EXHIBIT 10.4
DURA PHARMACEUTICALS, INC.
1992 STOCK OPTION PLAN
EFFECTIVE DECEMBER 9, 1992; AS AMENDED JUNE 2, 1994; AS
AMENDED MAY 25, 1995; AS AMENDED MAY 29, 1996
AS AMENDED JULY 1, 1996; AS AMENDED FEBRUARY 19, 1997
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
A. IMPLEMENTATION. This 1992 Stock Option Plan ("PLAN") is implemented
as of December 9, 1992 ("EFFECTIVE DATE"), to enable Dura Pharmaceuticals, Inc.
("COMPANY") to grant options to the following eligible individuals ("ELIGIBLE
INDIVIDUALS") in order to attract them and to retain their services: (a) key
employees (including officers and directors) of the Company or its subsidiaries
or any parent corporation who are primarily responsible for the management,
growth and financial success of the Company or its subsidiaries, (b) non-
employee members of the Board of Directors ("BOARD") of the Company or any of
its subsidiaries, and (c) consultants and independent contractors who perform
valuable services for the Company or its subsidiaries.
B. SUCCESSOR PLAN. This Plan is a successor to the Company Stock Option
Plan that was adopted by the Board in 1983 ("1983 PLAN"). No further option
grants (including, but not limited to automatic option grants) will be made
under the 1983 Plan on and after the Effective Date of this Plan. All options
outstanding under the 1983 Plan on the Effective Date are hereby incorporated
into this Plan and will be treated as outstanding options under this Plan. Each
outstanding option so incorporated will continue to be governed solely by the
express terms and conditions of the instruments evidencing such grant. No
provision of this Plan will be deemed to affect or otherwise modify the rights
or obligations of the holders of such incorporated options with respect to their
acquisition of shares of the Company's Common Stock under the terms of the
incorporated options.
II. ADMINISTRATION OF THE PLAN
A. COMMITTEE. The Plan will be administered by the Board of Directors or
by a committee or committees appointed by the Board, and consisting of two or
more members of the Board. The Board may delegate the responsibility for
administration of the Plan with respect to designated classes of optionees to
different committees, subject to such limitations as the Board deems
appropriate. With respect to any matter, the term "COMMITTEE," when used in
this Plan, will refer to the committee that has been delegated authority with
respect to such matter. Members of a committee will serve for such term as the
Board may determine, and will be subject to removal by the Board at any time.
B. SECTION 16(b) COMMITTEE. Notwithstanding any other provision of this
Agreement, each grant of an option or other transaction between the Company and
any Section 16 Insider shall be valid and enforceable only if approved by the
Board of Directors or by a committee composed exclusively of two or more Non-
Employee Directors. For this purpose, a "Section 16 Insider" shall mean an
officer or director of the Corporation subject to the short-swing profit
liabilities of Section 16 of the 1934 Act, and a Non-Employee Director shall
have the meaning set forth in Rule 16b-3(b)(3).
C. AUTHORITY. Any Committee will have full authority to administer the
Plan within the scope of its delegated responsibilities, including authority to
interpret and construe any relevant provision of the Plan, to adopt such rules
and regulations as it may deem necessary, and to determine the terms of grants
made under the Plan (which need not be identical). Decisions of a Committee
made within the discretion delegated to it by the Board will be final and
binding on all persons.
III. STOCK SUBJECT TO THE PLAN
A. NUMBER OF SHARES. Shares of the Company's Common Stock available for
issuance under the Plan shall be drawn from either the Company's authorized but
unissued shares of Common Stock or from reacquired shares of Common Stock,
including shares repurchased by the Company on the open market. The maximum
number of shares of Common Stock that may be issued over the term of the Plan
shall not exceed 7,607,360 shares, subject to adjustment from time to time in
accordance with the provisions of this Section. This authorized share reserve
is comprised of (i) the number of shares remaining available for issuance under
the 1983 Plan as of the Effective Date, including the shares subject to the
outstanding options incorporated into this Plan and any other shares that would
have been available for future option grant under the 1983 Plan, plus (ii) an
additional 416,040 shares of Common Stock, plus (iii) an additional increase of
750,000 shares of Common Stock, plus (iv) an additional increase of 1,000,000
shares of Common Stock, plus (v) an additional increase of 1,500,000 shares of
Common Stock, plus (vi) an additional increase of 1,600,000 shares of Common
Stock. Accordingly, to the extent one or more outstanding options under the
1983 Plan that have been incorporated into this Plan are subsequently exercised,
the number of shares issued with respect to each such option will reduce, on a
share-for-share basis, the number of shares available for issuance under this
Plan.
B. EXPIRED OPTIONS. Should an outstanding option under this Plan
(including any outstanding option under the 1983 Plan incorporated into 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
this Plan), the shares subject to the portion of the option not so exercised
will be available for subsequent option grant under this Plan. Shares subject
to any option or portion thereof cancelled in accordance with the stock
appreciation (or limited stock appreciation) rights provisions of this Plan will
NOT be available for subsequent option grant under the Plan.
C. ADJUSTMENTS. If any change is made to the Common Stock issuable under
the Plan (including Common Stock issuable under an Automatic Option Grant) 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 receipt of consideration, then appropriate adjustments
will be made to (i) the number and/or class of shares issuable under the Plan,
(ii) the number and/or class of shares and price per share in effect under each
outstanding option under the Plan, and (iii) the number and/or class of shares
and price per share in effect under each outstanding option incorporated into
this Plan from the 1983 Plan. The purpose of these adjustments will be to
preclude the enlargement or dilution of rights and benefits under the options.
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ARTICLE TWO
STANDARD OPTION PROVISIONS
I. TERMS AND CONDITIONS OF OPTIONS
A. COMMITTEE DISCRETION.
(1) Except as provided under the Automatic Option Grant provisions of
this Plan, the Committee will have full authority to determine which Eligible
Individuals are to receive option grants under the Plan, the number of shares to
be governed by each such grant, whether the option is to be an incentive stock
option ("INCENTIVE OPTION") that satisfies the requirements of Section 422 of
the Internal Revenue Code or a non-qualified option not intended to satisfy such
requirements ("NON-QUALIFIED OPTION"), the time or times at which each such
option is to become exercisable, and the maximum term for which the option is to
remain outstanding.
(2) Notwithstanding any other provision of this Plan, no individual
shall be granted options to acquire more than 400,000 shares in any fiscal year
or 1,500,000 shares over the lifetime of the Plan.
B. TERM. No option granted under the Plan will be exercisable after the
expiration of 10 years from the date the option was granted.
C. PRICE. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than 100% percent of the Fair Market Value
per share of Common Stock on the option grant date, provided that the Plan
Administrator may fix the exercise price at less than 100% if the optionee, at
the time of the option grant, shall have made a payment to the Company
(including payment made by means of an agreed salary reduction) equal to the
excess of the Fair Market Value of the Common Stock on the option grant date
over such exercise price.
D. EXERCISE AND PAYMENT. After any option granted under the Plan becomes
exercisable, it may be exercised by notice to the Company at any time prior to
the termination of such option. The option price will be payable in full in
cash or check made payable to the Company; provided, however, that the Committee
may, either at the time the option is granted or at the time it is exercised and
subject to such limitations as it may determine, authorize payment of all or a
portion of the option price in one or more of the following alternative forms:
(1) a promissory note authorized pursuant to Section IV of this
Article; or
(2) full payment in shares of Common Stock valued as of the exercise
date and held for the requisite period to avoid a charge to the Company's
earnings; or
(3) full payment through a sale and remittance procedure under which
the option holder delivers a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale proceeds to pay the option prices.
For purposes of Subparagraphs (1) and (3) immediately above, the Exercise Date
shall be the date on which written notice of the exercise of the option is
delivered to the Company. In all other cases, the Exercise Date will be the
date on which written notice and actual payment is received by the Company.
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The sale and remittance procedure authorized for the exercise of
outstanding options under this Plan shall be available for all options granted
under this Plan on or after the Effective Date and for all non-qualified options
outstanding under the 1983 Plan and incorporated into this Plan. The Plan
Administrator may also allow such procedure to be utilized in connection with
one or more disqualifying dispositions of Incentive Option shares effected after
the Effective Date, whether such Incentive Options were granted under this Plan
or the 1983 Stock Option Plan.
E. SHAREHOLDER RIGHTS. An option holder will have no shareholder rights
with respect to any shares covered by an option (including an Automatic Option
Grant) prior to the Exercise Date of the option, as defined in the immediately
preceding Paragraph and in the Automatic Option Grant provisions of Section II
of Article Three of this Plan.
F. SEPARATION FROM SERVICE. The Committee will determine whether options
will continue to be exercisable, and the terms of such exercise, on and after
the date that an optionee ceases to be employed by, or to provide services to,
the Company or its subsidiaries PROVIDED, however, that in no event will an
option be exercisable after the specified expiration date of the option term.
The date of termination of an optionee's employment or services will be
determined by the Committee, which determination will be final.
G. INCENTIVE OPTIONS. Options granted under the Plan that are intended
to be Incentive Options will be subject to the following additional terms:
(1) 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 after December 31, 1986 under this Plan
(or any other option plan of the Company 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 $100,000. To the extent the Employee holds two 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.
(2) 10% SHAREHOLDER. If any employee to whom an Incentive Option is
to be granted pursuant to the provisions of the Plan is, on the date of grant,
the owner of stock (determined with application of the ownership attribution
rules of Section 424(d) of the Internal Revenue Code) possessing more than 10%
of the total combined voting power of all classes of stock of his or her
employer corporation or of its parent or subsidiary corporation ("10%
SHAREHOLDER"), then the following special provisions will apply to the option
granted to such individual:
(i) The option price per share of the stock subject to such
Incentive Option will not be less than 110% of the Fair Market Value of the
option shares on the date of grant; and
(ii) The option will not have a term in excess of 5 years from
the date of grant.
(3) PARENT AND SUBSIDIARY. For purposes of this Section, "PARENT
CORPORATION" and "SUBSIDIARY CORPORATION" will have the meaning attributed to
those terms, as they are used in Section 422(b) of the Internal Revenue Code.
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(4) EMPLOYEES. Incentive Options may only be granted to employees of
the Company or its subsidiaries.
H. FAIR MARKET VALUE. For all purposes under this Plan (including, but
not limited to Automatic Option Grants) the fair market value per share of
Common Stock on any relevant date under the Plan ("FAIR MARKET VALUE") will be
determined as follows:
(1) If the Common Stock is not at the time listed or admitted to
trading on any national stock exchange but is traded in the over-the-counter
market, the fair market value will be the mean between the highest bid and
lowest asked prices (or, if such information is available, the closing selling
price) per share of Common Stock on the date in question in the over-the-counter
market, as such prices are reported by the National Association of Securities
Dealers through its NASDAQ system or any successor system. If there are no
reported bid and asked prices (or closing selling price) for the Common Stock on
the date in question, then the mean between the highest bid price and lowest
asked price (or the closing selling price) on the last preceding date for which
such quotations exist will be determinative of fair market value.
(2) If the Common Stock is at the time listed or admitted to trading
on any national stock exchange, then the fair market value will be the closing
selling price per share of Common Stock on the date in question on the stock
exchange determined by the Committee 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 will be the closing selling
price on the exchange on the last preceding date for which such quotation
exists.
(3) If the Common Stock is at the time neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter market, then
the fair market value will be determined by the Committee after taking into
account such factors as the Committee shall deem appropriate.
I. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options 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-Qualified
Option may be assigned in whole or in part during the Optionee's lifetime. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. 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.
II. STOCK APPRECIATION RIGHTS
If, and only if the Committee, in its discretion, elects to implement an
option surrender program under the Plan, one or more option holders may, upon
such terms as the Committee may establish at the time of the option grant or at
any time thereafter, be granted the right to surrender all or part of an
unexercised option in exchange for a distribution equal in amount to the
difference between (i) the Fair Market Value (at date of surrender) of the
shares for which the surrendered option or portion thereof is at the time
exercisable and (ii) the aggregate option price payable for such shares. The
distribution to which an option holder becomes entitled under this
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Section may be made in shares of Common Stock, valued at Fair Market Value at
the date of surrender, in cash, or partly in shares and partly in cash, as
the Committee, in its sole discretion, deems appropriate. The option
surrender provisions of this Section will not apply to options granted
pursuant to the Automatic Option Grant provisions of this Plan.
III. CORPORATE TRANSACTION/CHANGE OF CONTROL/HOSTILE TAKEOVER
A. CORPORATE TRANSACTION. In the event of any of the following
transactions ("CORPORATE TRANSACTION"):
(1) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state of the Company's incorporation,
(2) the sale, transfer or other disposition of all or substantially
all of the assets of the Company in liquidation or dissolution of the Company,
(3) any reverse merger in which the Company is the surviving entity
but in which fifty percent (50%) or more of the Company's outstanding voting
stock is transferred to holders different from those who held such securities
immediately prior to such merger, or
(4) an acquisition by any person or related group of persons (other
than the Company or a person that directly or indirectly controls, is controlled
by or is under common control with, the Company) of ownership of more than fifty
percent (50%) of the Company's outstanding Common Stock, pursuant to a tender or
exchange offer,
the exercisability of each option 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. Upon the consummation of the Corporate Transaction, all outstanding
options under this Article Two shall terminate and cease to be outstanding.
B. HOSTILE TAKEOVER. One or more officers of the Company subject to the
short-swing profit restrictions of the Federal securities laws may, in the
Committee's sole discretion, be granted, in tandem with their outstanding
options, limited stock appreciation rights as described below. In addition all
Automatic Option Grants under this Plan will be made in tandem with limited
stock appreciation rights as described below.
(1) Upon the occurrence of a Hostile Takeover, each outstanding
option with such a limited stock appreciation right in effect for at least
six (6) months will automatically be cancelled in return for a cash
distribution from the Company in an amount equal to the excess of (i) the
Takeover Price (defined below) of the shares of Common Stock at the time
subject to the cancelled option (whether or not the option is otherwise at
the time exercisable for such shares) over (ii) the aggregate exercise price
payable for such shares. The cash distribution payable upon such cancellation
shall be made within five (5) days following the consummation of the Hostile
Takeover. Neither the approval of the Committee nor the consent of the Board
shall be required in connection with such option cancellation and cash
distribution.
(2) For purposes of the limited stock appreciation rights described
above, the following definitions shall be in effect:
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(i) A Hostile Takeover shall be deemed to occur upon the
acquisition by any person or related group of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) of ownership of more than 50% of the Company's
outstanding Common Stock (excluding the Common Stock holdings of officers and
directors of the Company who participate in this Plan) pursuant to a tender or
exchange offer which the Board does not recommend the Company's shareholders
accept.
(ii) The Takeover Price per share shall be deemed to be equal to
the GREATER of (a) the Fair Market Value per share on the date of cancellation,
or (b) the highest reported price per share paid in effecting the Hostile
Takeover. However, if the cancelled option is an Incentive Option, the Takeover
Price shall not exceed the clause (a) price per share.
C. COMPANY RIGHTS. The grant of options (including Automatic Option
Grants) under this Plan shall in no way affect the right of the Company 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. LOANS OR GUARANTEE OF LOANS
The Committee may assist any optionee (including any officer) in the
exercise of one or more outstanding options under this Article by (a)
authorizing the extension of a loan to such optionee from the Company, (b)
permitting the optionee to pay the option price for the purchased Common
Stock in installments over a period of years or (c) authorizing a guarantee
by the Company of a third-party loan to the optionee. The terms of any loan,
installment method of payment or guarantee (including the interest rate and
terms of repayment) will be established by the Committee in its sole
discretion. Loans, installment payments and guarantees may be granted without
security or collateral (other than to optionees who are consultants or
independent contractors, in which event the loan must be adequately secured
by collateral other than the purchased shares), but the maximum credit
available to the optionee shall not exceed the SUM of (i) the aggregate
option price (less par value) of the purchased shares plus (ii) any federal
and state income and employment tax liability incurred by the optionee in
connection with the exercise of the option. Automatic Option Grants will not
be subject to these loan and loan guarantee provisions.
V. CANCELLATION AND REGRANT OF OPTIONS
The Committee 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 (including outstanding options under
the 1983 Plan incorporated into this Plan) and to grant in substitution new
options under the Plan covering the same or different numbers of shares of
Common Stock but having an option price per share not less than 100% of the fair
market value of the Common Stock on the new grant date. Automatic Option Grants
will not be subject to these cancellation and regrant provisions.
VI. REPURCHASE RIGHTS
The Committee may in its discretion determine that it shall be a term and
condition of one or more options exercised under the Plan that the Company (or
its assigns) shall have the right, exercisable upon the optionee's separation
from service with the Company and its subsidiaries, to repurchase any or all of
the shares of Common Stock previously acquired by the optionee upon the exercise
of such option. Any such repurchase right shall be exercisable upon such terms
and conditions (including the establishment of the appropriate vesting schedule
and
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other provisions for the expiration of such right in one or more
installments) as the Committee may specify in the instrument evidencing such
right. The Committee shall also have full power and authority to provide for
the automatic termination of these repurchase rights, in whole or in part,
and thereby accelerate the vesting of any or all of the purchased shares.
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. GRANTS
A. AUTOMATIC OPTION GRANTS. Non-employee members of the Board will
automatically be granted Non-Qualified Options to purchase the number of shares
of Common Stock set forth below (subject to adjustment under Section III(C) of
Article One of this Plan) on the dates and pursuant to the terms set forth below
("AUTOMATIC OPTION GRANTS").
B. CONTINUING DIRECTORS. On the date of each Annual Shareholders Meeting
of the Company held after the Effective Date of this Plan, each continuing non-
employee member of the Board will receive an Automatic Option Grant to purchase
8,000 shares of Common Stock; provided, however, that an individual who has not
served as a non-employee member of the Board for the immediately preceding 180
days will not receive such a grant.
C. NEW DIRECTORS. Each individual person who is newly elected or
appointed as a non-employee member of the Board on or after the Effective Date
of this Plan will receive, on the effective date of such election or
appointment, an Automatic Option Grant to purchase 30,000 shares of Common
Stock.
II. TERMS
The terms applicable to each Automatic Option Grant will be as follows:
A. PRICE. The option price per share will be equal to 100% of the Fair
Market Value of a share of Common Stock on the date of grant.
B. OPTION TERM. Each Automatic Option Grant will have a maximum term of
10 years measured from the automatic grant date.
C. EXERCISABILITY. Each Automatic Option Grant will become exercisable
for all Automatic Option Grant shares one (1) year after the automatic grant
date, provided the optionee continues to serve as a Board member throughout that
one (1)-year period.
D. PAYMENT. Upon exercise of the option, the option price for the
purchased shares will become payable immediately in one or more of the following
alternative forms: cash, shares of Common Stock held for the requisite period
to avoid a charge to the Company's reported earnings and valued at Fair Market
Value on the Exercise Date (as defined below), or pursuant to a sale and
remittance procedure under which the option holder delivers a properly executed
exercise notice together with irrevocable instructions to a broker to promptly
deliver to the Company the amount of sale proceeds to pay the option price. For
these purposes, the Exercise Date shall be the date on which written notice of
the exercise of the option is delivered to the Company. Except to the extent
the sale and remittance procedure specified above is utilized for the exercise
of the option, payment of the exercise price for the purchased shares must
accompany the notice.
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E. EFFECT OF TERMINATION OF BOARD MEMBERSHIP.
(1) Should the optionee cease to be a Board member for any reason
(other than death) while holding one or more Automatic Option Grants, then the
optionee will have 6 months 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 the option is exercisable at the time Board membership
ceases; provided however, that in no event may such an option be exercised after
the expiration of its 10-year term.
(2) Should the optionee die while holding one or more Automatic
Option Grants, then each such option may subsequently be exercised, for any or
all of the shares of Common Stock for which the option is exercisable at the
time of the optionee's 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, however, occur before the earlier of (i) the expiration
of the option's 10-year term, or (ii) 12 months after the date of the
optionee's death.
F. ACCELERATION. Automatic Option Grants will be subject to acceleration
and termination in the event of a Corporate Transaction as described in Article
Two, Section III.A. of this Plan.
G. HOSTILE TAKEOVER. Automatic Option Grants will be granted in tandem
with limited stock appreciation rights, as described in the Hostile Takeover
provisions contained in Article Two, Section III.B. of this Plan.
ARTICLE FOUR
MISCELLANEOUS
I. AMENDMENT OF THE PLAN
A. GENERAL RULES. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever.
However, no such amendment or modification shall, without the consent of the
option holders, adversely affect rights and obligations with respect to options
at the time outstanding under the Plan. In addition, certain amendments may be
made conditional on first having obtained stockholder approval if required by
the Board or pursuant to any applicable laws or regulations.
B. AUTOMATIC OPTION GRANTS. Amendment of the Automatic Option Grant
provisions of this Plan is subject to the requirements outlined above. In
addition, the Automatic Option Grant provisions of this Plan may not be amended
more than once every 6 months, other than to comport with changes in the
Internal Revenue Code or rules thereunder.
C. AMENDMENT OF OPTIONS. The Committee shall have full power and
authority to modify or waive any or all of the terms, conditions or restrictions
applicable to any outstanding option, to the extent not inconsistent with the
Plan; provided, however, that no such modification or waiver shall (1) without
the consent of the option holder, adversely affect the holder's rights
thereunder or (2) affect any outstanding option granted pursuant to the
Automatic Option Grant provisions of this Plan except to the extent necessary to
conform to any amendment to this Plan.
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II. TAX WITHHOLDING
A. OBLIGATION. The Company's obligation to deliver shares or cash upon
the exercise of stock options or stock appreciation rights granted under the
Plan is subject to the satisfaction of all applicable Federal, State and local
income and employment tax withholding requirements.
B. STOCK WITHHOLDING. The Plan Administrator may, in its discretion and
upon such terms and conditions as it may deem appropriate (including the
applicable safe-harbor provisions of SEC Rule 16b-3) provide any or all holders
of outstanding option grants under the Plan with the election to have the
Company withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such options, one or more of such shares with an aggregate fair
market value equal to the designated percentage (any multiple of 5% specified by
the optionee) of the Federal and State income taxes ("Taxes") incurred in
connection with the acquisition of such shares. In lieu of such direct
withholding, one or more optionees may also be granted the right to deliver
shares of Common Stock to the Company in satisfaction of such Taxes. The
withheld or delivered shares shall be valued at the Fair Market Value on the
applicable determination date for such Taxes or such other date required by the
applicable safe-harbor provisions of SEC Rule 16b-3.
III. EFFECTIVE DATE AND TERM OF PLAN
A. IMPLEMENTATION. This Plan, as successor to the Company's 1983 Stock
Option Plan, shall become effective as of the Effective Date, and no further
option grants shall be made under the 1983 Plan on or after the Effective Date
of this Plan. If shareholder approval of the 1,600,000-share increase is not
obtained by February 19, 1998, then each option granted under this Plan subject
to this share increase shall terminate without ever becoming exercisable for the
option shares and all shares issued hereunder shall be repurchased by the
Corporation at the purchase price paid, together with interest (at the
applicable Short Term Federal Rate). Subject to the foregoing limitations,
options may be granted under this Plan at any time from and after the Effective
Date of the Plan and before the date fixed herein for termination of the Plan.
B. TERMINATION. Unless sooner terminated due to a Corporate Transaction
or a Change in Control, the Plan will terminate upon the EARLIER of (i) October
8, 2003, or (ii) the date on which all shares available for issuance under the
Plan have been issued or cancelled pursuant to exercise, surrender or cash-out
of options. If the date of termination is determined under clause (i) above,
then options outstanding on such date shall thereafter continue to have force
and effect in accordance with the provisions of the instruments evidencing those
options.
C. ADDITIONAL SHARES. Options to purchase shares of Common Stock may be
granted under the Plan which are in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued are held in escrow until shareholder approval is obtained for a
sufficient increase in the number of shares available for issuance under the
Plan. If such shareholder approval is not obtained within twelve (12) months
after the date the first such excess option grants 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.
III. USE OF PROCEEDS
Any cash proceeds received by the Company from the sale of shares pursuant
to options granted under the Plan shall be used for general corporate purposes.
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IV. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option under the Plan,
and the issuance of stock upon the exercise or surrender of any such option
shall be subject to the procurement by the Company of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
options granted under it and the stock issued pursuant to it.
V. NO EMPLOYMENT/SERVICE RIGHTS
Neither the establishment of this Plan, nor any action taken under the
terms of this Plan, nor any provision of this Plan shall be construed so as to
grant any individual the right to remain in the employ or service of the Company
(or any parent or subsidiary corporation) for any period of specific duration,
and the Company (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.