Exhibit 10.2
DIANON SYSTEMS, INC.
1996 STOCK INCENTIVE PLAN
SECTION 1. Purposes
The purposes of the Dianon Systems, Inc. 1996 Stock Incentive Plan
(the "Plan") are (i) to enable Dianon Systems, Inc. (the "Company") and its
Related Companies (as defined below) to attract, retain and reward employees
and strengthen the existing mutuality of interests between such employees and
the Company's stockholders by offering such employees an equity interest in
the Company, and (ii) to enable the Company to pay part of the compensation of
its Outside Directors (as defined in Section 5.2) in the form of equity of the
Company, thereby increasing such directors' proprietary interests in the
Company. For purposes of the Plan, a "Related Company" means any corporation,
partnership, joint venture or other entity in which the Company owns, directly
or indirectly, at least a 20% beneficial ownership interest.
SECTION 2. Types of Awards
2.1 Awards under the Plan may be in the form of (i) Stock Options;
(ii) Stock Appreciation Rights; (iii) Restricted Stock; (iv) Deferred
Stock; (v) Bonus Stock; (vi) Loans; and/or (vii) Tax Offset Payments. One or
more types of awards may be granted, which may be independent or granted
in tandem. If two awards are granted in tandem, the award holder may exercise
(or otherwise receive the benefit of) one award only to the extent he or she
relinquishes the tandem award.
2.2 Outside Directors shall receive Stock Options, Limited Stock
Appreciation Rights and Stock Grants as provided in Section 15. In addition,
Outside Directors may be granted awards in one or more of the forms set forth
in Section 2.1.
SECTION 3. Administration
3.1 The Plan shall be administered (i) by the Compensation Committee
of the Company's Board of Directors (the "Board") or such other committee of
directors as the Board shall designate (the "Committee"), with respect to
awards to persons other than Outside Directors, and (ii) by the Board with
respect to awards to Outside Directors (except as provided in Section 4.4).
The Committee shall consist of not less than two directors each of whom is an
Outside Director. The members of the Committee shall serve at the pleasure of
the Board.
3.2 For purposes of this Plan the term "Granting Authority" shall mean
(i) the Board of Directors with respect to awards to Outside Directors (except
as provided in Section 4.4), and (ii) the Committee with respect to all other
awards. The Granting Authority shall have the following authority with respect
to awards under the Plan within its jurisdiction: to grant such awards to
persons eligible to receive them under the Plan; to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall deem advisable; to interpret the terms and provisions of the Plan and
any award granted by it under the Plan; and to otherwise supervise the
administration of the Plan. In particular, and without limiting its authority
and powers, the Granting Authority shall have the authority with respect to
the awards within its jurisdiction:
(a) to determine whether and to what extent any award or combination
of awards will be granted hereunder, including whether any awards
will be granted in tandem with each other;
(b) to select the eligible persons to whom awards will be granted;
(c) to determine the number of shares of the common stock of the
Company (the "Stock") to be covered by each award granted
hereunder subject to the limitations contained herein;
(d) to determine the terms and conditions of any award granted
hereunder, including, but not limited to, any vesting or other
restrictions based on such performance objectives (the
"Performance Objectives") and such other factors as the Granting
Authority may establish, and to determine whether the Performance
Objectives and other terms and conditions of the award are
satisfied;
(e) to determine the treatment of awards upon an award holder's
retirement, disability, death, termination for cause or other
termination of employment or service with the Company or Related
Company;
(f) to determine pursuant to a formula or otherwise the fair market
value of the Stock on a given date; provided, however, that if the
Granting Authority fails to make such a determination, fair market
value of the Stock on a given date shall be the closing sale price
on a given date, or if no such sale of Stock occurs on such date,
the weighted average of the closing sale prices on the nearest
trading dates before and after such date;
(g) to determine that amounts equal to the amount of any dividends
declared with respect to the number of shares covered by an award
(i) will be paid to the award holder currently or (ii) will be
deferred and deemed to be reinvested or (iii) will otherwise be
credited to the award holder, or that the award holder has no
rights with respect to such dividends;
(h) to determine whether, to what extent, and under what circumstances
Stock and other amounts payable with respect to an award will be
deferred either automatically or at the election of an award
holder, including providing for and determining the amount (if any)
of deemed earnings on any deferred amount during any deferral
period;
(i) to provide that the shares of Stock received as a result of an
award shall be subject to a right of first refusal, pursuant to
which the award holder shall be required to offer to the Company
any shares that the award holder wishes to sell, subject to such
terms and conditions as the Granting Authority may specify;
(j) to amend the terms of any award (including those granted under
Section 15), prospectively or retroactively; provided, however,
that no amendment shall impair the rights of the award holder
without his or her written consent; and
(k) to substitute new Stock Options for previously granted Stock
Options, or for options granted under other plans or agreements,
in each case including previously granted options having higher
option prices.
3.3 The Committee shall have the right to designate awards as
"Performance Awards." Awards so designated shall be granted and administered
in a manner designed to preserve the deductibility of the compensation
resulting from such awards in accordance with Section 162(m) of the Internal
Revenue Code (the "Code"). The grant or vesting of a Performance Award shall
be subject to the achievement of Performance Objectives established by the
Committee based on one or more of the following criteria, in each case applied
to the Company on a consolidated basis and/or to a business unit and which the
Committee may use as an absolute measure, as a measure of improvement relative
to prior performance, or as a measure of comparable performance relative to a
peer group of companies: sales, operating profits, operating profits before
interest expense and taxes, net earnings, earnings per share, return on
equity, return on assets, return on invested capital, total shareholder
return, cash flow, debt to equity ratio, market share, stock price, economic
value added, and market value added.
The Performance Objectives for a particular Performance Award relative
to a particular fiscal year shall be established by the Committee in writing
no later than 90 days after the beginning of such year. The Committee's
determination as to the achievement of Performance Objectives relating to a
Performance Award shall be made in writing. The Committee shall have
discretion to modify the Performance Objectives or vesting conditions of a
Performance Award only to the extent that the exercise of such discretion
would not cause the Performance Award to fail to qualify as "performance-
based compensation" within the meaning of Section 162(m) of the Code.
3.4 All determinations made by the Granting Authority pursuant to the
provisions of the Plan shall be final and binding on all persons, including
the Company and Plan participants.
3.5 The Committee may from time to time delegate to one or more
officers of the Company any or all of its authorities granted hereunder
except with respect to awards granted to persons subject to Section 16 of
the Securities Exchange Act of 1934 or Performance Awards. The Committee
shall specify the maximum number of shares that the officer or officers to
whom such authority is delegated may award.
SECTION 4. Stock Subject to Plan
4.1 The total number of shares of Stock which may be issued under the
Plan shall be 700,000, of which 630,000 shall be used for awards to employees
and 70,000 shall be used for awards to Outside Directors (all subject to
adjustment as provided below). Such shares may consist of authorized but
unissued shares or treasury shares. The exercise of a Stock Appreciation Right
for cash or the payment of any other award in cash shall not count against
this share limit.
4.2 To the extent a Stock Option terminates without having been
exercised, or an award terminates without the award holder having received
payment of the award, or shares awarded are forfeited, the shares subject to
such award shall again be available for distribution in connection with future
awards under the Plan. Shares of Stock equal in number to the shares
surrendered in payment of the option price, and shares of Stock which are
withheld in order to satisfy federal, state or local tax liability, shall not
count against the above limit, and shall again be available for grants under
the Plan.
4.3 No employee shall be granted Stock Options, Stock Appreciation
Rights, Restricted Stock, Deferred Stock, and/or Bonus Stock, or any
combination of the foregoing with respect to more than 300,000 shares of
Stock in any fiscal year (subject to adjustment as provided in Section 4.4).
No employee shall be granted a Tax Offset Payment in any fiscal year with
respect to more than the number of shares of Stock covered by awards granted
to such employee in such fiscal year.
4.4 In the event of any merger, reorganization, consolidation, sale
of substantially all assets, recapitalization, Stock dividend, Stock split,
spin-off, split-up, split-off, distribution of assets or other change in
corporate structure affecting the Stock, a substitution or adjustment, as may
be determined to be appropriate by the Committee in its sole discretion, shall
be made in the aggregate number of shares reserved for issuance under the
Plan, the number of shares as to which awards may be granted to any individual
in any calendar year, the number and type of shares subject to outstanding
awards and the amounts to be paid by award holders or the Company, as the case
may be, with respect to outstanding awards; provided, however, that no such
adjustment shall increase the aggregate value of any outstanding award. In the
event any change described in this Section 4.4 occurs, the Committee shall
make appropriate adjustment in the awards previously granted and to be granted
to Outside Directors under the Plan; provided that no such adjustment shall
increase the aggregate value of any outstanding award.
SECTION 5. Eligibility
5.1 Employees of the Company or a Related Company, including employees
who are officers and/or directors of the Company, are eligible to be granted
awards under the Plan, other than under Section 15. Employees shall be
selected for participation in the Plan from time to time by the Committee, in
its sole discretion, from among those eligible.
5.2 Awards under Section 15 of the Plan shall be made solely to
Outside Directors, which term shall mean any director of the Company other
than one who is an employee of the Company or a Related Company. The Board, in
its discretion, may also grant other awards under the Plan in one or more of
the forms set forth in Section 2.1 to one or more Outside Directors.
SECTION 6. Stock Options
6.1 The Stock Options awarded under the Plan may be of two types:
(i) Incentive Stock Options within the meaning of Section 422 of the Code or
any successor provision thereto (which may only be granted to employees); and
(ii) Non-Qualified Stock Options. To the extent that any Stock Option does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified
Stock Option.
6.2 Subject to the following provisions, Stock Options awarded under
the Plan shall be in such form and shall have such terms and conditions as the
Granting Authority may determine:
(a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Granting Authority, and
may be less than the fair market value of the Stock on the date of
the award of the Stock Option.
(b) Option Term. The term of each Stock Option shall be fixed by the
Granting Authority.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be
determined by the Granting Authority. The Granting Authority may
waive such exercise provisions or accelerate the exercisability of
the Stock Option at any time in whole or in part.
(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice
of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment of the purchase price. Payment
of the purchase price shall be made in such manner as the Granting
Authority may provide in the award, which may include cash
(including cash equivalents), delivery of shares of Stock already
owned by the optionee or subject to awards hereunder, "cashless
exercise", any other manner permitted by law determined by the
Granting Authority, or any combination of the foregoing. If the
Granting Authority determines that a Stock Option may be exercised
using shares of Restricted Stock, then unless the Granting
Authority provides otherwise, the shares received upon the
exercise of a Stock Option which are paid for using Restricted
Stock shall be restricted in accordance with the original terms of
the Restricted Stock award.
(e) No Stockholder Rights. An optionee shall have neither rights to
dividends or other rights of a stockholder with respect to shares
subject to a Stock Option until the optionee has given written
notice of exercise and has paid for such shares.
(f) Surrender Rights. The Granting Authority may provide that options
may be surrendered for cash upon any terms and conditions set by
the Granting Authority.
(g) Non-transferability. Unless otherwise provided by the Granting
Authority, (i) Stock Options shall not be transferable by the
optionee other than by will or by the laws of descent and
distribution, and (ii) during the optionee's lifetime, all Stock
Options shall be exercisable only by the optionee or by his or her
guardian or legal representative.
(h) Termination of Service. Following the termination of an optionee's
service with the Company or a Related Company, the Stock Option
shall be exercisable to the extent determined by the Granting
Authority. The Granting Authority may provide different
post-termination exercise provisions with respect to termination
of service for different reasons. The Granting Authority may
provide that, notwithstanding the option term fixed pursuant to
Section 6.2(b), a Stock Option which is outstanding on the date of
an optionee's death shall remain outstanding for an additional
period after the date of such death.
6.3 Notwithstanding the provisions of Section 6.2, no Incentive Stock
Option shall (i) have an option price which is less than 100% of the fair
market value of the Stock on the date of the award of the Incentive Stock
Option, (ii) be exercisable more than ten years after the date such Incentive
Stock Option is awarded, or (iii) be awarded more than ten years after the
effective date of the Plan specified in Section 19. No Incentive Stock Option
granted to an employee who owns more than 10% of the total combined voting
power of all classes of stock of the Company or any of its parent or
subsidiary corporations, as defined in Section 424 of the Code, shall (A) have
an option price which is less than 110% of the fair market value of the Stock
on the date of award of the Incentive Stock Option or (B) be exercisable more
than five years after the date such Incentive Stock Option is awarded.
SECTION 7. Stock Appreciation Rights
7.1 A Stock Appreciation Right shall entitle the holder thereof to
receive payment of an amount, in cash, shares of Stock or a combination
thereof, as determined by the Granting Authority, equal in value to the
excess of the fair market value of the number of shares of Stock as to which
the award is granted on the date of exercise over an amount specified by the
Granting Authority. Any such award shall be in such form and shall have such
terms and conditions as the Granting Authority may determine. The grant shall
specify the number of shares of Stock as to which the Stock Appreciation Right
is granted.
7.2 The Granting Authority may provide that a Stock Appreciation
Right may be exercised only within the 60-day period following occurrence of a
Change of Control (as defined in Section 17.2) (such Stock Appreciation Right
being referred to herein as a Limited Stock Appreciation Right). The Granting
Authority may also provide that in the event of a Change of Control the amount
to be paid upon exercise of a Stock Appreciation Right shall be based on the
Change of Control Price (as defined in Section 17.3).
SECTION 8. Restricted Stock
Subject to the following provisions, all awards of Restricted Stock shall
be in such form and shall have such terms and conditions as the Granting
Authority may determine:
(a) The Restricted Stock award shall specify the number of shares of
Restricted Stock to be awarded, the price, if any, to be paid by
the recipient of the Restricted Stock and the date or dates on
which, or the conditions upon the satisfaction of which, the
Restricted Stock will vest. The grant and/or the vesting of
Restricted Stock may be conditioned upon the completion of a
specified period of service with the Company or a Related Company,
upon the attainment of specified Performance Objectives or upon
such other criteria as the Granting Authority may determine.
(b) Stock certificates representing the Restricted Stock awarded under
the Plan shall be registered in the award holder's name, but the
Granting Authority may direct that such certificates be held by
the Company on behalf of the award holder. Except as may be
permitted by the Granting Authority, no share of Restricted Stock
may be sold, transferred, assigned, pledged or otherwise encumbered
by the award holder until such share has vested in accordance with
the terms of the Restricted Stock award. At the time Restricted
Stock vests, a certificate for such vested shares shall be
delivered to the award holder (or his or her designated
beneficiary in the event of death), free of all restrictions.
(c) The Granting Authority may provide that the award holder shall
have the right to vote or receive dividends on Restricted Stock.
Unless the Granting Authority provides otherwise, Stock received
as a dividend on, or in connection with a stock split of,
Restricted Stock shall be subject to the same restrictions as the
Restricted Stock.
(d) Except as may be provided by the Granting Authority, in the event
of an award holder's termination of service before all of his or
her Restricted Stock has vested, or in the event any conditions to
the vesting of Restricted Stock have not been satisfied prior to
any deadline for the satisfaction of such conditions set forth in
the award, the shares of Restricted Stock which have not vested
shall be forfeited, and the Granting Authority may provide that
(i) any purchase price paid by the award holder shall be returned
to the award holder or (ii) a cash payment equal to the Restricted
Stock's fair market value on the date of forfeiture, if lower,
shall be paid to the award holder.
(e) The Granting Authority may waive, in whole or in part, any or all
of the conditions to receipt of, or restrictions with respect to,
any or all of the award holder's Restricted Stock, other than
Performance Awards whose vesting was made subject to satisfaction
of one or more Performance Objectives (except that the Committee
may waive conditions or restrictions with respect to Performance
Awards if such waiver would not cause the Performance Award to
fail to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code).
SECTION 9. Deferred Stock Awards
Subject to the following provisions, all awards of Deferred Stock shall
be in such form and shall have such terms and conditions as the Granting
Authority may determine:
(a) The Deferred Stock award shall specify the number of shares of
Deferred Stock to be awarded and the duration of the period (the
"Deferral Period") during which, and the conditions under which,
receipt of the Stock will be deferred. The Granting Authority may
condition the grant or vesting of Deferred Stock, or receipt of
Stock or cash at the end of the Deferral Period, upon the
attainment of specified Performance Objectives or such other
criteria as the Granting Authority may determine.
(b) Except as may be provided by the Granting Authority, Deferred
Stock awards may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Deferral Period.
(c) At the expiration of the Deferral Period, the award holder (or his
or her designated beneficiary in the event of death) shall receive
(i) certificates for the number of shares of Stock equal to the
number of shares covered by the Deferred Stock award, (ii) cash
equal to the fair market value of such Stock, or (iii) a
combination of shares and cash, as the Granting Authority may
determine.
(d) Except as may be provided by the Granting Authority, in the event
of an award holder's termination of service before the Deferred
Stock has vested, his or her Deferred Stock award shall be
forfeited.
(e) The Granting Authority may waive, in whole or in part, any or all
of the conditions to receipt of, or restrictions with respect to,
Stock or cash under a Deferred Stock award, other than with
respect to Performance Awards (except that the Committee may waive
conditions or restrictions with respect to Performance Awards if
such waiver would not cause the Performance Award to fail to
qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code).
SECTION 10. Bonus Stock
The Granting Authority may award Bonus Stock subject to such terms and
conditions as the Granting Authority shall determine. The grant of Bonus Stock
may be conditioned upon the attainment of specified Performance Objectives or
upon such other criteria as the Granting Authority may determine. The Granting
Authority may waive such conditions in whole or in part other than with
respect to Performance Awards (except that the Committee may waive conditions
or restrictions with respect to Performance Awards if such waiver would not
cause the Performance Award to fail to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code). The Granting
Authority shall also have the right to eliminate or reduce the amount of Bonus
Stock otherwise payable under an award. Unless otherwise specified by the
Granting Authority, no money shall be paid by the recipient for the Bonus
Stock. Alternatively, the Granting Authority may offer the award holder the
opportunity to purchase Bonus Stock at a discount from its fair market value.
The Bonus Stock award shall be satisfied by the delivery of the designated
number of shares of Stock which are not subject to restriction.
SECTION 11. Loans
The Granting Authority may provide that the Company shall make, or
arrange for, a loan or loans with respect to the exercise of any Stock Option
awarded under the Plan, with respect to the payment of the purchase price, if
any, of any Restricted Stock awarded hereunder or with respect to any taxes
arising from an award hereunder; provided, however, that the Company shall not
loan more than the sum of (i) the excess of the purchase or exercise price of
an award over the par value of any shares of Stock awarded plus (ii) the
amount of any taxes arising from such award. The Granting Authority shall have
full authority to decide whether a loan will be made hereunder and to
determine the amount, term and provisions of any such loan, including the
interest rate to be charged, whether the loan will be with or without recourse
against the borrower, any security for the loan, the terms on which the loan
is to be repaid and the conditions, if any, under which the loan may be
forgiven.
SECTION 12. Tax Offset Payments
The Granting Authority may provide for a Tax Offset Payment by the
Company with respect to one or more awards granted under the Plan. The Tax
Offset Payment shall be in an amount specified by the Granting Authority,
which shall not exceed the amount necessary to pay the federal, state, local
and other taxes payable with respect to the applicable award and the receipt
of the Tax Offset Payment, assuming that the award holder is taxed at the
maximum tax rate applicable to such income. The Tax Offset Payment shall be
paid solely in cash.
SECTION 13. Election to Defer Awards
The Granting Authority may permit an employee or Outside Director to
elect to defer receipt of an award (other than an award pursuant to Section
15) for a specified period or until a specified event, upon such terms as
are determined by the Granting Authority.
SECTION 14. Tax Withholding
14.1 Each employee shall, no later than the date as of which the value
of an award first becomes includible in such person's gross income for
applicable tax purposes, pay to the Company, or make arrangements satisfactory
to the Committee regarding payment of, any federal, state, local or other
taxes of any kind required by law to be withheld with respect to the award.
The obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company (and, where applicable, any Related
Company), shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the employee.
14.2 To the extent permitted by the Committee, and subject to such
terms and conditions as the Committee may provide, an employee may elect to
have the withholding tax obligation, or any additional tax obligation with
respect to any awards hereunder, satisfied by (i) having the Company withhold
shares of Stock otherwise deliverable to such person with respect to the award
or (ii) delivering to the Company shares of unrestricted Stock. Alternatively,
the Committee may require that a portion of the shares of Stock otherwise
deliverable be applied to satisfy the withholding tax obligations with respect
to the award.
SECTION 15. Automatic Stock Options, Limited Stock Appreciation Rights and
Stock Grants for Outside Directors
15.1 Outside Directors shall be granted Stock Options as follows:
(a) Initial Grant. Each person who is an Outside Director on the date
of adoption of the Plan by the Board shall be granted on such date
a Stock Option to purchase the number of whole shares of Stock
obtained by dividing $5,000 by the closing sales price of the
Stock on the date of grant. Each person who becomes an Outside
Director after such date shall be granted, on the first trading
day coincident with or immediately following the effective date of
his or her election as an Outside Director, a Stock Option to
purchase the number of whole shares of Stock obtained by dividing
$5,000 by the closing sales price of the Stock on the date of
grant.
(b) Quarterly Grants. On the first trading day of each calendar
quarter beginning with October 1, 1995, each Outside Director then
serving on the Board and who has served for all or a portion of
the previous calendar quarter shall be granted a Stock Option to
purchase the number of whole shares of Stock obtained by dividing
$5,000 by the closing sales price of the Stock on the date of
grant.
(c) For purposes of this Section 15.1, the term trading day shall mean
a day on which the Stock is traded on a national securities
exchange, on the Nasdaq National Market, or in the over-the-
counter market.
(d) Notwithstanding the foregoing, if on any date on which Stock
Options are to be granted under this Section 15.1 the remaining
shares available for issuance to Outside Directors under the Plan
are insufficient to enable each Outside Director to receive a
Stock Option to purchase the applicable number of shares of Stock
set forth above, each Outside Director who is entitled to be
granted a Stock Option pursuant to this Section 15.1 on such date
shall be granted a Stock Option to purchase his or her pro rata
portion of such remaining shares.
15.2 Stock Options granted under this Section 15 shall be Non-Qualified
Stock Options, and shall have the following terms and conditions:
(a) Option Price. The option price per share of Stock purchasable under
the Stock Option shall be equal to the closing sales price of the
Stock on the date the Stock Option is granted.
(b) Term of Option. The term of the Stock Option shall be ten years
from the date of grant, subject to earlier termination in the
event of termination of service as a director, as set forth in
paragraphs (e) and (f) below.
(c) Exercisability. Subject to paragraphs (e) and (f) below, each
Stock Option shall vest with respect to 10% of the underlying
shares on the date which is three months after the date of grant,
and an additional 10% at the end of each three-month period
thereafter, provided that the optionee is a director of the
Company on such date. The minimum number of shares with respect to
which a Stock Option may be exercised is the lesser of 100 shares
or the number of shares then subject to the Stock Option.
(d) Method of Exercise. The Stock Options may be exercised in whole or
in part at any time during the option period by giving written
notice of exercise to the Company specifying the number of shares
to be purchased, accompanied by payment of the purchase price.
Payment of the purchase price shall be made in cash (including
cash equivalents) or by delivery of shares of Stock already owned
by the optionee for at least six months, or by any combination of
the foregoing. Shares delivered upon payment of the exercise price
shall be valued at the average of the high and low sale price of
the Stock on the date of exercise (or, if the Stock is not traded
on such date, at the weighted average of the high and low prices
on the nearest trading dates before and after such date).
(e) Termination of Service as Director. If an optionee's service as a
director is terminated for any reason, such director's Stock
Options may be exercised for five years following such termination
of service (but not beyond the Option term), but only to the
extent such Options were vested on the date of termination of
service.
(f) Change of Control. Notwithstanding any other provision of the
Plan, upon the occurrence of a Change of Control (as defined in
Section 17.2), all Stock Options outstanding at the time of such
Change of Control shall become immediately vested and exercisable
and shall remain exercisable for five years after the director's
termination of service (but not beyond the option term).
(g) Non-transferability. No Stock Option shall be transferable by the
optionee other than by will or by the laws of descent and
distribution. During an optionee's lifetime, all Stock Options
shall be exercisable only by the optionee or by his or her
guardian or legal representative.
(h) Shareholder Rights. The holder of a Stock Option shall, as such,
have none of the rights of a shareholder.
15.3 Limited Stock Appreciation Rights in Tandem with Options. Each
Stock Option granted to an Outside Director under this Section 15 shall be
granted in tandem with a Limited Stock Appreciation Right which may be
exercised only within the 60-day period following a Change of Control. Upon
exercise of the Limited Stock Appreciation Right, the holder shall receive,
for each share with respect to which the Limited Stock Appreciation Right is
exercised, an amount equal in value to the excess of the Change of Control
Price (as defined in Section 17.3) over the exercise price of the related
Stock Option. The Limited Stock Appreciation Right shall be payable solely in
cash, and shall be paid within 30 days of the exercise of the Limited Stock
Appreciation Right.
15.4 Quarterly Stock Grants. On the first trading day of each calendar
quarter beginning with the first calendar quarter after the date of
shareholder approval of the Plan, each Outside Director then serving on the
Board and who has served for all or a portion of the previous calendar quarter
shall be granted the number of whole shares of Stock obtained by dividing
$2,000 by the closing sales price of the Stock on the date of grant.
Notwithstanding the foregoing, if on any date on which shares are to be
granted pursuant to this Section 15.4 the remaining shares reserved for
issuance to Outside Directors under the Plan are insufficient to enable each
Outside Director to receive the applicable number of shares of Stock set forth
above, each Outside Director who is entitled to be granted shares pursuant to
this Section 15.4 shall be granted his or her pro rata portion of such
remaining shares. All shares granted under this Section 15.4 shall be fully
vested and non-forfeitable at the time of grant.
SECTION 16. Amendments and Termination
The Board may discontinue the Plan at any time and may amend it from time
to time. No amendment or discontinuation of the Plan shall adversely affect
any award previously granted without the award holder's written consent. To
the extent required in order to satisfy Rule 16b-3 under the Securities
Exchange Act of 1934 ("Rule 16b-3") (or any successor rule), the provisions
of Section 15 shall not be amended more than once every six months, other than
to comport with changes in the Code, the Employee Retirement Income Security
Act, or the rules thereunder. Amendments may be made without stockholder
approval except as required to satisfy Rule 16b-3, Section 162(m) of the Code,
or other NASDAQ, stock exchange, or regulatory requirements.
SECTION 17. Change of Control
17.1 In the event of a Change of Control, unless otherwise determined
by the Granting Authority at the time of grant or by amendment (with the award
holder's consent) of such grant:
(a) all outstanding Stock Options and all outstanding Stock
Appreciation Rights (including Limited Stock Appreciation Rights)
awarded under the Plan shall become fully exercisable and vested;
(b) the restrictions and deferral limitations applicable to any
outstanding Restricted Stock and Deferred Stock awards under the
Plan shall lapse and such shares and awards shall be deemed fully
vested; and
(c) to the extent the cash payment of any award is based on the fair
market value of Stock, such fair market value shall be the Change
of Control Price.
17.2 A "Change of Control" shall be deemed to occur on:
(a) the date that any person or group deemed a person under Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (other
than the Company and its subsidiaries as determined immediately
prior to that date) has become the beneficial owner, directly or
indirectly (with beneficial ownership determined as provided in
rule 13d-3, or any successor rule, under the Securities Exchange
Act of 1934) of securities of the Company representing 25% or more
of the total combined voting power of all classes of stock of the
Company having the right under ordinary circumstances to vote at
an election of the Board, unless such person has acquired 80% or
more of such securities directly from the Company;
(b) the date on which one-third or more of the members of the Board
shall consist of persons other than Current Directors (for these
purposes a "Current Director" shall mean any member of the Board
on July 27, 1995 and any member of the Board whose nomination or
election has been approved by a majority of the Current Directors
then on the Board);
(c) the date of approval by the stockholders of the Company of an
agreement providing for the merger or consolidation of the Company
with another corporation where (i) the stockholders of the
Company, immediately prior to the merger or consolidation, would
not beneficially own, immediately after the merger or
consolidation, shares entitling such stockholders to 50% or more
of all votes (without consideration of the rights of any class of
stock to elect directors by a separate class vote) to which all
stockholders of the corporation issuing cash or securities in the
merger or consolidation would be entitled in the election of
directors, or (ii) where the members of the Board, immediately
prior to the merger or consolidation, would not, immediately after
the merger or consolidation, constitute a majority of the board of
directors of the corporation issuing cash or securities in the
merger; or
(d) the date of approval by the stockholders of the Company of an
agreement providing for the sale or other disposition of all or
substantially all of the assets of the Company.
17.3 "Change of Control Price" means the highest price per share paid
in any transaction reported in the Nasdaq National Market or on any national
securities exchange where the Stock is traded, or paid or offered in any
transaction related to a Change of Control at any time during the 90-day
period ending with the Change of Control. Notwithstanding the foregoing
sentence, in the case of Stock Appreciation Rights granted in tandem with
Incentive Stock Options, the Change of Control Price shall be the highest
price paid on the date on which the Stock Appreciation Right is exercised.
SECTION 18. General Provisions
18.1 Each award under the Plan shall be subject to the requirement
that, if at any time the Granting Authority shall determine that (i) the
listing, registration or qualification of the Stock subject or related thereto
upon any securities exchange or under any state or federal law, or (ii) the
consent or approval of any government regulatory body or (iii) an agreement by
the recipient of an award with respect to the disposition of Stock is
necessary or desirable (in connection with any requirement or interpretation
of any federal or state securities law, rule or regulation) as a condition of,
or in connection with, the granting of such award or the issuance, purchase or
delivery of Stock thereunder, such award shall not be granted or exercised, in
whole or in part, unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Granting Authority.
18.2 Nothing set forth in this Plan shall prevent the Board from
adopting other or additional compensation arrangements. Neither the adoption
of the Plan nor any award hereunder shall confer upon any employee of the
Company, or of a Related Company, any right to continued employment, and no
award shall confer upon any Outside Director any right to continued service as
a director.
18.3 Determinations by the Granting Authority under the Plan relating
to the form, amount, and terms and conditions of awards need not be uniform,
and may be made selectively among persons who receive or are eligible to
receive awards under the Plan, whether or not such persons are similarly
situated.
18.4 No member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the Committee, shall
be personally liable for any action, determination or interpretation taken or
made with respect to the Plan, and all members of the Board or the Committee
and all officers or employees of the Company acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the Company
in respect of any such action, determination or interpretation.
SECTION 19. Effective Date of Plan
The provisions of the Plan with respect to formula grants to Outside
Directors (as currently set forth in Section 15) were adopted and shall be
effective on July 27, 1995, and the provisions of the Plan with respect to
grants to employees were adopted and shall be effective on April 10, 1996, in
each case subject to approval by the Company's stockholders at the 1996 Annual
Meeting of Stockholders. The provisions of the Plan with respect to
discretionary grants to Outside Directors were adopted on September 6, 1996
and shall become effective on the date of approval by the Company's
stockholders at the 1996 Annual Meeting of Stockholders.