall be determined as follows:
(a) For employees who do not own (and are not deemed to own by
reason of the attribution rules of Section 424(d) of the Code)
stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation or of any
Subsidiary, the ISO exercise price per share shall not be less than
one hundred percent (100%) of Fair Market Value of the underlying
Common Stock on the date the Option is granted, as determined by
the Committee.
(b) For employees who own (or who are deemed to own by reason of
the attribution rules of Section 424(d) of the Code), stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Corporation or of any
Subsidiary, the ISO exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value of the
underlying Common Stock on the date the Option is granted, as
determined by the Committee.
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(c) The NQO exercise price per share shall be any price deemed
appropriate by the Committee.
6.4 The aggregate Fair Market Value (determined as of the time the
Option is granted) of the Common Stock with respect to which ISOs under this
Plan or any other plan of the Corporation or its Subsidiaries are exercisable
for the first time by an Optionee during any calendar year shall not exceed
$100,000. Further, no Optionee shall receive grants of Options under the Plan
which exceed 250,000 shares during any fiscal year of the Corporation.
6.5 An Option shall be exercisable at such time or times, and with
respect to such minimum number of shares, as may be determined by the Committee
at the time of the grant; provided, however, that the Committee may, in its
discretion, accelerate the exercise date for any unexercisable Options when the
Committee deems such action to be appropriate under the circumstances. The
Option Agreement may require, if so determined by the Committee, that no part of
the Option may be exercised until the Optionee shall have remained in the employ
of the Corporation or of a Subsidiary for such period after the date of the
Option as the Committee may specify.
6.6 The Corporation may require as a condition to the sale of shares on
the exercise of any Option, that the person exercising such Option represent to
the Corporation that he or she is acquiring such shares without a view to the
distribution thereof. The Corporation may prescribe the form of legend which
shall be affixed to the stock certificate representing shares to be issued and
the shares shall be subject to the provisions of any repurchase agreement or
other agreement restricting the sale or transfer thereof. Such agreements or
restrictions shall be noted on the certificate representing the shares to be
issued.
7. EXERCISE OF OPTION.
7.1 Each exercise of an Option granted hereunder, whether in whole or
in part, shall be by written notice thereof, delivered to the Chief Financial
Officer of the Corporation (or such other person as he may designate). The
notice shall state the number of shares with respect to which the Options are
being exercised and shall be accompanied by payment in full for the number of
shares so designated. Shares shall be registered in the name of the Optionee
unless the Optionee otherwise directs in his or her notice of election.
7.2 Payment shall be made to the Corporation either (i) in cash,
including certified check, bank draft or money order as authorized by the
Corporation, or (ii) at the sole discretion of the Corporation, by delivering
any combination of the following forms of payment, provided the total Fair
Market Value of all payments made equals the exercise price: (a) shares of
Corporation Common Stock already owned by the participant, (b) a promissory note
reflecting terms and conditions acceptable to the Corporation, and/or (c) cash.
With respect to (ii), the Fair Market Value of stock so delivered shall be
determined as of the date immediately preceding the date of exercise.
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7.3 Upon notification of the amount due and prior to, or concurrently
with, the delivery to the Optionee of a certificate representing any shares
purchased pursuant to the exercise of an Option, the Optionee shall promptly pay
to the Corporation any amount necessary to satisfy applicable federal, state or
local withholding tax requirements.
7.4 If the terms of an Option so permit, subject to the approval of the
Committee, an Optionee may elect by written notice to the Chief Financial
Officer of the Corporation (or such other person as he or she may designate), to
satisfy the withholding tax requirements associated with the exercise of an
Option by (i) authorizing the Corporation to retain from the number of shares of
Common Stock that would otherwise be deliverable to the Optionee, or (ii)
delivering to the Corporation from shares of Common Stock already owned by the
Optionee, that number of shares having an aggregate Fair Market Value equal to
the tax payable by the Optionee under Section 7.3. Any such election shall be in
accordance with, and subject to, applicable tax and securities laws, regulations
and rulings.
8. EXTRAORDINARY CORPORATE TRANSACTIONS. Notwithstanding the foregoing,
unless the Stock Option Agreement provides otherwise, any Option granted under
this Plan shall be exercisable in full, without regard to any installment
exercise or vesting provisions, for a period specified by the Board, but not to
exceed sixty (60) days nor be less than seven (7) days, prior to the occurrence
of any of the following events: (i) dissolution or liquidation of the
Corporation other than in conjunction with a bankruptcy of the Corporation or
any similar occurrence, (ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Corporation will not be the
surviving entity or (iii) the transfer of substantially all of the assets of the
Corporation or 75% or more of the outstanding Stock of the Corporation.
9. CHANGES IN CORPORATION'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Corporation or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Corporation's capital
structure or its business, or any merger or consolidation of the Corporation, or
any issuance of Common Stock or subscription rights thereto, or any merger or
consolidation of the Corporation, or any issuance of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Common Stock or
the rights thereof, or the dissolution or liquidation of the Corporation, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise;
provided, however, that if the outstanding shares of Common Stock of the
Corporation shall at any time be changed or exchanged by declaration of a stock
dividend, stock split, combination of shares or recapitalization, the number and
kind of shares subject to the Plan or subject to any Options theretofore
granted, and the Option exercise prices, shall be appropriately and equitably
adjusted so as to maintain the proportionate number of shares without changing
the aggregate Option exercise price.
10. ASSIGNMENTS. Any Option granted under this Plan shall be
exercisable only by the Optionee to whom granted during his or her lifetime and
shall not be assignable or transferable otherwise than by will or by the laws of
descent and distribution.
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11. SEVERANCE; DEATH; DISABILITY.
11.1 Except as otherwise provided in this Section 11 or the Option
Agreement, an Option shall terminate, and no rights thereunder may be exercised,
if the employment of the Optionee is terminated by any reason other than his or
her death or disability, and all rights under the Option shall terminate and
expire upon such termination.
11.2 If the Optionee dies while in the employ of the Corporation or a
Subsidiary, the Optionee's rights under the Option may be exercised in whole or
in part, without regard to any installment exercise restrictions, at any time
within three months following such death by his or her personal representative
or by the person or persons to whom such rights under the Option shall pass by
will or by the laws of descent and distribution.
11.3 If the employment of the Optionee is terminated because of
permanent disability, the Optionee, or his or legal representative, may at any
time within not more than three months after termination of his or her
employment, exercise his or her Option rights in whole or in part, without
regard to any installment exercise restrictions.
11.4 Notwithstanding anything contained in Sections 11.1, 11.2 and 11.3
to the contrary, no Option rights shall be exercisable by anyone after the
expiration of the term of the Option.
11.5 Transfers of employment between the Corporation and a Subsidiary,
or between Subsidiaries, will not constitute termination of employment for
purposes of any Option granted under this Plan. The Committee may specify in the
terms and conditions of an Option whether any authorized leave of absence or
absence for military or government service or for any other reasons will
constitute a termination of employment for purposes of the Option and the Plan.
12. RIGHTS OF PARTICIPANTS. Neither the participant nor the personal
representatives, heirs, or legatees of such participant shall be or have any of
the rights or privileges of a shareholder of the Corporation in respect of any
of the shares issuable upon the exercise of an Option granted under this Plan
unless and until certificates representing such shares have been issued and
delivered to the participant or to such personal representatives, heirs or
legatees.
13. SECURITIES REGISTRATION. If any law or regulation of the Securities
and Exchange Commission or of any other body having jurisdiction shall require
the Corporation or the participant to take any action in connection with the
exercise of an Option, then notwithstanding any contrary provision of an Option
Agreement or this Plan, the date for exercise of such Option and the delivery of
the shares purchased thereunder shall be deferred until the completion of the
necessary action. In the event that the Corporation shall deem it necessary, the
Corporation may condition the grant or exercise of an Option granted under this
Plan upon the receipt of a satisfactory certificate that the Optionee is
acquiring the Option or the shares obtained by exercise of the Option for
investment purposes and not with the view or intent to resell or otherwise
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distribute such Option or shares. In such event, the stock certificate
evidencing such shares shall bear a legend referring to applicable laws
restricting transfer of such shares. In the event that the Corporation shall
deem it necessary to register under the Securities Act of 1933, as amended,
or any other applicable statute, any Options or any shares with respect to
which an option shall have been granted or exercised, then the participant
shall cooperate with the Corporation and take such action as is necessary to
permit registration or qualification of such Options or shares.
14. UNFUNDED STATUS OF PLAN. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to an Optionee by the Corporation, nothing contained
herein shall give any such Optionee any rights that are greater than those of a
general creditor of the Corporation. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or payments in lieu of or with
respect to awards hereunder, provided, however, that the existence of such
trusts or other arrangements is consistent with the unfunded status of the Plan.
15. DURATION AND AMENDMENT.
15.1 There is no express limitation upon the duration of the Plan,
except for the requirement of the Code that all ISOs must be granted within ten
years from the date the Plan is adopted, or the date the Plan is approved by the
shareholders, whichever is earlier.
15.2 The Board may terminate or may amend the Plan at any time,
provided, however, that the Board may not, without approval of the shareholders
of the Corporation, (i) increase the maximum number of shares as to which
Options may be granted under the Plan, (ii) permit the granting of ISOs at less
than 100% of the Fair Market Value of the underlying Common Stock of the
Corporation at the time of grant, or (iii) change the class of employees
eligible to receive Options under the Plan.
16. APPROVAL OF SHAREHOLDERS. This Plan expressly is subject to
approval of holders of a majority of the outstanding shares of Common Stock of
the Corporation, and if it is not so approved on or before one year after the
date of adoption of this Plan by the Board, the Plan shall not come into effect,
and any Options granted pursuant to this Plan shall be deemed canceled.
17. CONDITIONS OF EMPLOYMENT. The granting of an Option to a
participant under this Plan who is an employee shall impose no obligation on the
Corporation to continue the employment of any participant and shall not lessen
or affect the right of the Corporation to terminate the employment of the
participant.
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