EXHIBIT 10.7
1996 Stock Option/Stock Issuance Plan
WESTERN STAFF SERVICES, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1996 Stock Option/Stock Issuance Plan (the "Plan") is
intended to promote the interests of Western Staff Services, Inc., a Delaware
corporation (the "Corporation"), by providing eligible individuals with the
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation (or its parent or subsidiary corporations).
B. The Plan shall become effective immediately upon the execution and
final pricing of the Underwriting Agreement for the initial public offering of
the Corporation's Common Stock. The execution date of such Underwriting
Agreement is hereby designated as the Plan Effective Date.
II. DEFINITIONS
A. For purposes of the Plan, the following definitions shall be in
effect:
BOARD: the Corporation's Board of Directors.
CHANGE IN CONTROL: a change in ownership or control of the Corporation
effected through either of the following transactions:
(i) the acquisition directly or indirectly by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept; or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who were
still in office at the time such election or nomination was approved by the
Board.
CODE: the Internal Revenue Code of 1986, as amended.
COMMON STOCK: shares of the Corporation's Common Stock, par value of
$0.01 per share.
CORPORATE TRANSACTION: either of the following stockholder-approved
transactions to which the Corporation is a party:
a. a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or
b. the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
DOMESTIC RELATIONS ORDER: any judgment, decree or order (including
approval of a property settlement agreement) which provides or otherwise
conveys, pursuant to applicable State domestic relations laws (including
community property laws), marital property rights to any spouse or former spouse
of the Optionee.
EMPLOYEE: an individual who performs services while in the employ of
the Corporation or one or more parent or subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.
EXERCISE DATE: the date on which the Corporation shall have received
written notice of the option exercise.
FAIR MARKET VALUE: the Fair Market Value per share of Common Stock
determined in accordance with the following provisions:
- If the Common Stock is not at the time listed or admitted to trading
on any national stock exchange but is traded on the Nasdaq National
2.
Market, the Fair Market Value shall be the closing selling price per share
on the date in question, as such price is reported by the National
Association of Securities Dealers, Inc. through the Nasdaq National Market.
If there is no reported closing selling price for the Common Stock on the
date in question, then the closing selling price on the last preceding date
for which such quotation exists shall be determinative of Fair Market
Value.
- If the Common Stock is at the time listed or admitted to trading on
any national securities exchange, then the Fair Market Value shall be the
closing selling price per share on the date in question on the exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common
Stock on such exchange on the date in question, then the Fair Market Value
shall be the closing selling price on the exchange on the last preceding
date for which such quotation exists.
- For purposes of any option grants which are made at the time the
Underwriting Agreement for the initial public offering of the Common Stock
is executed and priced but prior to the time the Common Stock is first
traded on either a national securities exchange or the Nasdaq National
Market, the Fair Market Value per share of Common Stock shall be deemed to
be equal to the price per share at which the Common Stock is to be sold in
the initial public offering pursuant to the Underwriting Agreement.
HOSTILE TAKE-OVER: a change in ownership of the Corporation effected
through the following transaction:
a. the direct or indirect acquisition by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept, AND
b. the acceptance of more than fifty percent (50%) of the securities so
acquired in such tender or exchange offer from holders other than the
officers and directors of the Corporation subject to the short-swing profit
restrictions of Section 16 of the 1934 Act.
3.
INCENTIVE OPTION: a stock option which satisfies the requirements of
Code Section 422.
INVOLUNTARY TERMINATION: the termination of the Service of any
individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces
his or her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the
individual's consent.
MISCONDUCT: the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure by
such person of confidential information or trade secrets of the Corporation (or
any parent or subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Corporation (or any parent or
subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
parent or subsidiary) may consider as grounds for the dismissal or discharge of
any Optionee, Participant or other person in the Service of the Corporation (or
any parent or subsidiary).
1934 ACT: the Securities and Exchange Act of 1934, as amended from
time to time.
NON-STATUTORY OPTION: a stock option not intended to meet the
requirements of Code Section 422.
OPTIONEE: a person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program.
PARTICIPANT: a person who is issued Common Stock under the Stock
Issuance Program.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of the
Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of
4.
continuous duration of twelve (12) months or more. However, solely for the
purposes of the Automatic Option Grant Program, Permanent Disability or
Permanently Disabled shall mean the inability of the non-employee Board member
to perform his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
PLAN ADMINISTRATOR: the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
PRIMARY COMMITTEE: the committee of two (2) or more non-employee Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to Section 16 Insiders.
QUALIFIED DOMESTIC RELATIONS ORDER: a Domestic Relations Order which
substantially complies with the requirements of Code Section 414(p). The Plan
Administrator shall have the sole discretion to determine whether a Domestic
Relations Order is a Qualified Domestic Relations Order.
SECONDARY COMMITTEE: a committee of two (2) or more Board members
appointed by the Board to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to eligible persons other than Section 16
Insiders.
SECTION 16 INSIDER: an officer or director of the Corporation subject
to the short-swing profit liabilities of Section 16 of the 1934 Act.
SECTION 12(g) REGISTRATION DATE: the date on which the initial
registration of the Common Stock under Section 12(g) of the 1934 Act becomes
effective.
SERVICE: the performance of services on a periodic basis for the
Corporation (or any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the board of directors or an independent
consultant or advisor, except to the extent otherwise specifically provided in
the applicable stock option or stock issuance agreement.
TAKE-OVER PRICE: the GREATER of (a) the Fair Market Value per share of
Common Stock on the date the particular option to purchase such stock is
surrendered to the Corporation in connection with a Hostile Take-Over or (b) the
highest reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over. However, if the surrendered option is an
Incentive Option, the Take-Over Price shall not exceed the clause (a) price per
share.
5.
B. The following provisions shall be applicable in determining the
parent and subsidiary corporations of the Corporation:
Any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation shall be considered to be a
PARENT of the Corporation, provided each such corporation in the unbroken
chain (other than the Corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be considered to
be a SUBSIDIARY of the Corporation, provided each such corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
III. STRUCTURE OF THE PLAN
A. STOCK PROGRAMS. The Plan shall be divided into three separate
components: the Discretionary Option Grant Program specified in Article Two, the
Automatic Option Grant Program specified in Article Three and the Stock Issuance
Program specified in Article Four. Under the Discretionary Option Grant
Program, eligible individuals may, at the discretion of the Plan Administrator,
be granted options to purchase shares of Common Stock in accordance with the
provisions of Article Two. Under the Automatic Option Grant Program, each
individual serving as a non-employee Board member on the Plan Effective Date and
each individual who first joins the Board as a non-employee director at any time
after such Plan Effective Date shall at periodic intervals receive option grants
to purchase shares of Common Stock in accordance with the provisions of Article
Three, with the first such grants to be made on the Plan Effective Date. Under
the Stock Issuance Program, eligible individuals may be issued shares of Common
Stock directly, either through the immediate purchase of such shares at a price
per share not less than eighty-five percent (85%) of the fair market value per
share of Common Stock at the time of issuance or as a bonus for past services
rendered the Corporation or the Corporation's attainment of financial
objectives.
B. GENERAL PROVISIONS. Unless the context clearly indicates
otherwise, the provisions of Articles One and Five shall apply to the
Discretionary Option Grant Program, the Automatic Option Grant Program and the
Stock Issuance Program and shall accordingly govern the interests of all
individuals under the Plan.
6.
IV. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. No non-employee Board member shall be eligible
to serve on the Primary Committee if such individual has, during the twelve
(12)-month period immediately preceding the date of his or her appointment to
the Committee or (if shorter) the period commencing with the Section 12(g)
Registration Date and ending with the date of his or her appointment to the
Primary Committee, received an option grant or direct stock issuance under the
Plan or any other stock option, stock appreciation, stock bonus or other stock
plan of the Corporation (or any parent or subsidiary), other than pursuant to
the Automatic Option Grant Program.
B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. The members of the
Secondary Committee may be Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any parent or subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions
of any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant and Stock Issuance Programs and
to make such determinations under, and issue such interpretations of, the
provisions of such programs and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any stock option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
7.
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the express terms and conditions of Article
Three, and no Plan Administrator shall exercise any discretionary functions with
respect to option grants made pursuant to that program.
V. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant Program under Article Two and the Stock Issuance Program under Article
Four shall be limited to the following:
(i) officers and other key employees of the Corporation (or its
parent or subsidiary corporations) who render services which contribute to
the management, growth and financial success of the Corporation (or its
parent or subsidiary corporations);
(ii) non-employee members of the Board other than those serving
as Plan Administrator; and
(iii) those consultants or other independent advisors who provide
valuable services to the Corporation (or its parent or subsidiary
corporations).
B. The non-employee Board members serving as Plan Administrator shall
NOT be eligible during such period of service to participate in the
Discretionary Option Grant and Stock Issuance Programs or in any other stock
option, stock purchase, stock bonus or other stock plan of the Corporation (or
its parent or subsidiary corporations). Such individuals shall, however, be
eligible to receive automatic option grants pursuant to the provisions of
Article Three.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine, (i) with respect to the option grants
under the Discretionary Option Grant Program, which eligible persons are to
receive option grants, the time or times when such option grants are to be made,
the number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times at which each option is to become exercisable, the vesting schedule (if
any) applicable to the option shares and the maximum term for which the option
is to remain outstanding and (ii) with respect to stock issuances under the
Stock Issuance Program, which eligible persons are to receive stock issuances,
the time or times when such issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration to be paid for such shares.
8.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock which may be issued over the term of the Plan shall not
exceed 1,033,812 shares, subject to adjustment from time to time in accordance
with the provisions of this Section VI.
B. No one person participating in the Plan may receive stock options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 500,000 shares of Common Stock in the aggregate per calendar year.
C. Should one or more outstanding options under this Plan expire or
terminate for any reason prior to exercise in full (including any option
cancelled in accordance with the cancellation-regrant provisions of Section IV
of Article Two of the Plan), then the shares subject to the portion of each
option not so exercised shall be available for subsequent issuance under the
Plan. Shares subject to any stock appreciation rights exercised under the Plan
and all share issuances under the Plan, whether or not the shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan. In addition,
should the exercise price of an outstanding option under the Plan be paid with
shares of Common Stock or should shares of Common Stock otherwise issuable under
the Plan be withheld by the Corporation in satisfaction of the withholding taxes
incurred in connection with the exercise of an outstanding option under the Plan
or the vesting of a direct share issuance made under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the share issuance, and not by the net number of shares of Common Stock
actually issued to the holder of such option or share issuance.
D. Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities for which any one individual participating in the Plan may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances in the aggregate per calendar year, (iii) the number and/or class of
securities for which automatic option grants are to be subsequently made per
eligible non-employee Board member under the Automatic Option Grant Program and
(iv) the number and/or class of securities and price per share in effect under
each option outstanding under either the Discretionary Option Grant or Automatic
Option Grant Program. Such adjustments to the outstanding options are to be
effected in a manner which shall preclude
9.
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
10.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program
shall be authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not Employees of the Corporation or its parent or
subsidiary corporations may only be granted non-statutory options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; PROVIDED, however, that each such instrument shall comply
with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. OPTION PRICE.
1. The option price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The option price per share of Common Stock subject to an
Incentive Option shall in no event be less than one hundred percent (100%)
of the Fair Market Value of such Common Stock on the grant date.
(ii) The option price per share of Common Stock subject to a
non-statutory stock option shall in no event be less than eighty-five
percent (85%) of the Fair Market Value of such Common Stock on the grant
date.
2. The option price shall become immediately due upon exercise of
the option and, subject to the provisions of Section I of Article Five and the
instrument evidencing the grant, shall be payable in one of the following
alternative forms specified below:
(i) full payment in cash or check drawn to the Corporation's
order;
(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value on the
Exercise Date (as such term is defined below);
11.
(iii) full payment in a combination of shares of Common Stock
held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date and cash or check drawn to the
Corporation's order; or
(iv) full payment through a broker-dealer sale and remittance
procedure pursuant to which the Optionee shall provide irrevocable written
instructions to (I) a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate option price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes required to
be withheld by the Corporation in connection with such purchase and (II)
the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale transaction.
Except to the extent the sale and remittance procedure is used in
connection with the exercise of the option, payment of the option price for the
purchased shares must accompany such notice.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under this
Discretionary Option Grant Program shall be exercisable at such time or times
and during such period as is determined by the Plan Administrator and set forth
in the instrument evidencing the grant. No such option, however, shall have a
maximum term in excess of ten (10) years from the grant date.
C. TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise period
applicable to any outstanding options held by the Optionee at the time of
cessation of Service or death.
(i) Should an Optionee cease Service for any reason
(including death or Permanent Disability) while holding one or more
outstanding options under this Article Two, then none of those options
shall (except to the extent otherwise provided pursuant to subparagraph 2
below) remain exercisable for more than a twelve (12)-month period (or such
shorter period determined by the Plan Administrator and set forth in the
instrument evidencing the grant) measured from the date of such cessation
of Service.
(ii) Any option held by the Optionee under this Article Two
and exercisable in whole or in part on the date of his or her
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death may be subsequently exercised by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the laws
of descent and distribution. However, the right to exercise such option
shall lapse upon the EARLIER of (i) the first anniversary of the date of
the Optionee's death (or such shorter period determined by the Plan
Administrator and set forth in the instrument evidencing the grant) or (ii)
the specified expiration date of the option term. Accordingly, upon the
occurrence of the earlier event, the option shall terminate and cease to
remain outstanding.
(iii) Under no circumstances shall any such option be
exercisable after the specified expiration date of the option term.
(iv) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
shares (if any) in which the Optionee is vested at the time of his or her
cessation of Service. Upon the expiration of the limited post-Service
exercise period or (if earlier) upon the specified expiration date of the
option term, each such option shall terminate and cease to remain
outstanding with respect to any vested shares for which the option has not
otherwise been exercised. However, each outstanding option shall
immediately terminate and cease to remain outstanding, at the time of the
Optionee's cessation of Service, with respect to any shares for which the
option is not otherwise at that time exercisable or in which the Optionee
is not otherwise vested.
(v) Should (i) the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee under this
Article Two shall terminate immediately and cease to remain outstanding.
2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the
period otherwise in effect for that option to such greater period of time
as the Plan Administrator shall deem appropriate, but in no event beyond
the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or
13.
more additional installments in which the Optionee would have vested under
the option had the Optionee continued in Service.
D. STOCKHOLDER RIGHTS.
An Optionee shall have no stockholder rights with respect to any
shares covered by the option until such individual shall have exercised the
option, paid the option price for the purchased shares and become the holder of
record of those shares.
E. LIMITED TRANSFERABILITY
During the lifetime of the Optionee, the option shall be
exercisable only by the Optionee and shall not be assignable or transferable
other than by will or by the laws of descent and distribution following the
Optionee's death. However, a Non-Statutory Option may be assigned in whole or in
part during the Optionee's lifetime in accordance with the terms of a Qualified
Domestic Relations Order. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
such Qualified Domestic Relations Order. The terms applicable to the assigned
portion shall be the same as those in effect for the option immediately prior to
such assignment and shall be set forth in such documents issued to the assignee
as the Plan Administrator may deem appropriate.
F. REPURCHASE RIGHTS.
The shares of Common Stock acquired upon the exercise of any
Article Two option grant may be subject to repurchase by the Corporation in
accordance with the following provisions:
(i) The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock under this
Article Two. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase any or all of
those unvested shares at the option price paid per share. The terms and
conditions upon which such repurchase right shall be exercisable (including
the period and procedure for exercise and the appropriate vesting schedule
for the purchased shares) shall be established by the Plan Administrator
and set forth in the instrument evidencing such repurchase right.
(ii) All of the Corporation's outstanding repurchase rights
under this Article Two shall automatically terminate, and all shares
subject to such terminated rights shall immediately vest in full, upon the
occurrence of a Corporate Transaction, except to the extent: (A) any such
repurchase right is expressly assigned to the successor corporation (or
parent thereof) in connection with the Corporate Transaction or (B) such
termination
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is precluded by other limitations imposed by the Plan Administrator at the
time the repurchase right is issued.
(iii) The Plan Administrator shall have the discretionary
authority, exercisable either before or after the Optionee's cessation of
Service, to cancel the Corporation's outstanding repurchase rights with
respect to one or more shares purchased or purchasable by the Optionee
under this Article Two and thereby accelerate the vesting of such shares in
whole or in part at any time.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees. Options which are specifically
designated as "non-statutory" options when issued under the Plan shall NOT be
subject to such terms and conditions.
A. DOLLAR LIMITATION. The aggregate Fair Market Value (determined as
of the respective date or dates of grant) of the Common Stock for which one or
more options granted to any Employee under this Plan (or any other option plan
of the Corporation or its parent or subsidiary corporations) may for the first
time become exercisable as incentive stock options under the Federal tax laws
during any one calendar year shall not exceed the sum of One Hundred Thousand
Dollars ($100,000). To the extent the Employee holds two (2) or more such
options which become exercisable for the first time in the same calendar year,
the foregoing limitation on the exercisability of such options as incentive
stock options under the Federal tax laws shall be applied on the basis of the
order in which such options are granted. Should the number of shares of Common
Stock for which any Incentive Option first becomes exercisable in any calendar
year exceed the applicable One Hundred Thousand Dollar ($100,000) limitation,
then that option may nevertheless be exercised in that calendar year for the
excess number of shares as a non-statutory option under the Federal tax laws.
B. 10% STOCKHOLDER. If any individual to whom an Incentive Option is
granted is the owner of stock (as determined under Section 424(d) of the Code)
possessing ten percent (10%) or more of the total combined voting power of all
classes of stock of the Corporation or any one of its parent or subsidiary
corporations, then the option price per share shall not be less than one hundred
ten percent (110%) of the Fair Market Value per share of Common Stock on the
grant date, and the option term shall not exceed five (5) years, measured from
the grant date.
Except as modified by the preceding provisions of this Section II, the
provisions of Articles One, Two and Five of the Plan shall apply to all
Incentive Options granted hereunder.
15.
III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL
A. In the event of any Corporate Transaction, each option which is at
the time outstanding under this Article Two shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for the Corporate Transaction, become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for all or any portion of such shares. However, an outstanding
option under this Article Two shall NOT so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof or to be replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation or parent thereof, (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the option spread
existing at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such option,
or (iii) the acceleration of such option is subject to other limitations imposed
by the Plan Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options under this Article Two shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation or its parent company.
C. Each outstanding option under this Article Two which is assumed in
connection with the Corporate Transaction or is otherwise to continue in effect
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would have been
issued to the option holder, in consummation of such Corporate Transaction, had
such person exercised the option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the option price
payable per share, PROVIDED the aggregate option price payable for such
securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan on both an aggregate and per
participant basis following the consummation of the Corporate Transaction shall
be appropriately adjusted.
D. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in whole or in part in the event the Optionee's Service
subsequently terminates by reason of an Involuntary Termination within a
designated period (not to exceed twelve (12) months) following the effective
date of any Corporate Transaction in which those options are assumed or replaced
and do not otherwise accelerate. Any options so accelerated shall remain
exercisable for fully-vested shares until the EARLIER of (i) the expiration of
the option term or (ii) the expiration of the twelve (12-month period measured
from the effective date of the Involuntary Termination. In addition, the Plan
Administrator may provide that one or more of the Corporation's outstanding
repurchase rights with respect to shares held by the Optionee at the time of
such Involuntary Termination shall immediately terminate in whole or in part,
and the shares subject to those terminated rights shall accordingly vest.
16.
E. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in whole or in part in the event the Optionee's Service
subsequently terminates by reason of an Involuntary Termination within a
designated period (not to exceed twelve (12) months) following the effective
date of any Change in Control. Each option so accelerated shall remain
exercisable for fully-vested shares until the EARLIER of (i) the expiration of
the option term or (ii) the expiration of the twelve (12)-month period measured
from the effective date of the Involuntary Termination. In addition, the Plan
Administrator may provide that one or more of the Corporation's outstanding
repurchase rights with respect to shares held by the Optionee at the time of
such Involuntary Termination shall immediately terminate in whole or in part,
and the shares subject to those terminated rights shall accordingly vest.
F. The portion of any Incentive Option accelerated in connection with
a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Qualified
Option under the Federal tax laws.
G. The outstanding options shall in no way affect the right of the
Corporation 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.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under this Article Two and to
grant in substitution new options under the Plan covering the same or different
numbers of shares of Common Stock but with an option price per share not less
than (i) one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the new grant date in the case of a grant of an Incentive Option, (ii)
one hundred ten percent (110%) of such Fair Market Value in the case of a grant
of an Incentive Option to a 10% Stockholder or (iii) eighty-five percent (85%)
of such Fair Market Value in the case of all other grants.
V. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in its
discretion to implement the stock appreciation right provisions of this Section
V, one or more Optionees may be granted the right, exercisable upon such terms
and conditions as the Plan Administrator may establish, to surrender all or part
of an unexercised option under this Article Two in exchange for a distribution
from the Corporation in an amount equal to the excess of (i) the Fair Market
Value (on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (ii) the aggregate exercise price payable for such vested
shares.
17.
B. No surrender of an option shall be effective hereunder unless it
is approved by the Plan Administrator. If the surrender is so approved, then
the distribution to which the Optionee shall accordingly become entitled under
this Section V may be made in shares of Common Stock valued at Fair Market Value
on the option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the LATER of
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.
D. One or more officers of the Corporation subject to the short-swing
profit restrictions of the 1934 Act may, in the Plan Administrator's sole
discretion, be granted limited stock appreciation rights in tandem with their
outstanding options under this Article Two. Upon the occurrence of a Hostile
Take-Over, the officer shall have a thirty (30)-day period in which he or she
may surrender any outstanding options with such a limited stock appreciation
right in effect for at least six (6) months to the Corporation, to the extent
such option is at the time exercisable for fully vested shares of Common Stock.
The officer shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
vested shares of Common Stock at the time subject to each surrendered option (or
surrendered portion of such option) over (ii) the aggregate exercise price
payable for such shares. The cash distribution shall be made within five (5)
days following the date the option is surrendered to the Corporation, and
neither the approval of the Plan Administrator nor the consent of the Board
shall be required in connection with the option surrender and cash distribution.
Any unsurrendered portion of the option shall continue to remain outstanding and
become exercisable in accordance with the terms of the instrument evidencing
such grant.
E. The shares of Common Stock subject to any option surrendered for
an appreciation distribution pursuant to this Section V shall NOT be available
for subsequent issuance under the Plan.
18.
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. ELIGIBLE OPTIONEES. The individuals eligible to receive
automatic option grants pursuant to the provisions of this Article Three program
shall be limited to those individuals who are serving as non-employee Board
members on the Plan Effective Date or who are first elected or appointed as non-
employee Board members on or after such Effective Date, whether through
appointment by the Board or election by the Corporation's stockholders. Each
non-employee Board member eligible to participate in the Automatic Option Grant
Program pursuant to the foregoing criteria shall be designated an Eligible
Director for purposes of the Plan.
B. LIMITATION. Except for the option grants to be made pursuant to
the provisions of this Automatic Option Grant Program, Eligible Directors who
are serving as the Plan Administrator shall NOT be eligible during such period
of service to receive any additional option grants or stock issuances under this
Plan or any other stock plan of the Corporation (or any parent or subsidiary
corporation).
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. GRANT DATES. Option grants shall be made under this Article Three
on the dates specified below:
1. INITIAL GRANT. Each Eligible Director who is a non-employee
Board member on the Plan Effective Date and each Eligible Director who is first
elected or appointed as a non-employee Board member after such date shall
automatically be granted, on the Plan Effective Date or on the date of such
initial election or appointment (as the case may be), a Non-Statutory Option to
purchase 1,000 shares of Common Stock upon the terms and conditions of this
Article Three. In no event, however, shall a non-employee Board member be
eligible to receive such an initial option grant if such individual has at any
time been in the prior employ of the Corporation (or any parent or subsidiary
corporation).
2. ANNUAL GRANT. On the date of each Annual Stockholders
Meeting, beginning with the 1997 Annual Meeting, each individual who will
continue to serve as an Eligible Director shall automatically be granted,
whether or not such individual is standing for re-election as a Board member at
that Annual Meeting, a Non-Statutory Option to purchase an additional 1,000
shares of Common Stock upon the terms and conditions of this Article Three,
provided he or she has served as a non-employee Board member for at least six
(6) months. There shall be no limit on the number of such annual option grants
any one Eligible Director may receive over his or her period of Board service,
19.
and non-employee Board members who have previously been in the employ of the
Corporation (or any parent or subsidiary corporation) shall be eligible to
receive such annual option grants over their period of continued Board service.
B. EXERCISE PRICE. The exercise price per share of Common Stock
subject to each automatic option grant made under this Article Three shall be
equal to one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the automatic grant date.
C. PAYMENT. The exercise price shall be payable in one of the
alternative forms specified below:
(i) full payment in cash or check drawn to the Corporation's
order;
(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value on the
Exercise Date (as such term is defined below);
(iii) full payment in a combination of shares of Common Stock
held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date and cash or check drawn to the
Corporation's order; or
(iv) full payment through a sale and remittance procedure
pursuant to which the Optionee shall provide irrevocable written
instructions to (I) a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares and
(II) the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale transaction.
Except to the extent the sale and remittance procedure specified above
is used for the exercise of the option for vested shares, payment of the
exercise price for the purchased shares must accompany the exercise notice.
D. OPTION TERM. Each automatic grant under this Article Three shall
have a maximum term of ten (10) years measured from the automatic grant date.
E. EXERCISABILITY. Each automatic grant shall become fully
exercisable for the option shares upon the Optionee's completion of one year of
Board service measured from the automatic grant date. The exercisability of
each automatic grant outstanding under
20.
this Article Three shall be accelerated as provided in Section II.G and Section
III of this Article Three.
F. LIMITED TRANSFERABILITY. During the lifetime of the Optionee, the
option shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following the Optionee's death. However, the option may also assigned in whole
or in part during the Optionee's lifetime in accordance with the terms of a
Qualified Domestic Relations Order. The assigned portion may only be exercised
by the person or persons who acquire a proprietary interest in the option
pursuant to such Qualified Domestic Relations Order. The terms applicable to
the assigned portion shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Corporation may deem appropriate.
G. EFFECT OF TERMINATION OF BOARD MEMBERSHIP.
1. Should the Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability) while holding one or more
automatic option grants under this Article Three, then such individual shall
have a twelve (12)-month period following the date of such cessation of Board
membership in which to exercise each such option for any or all of the shares of
Common Stock for which that option is exercisable at the time of such cessation
of Board service. Each such option shall immediately terminate and cease to be
outstanding, at the time of such cessation of Board service, with respect to any
shares for which the option is not otherwise at that time exercisable.
2. Should the Optionee die within twelve (12) months after
cessation of Board service, then any automatic option grant held by the Optionee
at the time of death may subsequently be exercised, for any or all of the shares
of Common Stock for which such option is exercisable at the time of the
Optionee's cessation of Board membership (less any option shares subsequently
purchased by the Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
distribution. Any such exercise must occur within twelve (12) months after the
date of the Optionee's cessation of Board service.
3. Should the Optionee die or become Permanently Disabled while
serving as a Board member, then any automatic option grant held by such Optionee
under this Article Three shall accelerate in full, and the Optionee (or the
representative of the Optionee's estate or the person or persons to whom the
option is transferred upon the Optionee's death) shall have a twelve (12)-month
period following the date of the Optionee's cessation of Board membership in
which to exercise such option for any or all of the shares of Common Stock
subject to the option at the time of such cessation of Board membership.
21.
4. In no event shall any automatic grant under this Article
Three remain exercisable after the expiration date of the ten (10)-year option
term. Upon the expiration of the applicable post-service exercise period under
subparagraph 1, 2 or 3 above or (if earlier) upon the expiration of the ten
(10)-year option term, the automatic grant shall terminate and cease to be
outstanding for any unexercised shares for which the option was otherwise
exercisable at the time of the Optionee's cessation of Board membership.
H. STOCKHOLDER RIGHTS. The holder of an automatic option grant under
this Article Three shall have none of the rights of a stockholder with respect
to any shares subject to such option until such individual shall have exercised
the option, paid the exercise price for the purchased shares and become the
holder of record of those shares.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, each automatic option
grant at the time outstanding under this Article Three shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares.
Immediately after the consummation of the Corporate Transaction, all automatic
option grants under this Article Three shall terminate and cease to be
outstanding, except to the extent assumed by the successor entity or its parent
company.
B. In connection with any Change in Control, each automatic option
grant at the time outstanding under this Article Three shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Change in Control, become fully exercisable with respect
to the total number of shares of Common Stock at the time subject to such option
and may be exercised for all or any portion of such shares. Any option
accelerated in connection with the Change in Control shall remain fully
exercisable until the expiration or sooner termination of the option term.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
option held by him or her under this Article Three for a period of at least six
(6) months. The Optionee shall in return be entitled to a cash distribution
from the Corporation in an amount equal to the excess of (i) the Take-Over Price
of the shares of Common Stock at the time subject to the surrendered option
(whether or not the option is otherwise at the time exercisable for those
shares) over (ii) the aggregate exercise price payable for such shares. Such
cash distribution shall be paid within five (5) days following the surrender of
the option to the Corporation. Neither the approval of the Plan Administrator
nor the consent of the Board shall be required in connection with such option
surrender and cash distribution. The shares of Common Stock subject to each
option surrendered in connection with the Hostile Take-Over shall NOT be
available for subsequent issuance under the Plan.
22.
D. The automatic option grants outstanding under this Article Three
shall in no way affect the right of the Corporation 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.
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
The provisions of this Automatic Option Grant Program, together with
the automatic option grants outstanding under this Article Three, may not be
amended at intervals more frequently than once every six (6) months, other than
to the extent necessary to comply with applicable Federal income tax laws and
regulations.
V. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
23.
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate purchases without any intervening stock option
grants. The issued shares shall be evidenced by a Stock Issuance Agreement
("Issuance Agreement") that complies with the terms and conditions of this
Article Four.
A. CONSIDERATION.
1. Shares of Common Stock drawn from the Corporation's
authorized but unissued shares of Common Stock ("Newly Issued Shares") shall be
issued under the Stock Issuance Program for one or more of the following items
of consideration which the Plan Administrator may deem appropriate in each
individual instance:
a. full payment in cash or check made payable to the
Corporation's order;
b. a promissory note payable to the Corporation's order in
one or more installments, which may be subject to cancellation in whole or
in part upon terms and conditions established by the Plan Administrator;
or
c. past services rendered to the Corporation or any parent or
subsidiary corporation.
2. Newly Issued Shares may, in the absolute discretion of the
Plan Administrator, be issued for consideration with a value less than one
hundred percent (100%) of the Fair Market Value of such shares at the time of
issuance, but in no event less than eighty-five percent (85%) of such Fair
Market Value.
3. Shares of Common Stock reacquired by the Corporation and
held as treasury shares ("Treasury Shares") may be issued under the Stock
Issuance Program for such consideration (including one or more of the items of
consideration specified in subparagraph 1 above) as the Plan Administrator may
deem appropriate, whether such consideration is in an amount less than, equal to
or greater than the Fair Market Value of the Treasury Shares at the time of
issuance. Treasury Shares may, in lieu of any cash consideration, be issued
subject to such vesting requirements tied to the Participant's period of future
Service or the Corporation's attainment of specified performance objectives as
the Plan Administrator may establish at the time of issuance.
24.
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service. The elements of the vesting schedule
applicable to any unvested shares of Common Stock issued under the Stock
Issuance Program, namely:
a. the Service period to be completed by the Participant or
the performance objectives to be achieved by the Corporation,
b. the number of installments in which the shares are to
vest,
c. the interval or intervals (if any) which are to lapse
between installments, and
d. the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the vesting
schedule,
shall be determined by the Plan Administrator and incorporated into the Issuance
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.
2. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to him or her under the Plan,
whether or not his or her interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares. Any new, additional or different shares of
stock or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
his or her unvested shares by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration or by reason of any Corporate Transaction shall be
issued, subject to (i) the same vesting requirements applicable to his or her
unvested shares and (ii) such escrow arrangements as the Plan Administrator
shall deem appropriate.
3. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under the Stock Issuance
Program, then those shares shall be immediately surrendered to the Corporation
for cancellation, and the Participant shall have no further stockholder rights
with respect to those shares. To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participant's purchase-money promissory note), the
Corporation shall repay to the Participant the cash consideration paid for the
surrendered shares and shall cancel the unpaid principal balance of any
outstanding
25.
purchase-money note of the Participant attributable to such surrendered shares.
The surrendered shares may, at the Plan Administrator's discretion, be retained
by the Corporation as Treasury Shares or may be retired to authorized but
unissued share status.
4. The Plan Administrator may in its discretion elect to waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the non-
completion of the vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. Upon the occurrence of any Corporate Transaction, all unvested
shares of Common Stock at the time outstanding under this Stock Issuance Program
shall immediately vest in full and the Corporation's repurchase/cancellation
rights shall terminate, except to the extent: (i) any such is expressly assigned
to the successor corporation (or parent thereof) in connection with the
Corporate Transaction or (ii) such termination is precluded by other limitations
imposed in the Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within
twelve (12) months following the effective date of any Corporate Transaction in
which those repurchase/cancellation rights are assigned to the successor
corporation (or parent thereof).
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within
twelve (12) months following the effective date of any Change in Control.
III. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares may, in the Plan Administrator's discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing such unvested shares. To the extent an
escrow arrangement is utilized, the unvested shares and
26.
any securities or other assets distributed with respect to such shares (other
than regular cash dividends) shall be delivered in escrow to the Corporation to
be held until the Participant's interest in such shares (or the distributed
securities or assets) vests. If the unvested shares are issued directly to the
Participant, the restrictive legend on the certificates for such shares shall
read substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND
ARE ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS
AND (II) CANCELLATION OR REPURCHASE IN THE EVENT THE
REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) CEASES
TO REMAIN IN THE CORPORATION'S SERVICE. SUCH TRANSFER
RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH CANCELLATION
OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE AGREEMENT
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER
PREDECESSOR IN INTEREST) DATED ________________, 199__,
A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION."
B. The Participant shall have no right to transfer any unvested
shares of Common Stock issued to him or her under the Stock Issuance Program.
For purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift or other disposition
of such shares, whether voluntary or involuntary. Upon any such attempted
transfer, the unvested shares shall immediately be cancelled in accordance with
substantially the same procedure in effect under Section I.B.3 of this Article
Four, and neither the Participant nor the proposed transferee shall have any
rights with respect to such cancelled shares. However, the Participant shall
have the right to make a gift of unvested shares acquired under the Stock
Issuance Program to his or her spouse or issue, including adopted children, or
to a trust established for such spouse or issue, provided the donee of such
shares delivers to the Corporation a written agreement to be bound by all the
provisions of the Stock Issuance Program and the Issuance Agreement applicable
to the gifted shares.
27.
ARTICLE FIVE
MISCELLANEOUS
IV. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any
Optionee or Participant (including an Optionee or Participant who is an officer
of the Corporation) in the exercise of one or more options granted to such
Optionee under the Discretionary Option Grant Program or the purchase of one or
more shares issued to such Participant under the Stock Issuance Program,
including the satisfaction of any Federal and state income and employment tax
obligations arising therefrom, by (i) authorizing the extension of a loan from
the Corporation to such Optionee or Participant or (ii) permitting the Optionee
or Participant to pay the option price or purchase price for the purchased
Common Stock in installments over a period of years. The terms of any loan or
installment method of payment (including the interest rate and terms of
repayment) shall be upon such terms as the Plan Administrator specifies in the
applicable option or issuance agreement or otherwise deems appropriate at the
time such option price or purchase price becomes due and payable. Loans or
installment payments may be authorized with or without security or collateral.
In all events, the maximum credit available to the Optionee or Participant may
not exceed the option or purchase price of the acquired shares (less the par
value of such shares) plus any Federal, state and local income and employment
tax liability incurred by the Optionee or Participant in connection with the
acquisition of such shares.
B. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.
V. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to amend
or modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to Common Stock
issued under the Stock Issuance Program prior to such action, unless the
Optionee or Participant consents to such amendment, and (ii) any amendment made
to the Automatic Option Grant Program (or any options outstanding thereunder)
shall be in compliance with the limitation of Section IV of Article Three. In
addition, the Board may not, without the approval of the Corporation's
stockholders, amend the Plan to (i) materially increase the maximum number of
shares issuable under the Plan or the number of shares for which options may be
granted to newly elected or continuing Eligible Directors under Article Three of
the Plan or the maximum number of shares for which any one individual
participating in the Plan may be granted stock options, separately exercisable
stock appreciation rights and direct stock issuances in
28.
the aggregate per calendar year, except for permissible adjustments under
Section VI.C. of Article One, (ii) materially modify the eligibility
requirements for Plan participation or (iii) materially increase the benefits
accruing to Plan participants.
B. (i) Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program and (ii) shares of Common Stock may
be issued under the Stock Issuance Program, which are in both instances in
excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under the Discretionary Option Grant
Program or the Stock Issuance Program are held in escrow until stockholder
approval is obtained for a sufficient increase in the number of shares available
for issuance under the Plan. If such stockholder approval is not obtained
within twelve (12) months after the date the first such excess option grants or
excess share issuances are made, then (I) any unexercised excess options shall
terminate and cease to be exercisable and (II) the Corporation shall promptly
refund the purchase price paid for any excess shares actually issued under the
Plan and held in escrow, together with interest (at the applicable Short Term
Federal Rate) for the period the shares were held in escrow.
VI. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of stock options for such shares or the vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income tax and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and in accordance
with the provisions of this Section III of Article Five and such supplemental
rules as the Plan Administrator may from time to time adopt (including the
applicable safe-harbor provisions of Rule 16b-3 of the Securities and Exchange
Commission), provide any or all holders of non-statutory options (other than the
automatic grants made pursuant to Article Three of the Plan) or unvested shares
under the Plan with the right to use shares of Common Stock in satisfaction of
all or part of the Federal, state and local income and employment tax
liabilities incurred by such holders in connection with the exercise of their
options or the vesting of their shares (the "Taxes"). Such right may be
provided to any such holder in either or both of the following formats:
1. STOCK WITHHOLDING: The holder of the non-statutory option or
unvested shares may be provided with the election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such non-statutory option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the applicable Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
2. STOCK DELIVERY: The Plan Administrator may, in its
discretion, provide the holder of the non-statutory option or the unvested
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shares with the election to deliver to the Corporation, at the time the
non-statutory option is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such individual (other than in
connection with the option exercise or share vesting triggering the Taxes)
with an aggregate Fair Market Value equal to the percentage of the Taxes
incurred in connection with such option exercise or share vesting (not to
exceed one hundred percent (100%)) designated by the holder.
VII. EFFECTIVE DATE AND TERM OF PLAN
A. Provided this Plan is approved by the Corporation's stockholders
on or before the Plan Effective Date, this Plan shall become effective
immediately upon such Plan Effective Date.
B. The Plan shall terminate upon the EARLIER of (i) ten (10) years
following the Plan Effective Date or (ii) the date on which all shares available
for issuance under the Plan shall have been issued pursuant to the exercise of
the options granted under the Plan or the issuance of shares (whether vested or
unvested) under the Stock Issuance Program. If the date of termination is
determined under clause (i) above, then all option grants and unvested share
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
grants or issuance.
VIII. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or share issuances under the Plan shall be used for
general corporate purposes.
IX. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option under
the Plan, the issuance of any shares under the Stock Issuance Program, and the
issuance of Common Stock upon the exercise or surrender of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which stock of the same class is then listed.
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X. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in the
employ or service of the Corporation (or any parent or subsidiary corporation)
for any period of specific duration, and the Corporation (or any parent or
subsidiary corporation retaining the services of such individual) may terminate
such individual's employment or service at any time and for any reason, with or
without cause.
XI. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the Plan
may not be assigned, encumbered or otherwise transferred by any Optionee or
Participant.
B. The provisions of the Plan relating to the exercise of options
and the vesting of shares shall be governed by the laws of the State of
California, as such laws are applied to contracts entered into and performed in
such State.
C. The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
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