Exhibit 4.5
EXCEL SWITCHING CORPORATION
1997 STOCK OPTION PLAN
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1. PURPOSE. This 1997 Stock Option Plan (the "Plan") is intended to
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provide incentives: (a) to the officers and other employees of Excel Switching
Corporation (the "Company"), any present or future parent and any present or
future subsidiaries of the Company (collectively, "Related Corporations") by
providing them with opportunities to purchase stock in the Company pursuant to
options granted hereunder which qualify as "incentive stock options" ("ISO" or
"ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code"); (b) to directors, officers, employees and consultants of the
Company and Related Corporations by providing them with opportunities to
purchase stock in the Company pursuant to options granted hereunder which do not
qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"); (c) to
directors, officers, employees and consultants of the Company and Related
Corporations by providing them with awards of stock in the Company ("Awards");
and (d) to directors, officers, employees and consultants of the Company and
Related Corporations by providing them with opportunities to make direct
purchases of stock in the Company ("Purchases"). Both ISOs and Non-Qualified
Options are referred to hereafter individually as an "Option" and collectively
as "Options". Options, Awards and authorizations to make Purchases are referred
to hereafter collectively as "Stock Rights". As used herein, the terms "parent"
and "subsidiary" mean "parent corporation" and "subsidiary corporation",
respectively, as those terms are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
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A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered by
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the Board of Directors of the Company (the "Board") or, subject to paragraph
2(d) (relating to compliance with Section 162(m) of the Code), by a committee
appointed by the Board (the "Committee"). Hereinafter, all references in
this Plan to the "Committee" shall mean the Board if no Committee has been
appointed. Subject to ratification of the grant or authorization of each
Stock Right by the Board (if so required by applicable state law), and
subject to the terms of the Plan, the Committee shall have the authority to
(i) determine the employees of the Company and Related Corporations (from
among the class of employees eligible under paragraph 3 to receive ISOs) to
whom ISOs may be granted, and to determine (from among the class of
individuals and entities eligible under paragraph 3 to receive Non-Qualified
Options and Awards and to make Purchases) to whom Non-Qualified Options,
Awards and authorizations to make Purchases may be granted; (ii) determine
the time or times at which Options or Awards may be granted or Purchases
made; (iii) determine the exercise price per share subject to each Option,
which price shall not be less than the minimum price specified in paragraph
6, and the purchase price of shares subject to each Purchase; (iv) determine
whether each Option granted shall be an ISO or a Non-Qualified Option; (v)
determine (subject to paragraph 7) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to Options, Awards and Purchases and the nature of such restrictions,
if any; (viii) interpret the Plan and prescribe and rescind rules and
regulations relating to it; and (ix) authorize executive officers of the
Company to (a) execute option agreements with individuals hired as employees
of the Company during the periods between Comittee meetings, not including
individuals hired as executive officers, as of the date of hire of each
individual employee, and (b) determine the number of Options to be issued to
such employee, subject to the specific limitations set forth by the Committee
in its grant of authority to such executive officer. If the Committee
determines to issue a Non-Qualified Option, it shall take whatever actions it
deems necessary, under Section 422 of the Code and the regulations
promulgated thereunder, to ensure that such Option is not treated as an ISO.
The interpretation and construction by the Committee of any provisions of the
Plan or of any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such
rules and regulations for carrying out the Plan as it may deem best. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Stock Right
granted under it.
B. COMMITTEE ACTION. The Committee may select one of its members as its
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chairman, and shall hold meetings at such time and places as it may
determine. Acts by a majority of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be
the valid acts of the Committee. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members of the
Committee and thereafter directly administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be granted to
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members of the Board. All grants of Stock Rights to members of the Board
shall in all other respects be made in accordance with the provisions of this
Plan applicable to other eligible persons. Members of the Board who are
either (i) eligible for Stock Rights pursuant to the Plan or (ii) have been
granted Stock Rights may vote on any matters affecting the administration of
the Plan or the grant of any Stock Rights pursuant to the Plan, except that
no such member shall act upon the granting to himself of Stock Rights, but
any such member may be counted in determining the existence of a quorum at
any meeting of the Board during which action is taken with respect to the
granting to him of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its discretion, may take
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such action as may be necessary to ensure that Stock Rights granted under the
Plan qualify as "qualified performance-based compensation" within the meaning
of Section 162(m) of the Code and applicable regulations promulgated
thereunder ("Performance-Based Compensation"). Such action may include, in
the Board's discretion, some or all of the following (i) if the Board
determines that Stock Rights granted under the Plan generally shall
constitute Performance-Based Compensation, by a committee consisting solely
of two or more "outside directors (as defined in applicable regulations
promulgated under Section 162(m) of the Code), (ii) if any Non-Qualified
Options with an exercise price less than the fair market value per share of
Common Stock are granted under the Plan and the Board determines that such
Options should constitute Performance-Based Compensation, such options shall
be made exercisable only upon the attainment of a pre-established, objective
performance goal established by the Committee, and such grant shall be
submitted for, and shall be contingent upon shareholder approval and (iii)
Stock Rights granted under the Plan may be subject to such other terms and
conditions as are necessary for compensation recognized in connection with
the exercise or disposition of such Stock Right or the disposition of Common
Stock acquired pursuant to such Stock Right, to constitute Performance-Based
Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
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of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any director (whether or not
an employee), officer, employee or consultant of the Company or any Related
Corporation. Notwithstanding the foregoing, effective only on and after the
date of the Company's initial public offering, non-employee directors shall no
longer be eligible to participate in this Plan. The Committee may take into
consideration a recipient's individual circumstances in determining whether to
grant an ISO, a Non-Qualified Option or an authorization to make a Purchase.
Granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify him from, participation in any
other grant of Stock Rights.
4. STOCK. The stock subject to Options, Awards and Purchases shall be
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authorized but unissued shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 3,000,000 shares, subject to adjustment as provided in
paragraph 13. If any Option granted under the Plan shall expire or terminate
for any reason without having been exercised in full or shall cease for any
reason to be exercisable in whole or in part, the shares subject to such Options
shall again be available for grants of Stock Rights under the Plan.
The following provision shall be effective only on and after the date of
the initial public offering of shares of Common Stock of the Company pursuant to
the Securities Act of 1933, as amended. If any Option granted under the Plan
shall expire or terminate for any reason without having been exercised in full
or shall cease for any reason to be exercisable in whole or in part or shall be
repurchased by the Company, the shares subject to such Option shall be included
in the determination of the aggregate number of shares of Common Stock deemed to
have been granted to such employee under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
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at any time on or after September 16, 1997 and prior to September 15, 2007. The
date of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
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A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS, AND PURCHASES. Subject to
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paragraph 2(D) (relating to compliance with Section 162(m) of the Code), the
exercise price per share specified in the agreement relating to each Non-
Qualified Option granted and the purchase price per share of stock granted in
any Award or authorized as a Purchase under the Plan shall in no event be
less than the minimum legal consideration required therefor under the laws of
any jurisdiction in which the Company or its successors in interest may be
organized.
B. PRICE FOR ISOS. The exercise price per share specified in the
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agreement relating to each ISO granted under the Plan shall not be less than
the fair market value per share of Common Stock on the date of such grant.
In the case of an ISO to be granted to an employee owning stock possessing
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or any Related Corporation, the price per share
specified in the agreement relating to such ISO shall not be less than one
hundred ten percent (110%) of the fair market value per share of Common Stock
on the date of grant. For purposes of determining stock ownership under this
paragraph, the rules of Section 424(d) of the Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee may
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be granted options treated as ISOs only to the extent that, in the aggregate
under this Plan and all incentive stock option plans of the Company and any
Related Corporation, such ISOs do not become exercisable for the first time
by such employee during any calendar year in a manner which would entitle the
employee to purchase more than $100,000 in fair market value (determined at
the time the ISOs were granted) of Common Stock in that year. Any options
granted to an employee in excess of such amount will be granted as Non-
Qualified Options, and the Company shall issue separate certificates to the
optionee with respect to options that are Non-Qualified Options and Options
that are ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
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granted under the Plan, the Company's Common Stock is publicly traded, "fair
market value" shall be determined as of the date of grant or, if the prices
or quotes discussed in this sentence are unavailable for such date, the last
business day for which such prices or quotes are available prior to the date
such Option is granted and shall mean (i) the average (on that date) of the
high and low prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is then
traded on a national securities exchange; or (ii) the last reported sale
price (on that date) of the Common Stock on the Nasdaq National Market, if
the Common Stock is not then traded on a national securities exchange; or
(iii) the average of the closing bid and asked prices last quoted (on that
date) by an established quotation service for over-the-counter securities, if
the Common Stock is not reported on the Nasdaq National Market. However, if
the Common Stock is not publicly traded at the time an Option is granted
under the Plan, "fair market value" shall be deemed to be the fair value of
the Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
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paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years and one day from the date of grant in the case of Non-Qualified Options,
(ii) ten years from the date of grant in the case of ISOs generally, and (iii)
five years from the date of grant in the case of ISOs granted to an employee
owning stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Related Corporation, as
determined under paragraph 6(B). Subject to earlier termination as provided in
paragraphs 9 and 10, the term of each ISO shall be the term set forth in the
original instrument granting such ISO, except with respect to any part of such
ISO that is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
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12, 21 and 22 each Option granted under the Plan shall be exercisable as
follows:
A. FULL VESTING OR PARTIAL VESTING. The Option shall either be fully
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exercisable on the date of grant or shall become exercisable thereafter in
such installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes exercisable
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it shall remain exercisable until expiration or termination of the Option,
unless otherwise specified by the Committee or as otherwise provided in this
Plan.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at any
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time or from time to time, in whole or in part, for up to the total number of
shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. Subject to any accounting considerations with
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respect to "Accounting for Business Combinations" pursuant to Accounting
Principles Board Opinion No. 16, The Committee shall have the right to
accelerate the date of exercise of any installment of any Option; provided
that the Committee shall not accelerate the exercise date of any installment
of any Option granted to any employee as an ISO (and not previously converted
into a Non-Qualified Option pursuant to paragraph 16) if such acceleration
would violate the annual vesting limitation contained in Section 422(d) of
the Code, as described in paragraph 6(C).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
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Agreement relating to such ISO, if an ISO Optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
as defined in paragraph 10, no further installments of his ISOs shall become
exercisable, and his ISOs shall terminate after the passage of ninety (90) days
from the date of termination of his employment, but in no event later than on
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed ninety (90) days or, if longer, any period
during which such Optionee's right to reemployment is guaranteed by statute or
by contract. A bona fide leave of absence with the written approval of the
Committee shall not be considered an interruption of employment under the Plan,
provided that such written approval contractually obligates the Company or any
Related Corporation to continue the employment of the Optionee after the
approved period of absence. ISOs granted under the Plan shall not be affected
by any change of employment within or among the Company and Related
Corporations, so long as the Optionee continues to be an employee of the Company
or any Related Corporation. Nothing in the Plan shall be deemed to give any
grantee of any Stock Right the right to be retained in employment or other
service by the Company or any Related Corporation for any period of time.
10. DEATH; DISABILITY.
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A. DEATH. If an ISO Optionee ceases to be employed by the Company and all
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Related Corporations by reason of his or her death, any ISO owned by such
Optionee may be exercised, to the extent of the number of shares with respect
to which he or she could have exercised it on the date of his or her death,
by the estate, personal representative or beneficiary who has acquired the
ISO by will or by the laws of descent and distribution, at any time prior to
the earlier of (i) the specified expiration date of the ISO or (ii) 180 days
from the date of the Optionee's death.
B. DISABILITY. If an ISO Optionee ceases to be employed by the Company
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and all Related Corporations by reason of his or her disability, such
Optionee shall have the right to exercise any ISO held by him or her on the
date of termination of employment, to the extent of the number of shares with
respect to which he or she could have exercised it on that date, until the
earlier of (i) the specified expiration date of the ISO or (ii) 180 days from
the date of the termination of the Optionee's employment. For the purposes
of the Plan, the term "disability" shall mean "permanent and total
disability" as defined in Section 22(e)(3) of the Code or successor statute.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
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Optionee except by will or by the laws of descent and distribution or in case of
Non-Qualified Options only, pursuant to a valid domestic relations order, and
during the lifetime of the Optionee each Option shall be exercisable only by him
or her.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
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instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Committee may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other termination
and cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
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Optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the Optionee and the Company relating to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall
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be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable
upon the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase
price per share to reflect such subdivision, combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated with
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or acquired by another entity in a merger or other reorganization in which
the holders of the outstanding voting stock of the Company immediately
preceding the consummation of such event, shall, immediately following such
event, hold as a group, less than a majority of the voting securities of the
surviving or successor entity, or in the event of a sale of all or
substantially all of the Company's assets or otherwise (an "Acquisition"),
the Committee or the board of directors of any entity assuming the
obligations of the Company hereunder (the "Successor Board"), shall, as to
outstanding Options, take one or more of the following actions: (i) make
appropriate provision for the continuation of such Options by substituting on
an equitable basis for the shares then subject to such Options the
consideration payable with respect to the outstanding shares of Common Stock
in connection with the Acquisition; or (ii) make appropriate provision for
the continuation of such Options by substituting on an equitable basis for
the shares then subject to such Options any equity securities of the
successor corporation or such other securities as the Successor Board deems
appropriate, the fair market value of which shall not materially exceed the
fair market value of the shares of Common Stock subject to such Options
immediately preceding the Acquisition; or (iii) upon written notice to the
Optionees, provide that all Options must be exercised, to the extent then
exercisable, within a specified number of days of the date of such notice, at
the end of which period the Options shall terminate; or (iv) terminate all
Options in exchange for a cash payment equal to the excess of the fair market
value of the shares subject to such Options (to the extent then
exercisable) over the exercise price thereof; or (v) accelerate the date of
exercise of such Options or of any installment of any such Options; or (vi)
terminate all Options in exchange for the right to participate in any stock
option or other employee benefit plan of any successor corporation. The
foregoing actions are subject in all instances to the approval of the Board
of Directors and any accounting considerations for any acquisition which is
treated as a "pooling of interests" transaction pursuant to the Accounting
Principles Board (APB) Opinion No. 16, if any discretionary action by the
Board of Directors would otherwise violate the accounting rules for treatment
of the Acquisition as a "pooling of interests" under APB No. 16.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization
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or reorganization of the Company (other than a transaction described in
subparagraph B above) pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of
Common Stock, an Optionee upon exercising an Option shall be entitled to
receive for the purchase price paid upon such exercise the securities he or
she would have received if he or she had exercised his or her Option prior to
such recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any adjustments
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made pursuant to subparagraphs A, B or C with respect to ISOs shall be made
only after the Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424 of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, or would cause adverse tax consequences to the
holders, it may refrain from making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution
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or liquidation of the Company, each Option will terminate immediately prior
to the consummation of such proposed action or at such other time and subject
to such other conditions as shall be determined by the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
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issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the Plan
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and the Optionee shall receive from the Company cash in lieu of such
fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the foregoing events
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described in subparagraphs A, B or C above, the class and aggregate number of
shares set forth in paragraph 4 hereof that are subject to Stock Rights which
previously have been or subsequently may be granted under the Plan shall also
be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.
If any person or entity owning restricted Common Stock obtained by exercise of a
Stock Right made hereunder receives shares or securities or cash in connection
with a corporate transaction described in subparagraphs A, B or C above as a
result of owning such restricted
Common Stock, such shares or securities or cash shall be subject to all of the
conditions and restrictions applicable to the restricted Common Stock with
respect to which such shares or securities or cash were issued, unless otherwise
determined by the Committee or the Successor Board.
14. MEANS OF EXERCISING STOCK RIGHTS. A Stock Right (or any part or
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installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the Committee, through delivery of shares of Common Stock having a
fair market value equal as of the date of the exercise to the cash exercise
price of the Stock Right, or (c) at the discretion of the Committee, by delivery
of the grantee's personal recourse note bearing interest payable not less than
annually at no less than 100% of the lowest applicable Federal rate, as defined
in Section 1274(d) of the Code, or (d) at the discretion of the Committee and
consistent with applicable law, through the delivery of an assignment to the
Company of a sufficient amount of the proceeds from the sale of the Common Stock
acquired upon exercise of the Option and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall be at the
participant's direction at the time of exercise, or (e) at the discretion of the
Committee, by any combination of (a), (b), (c) and (d) above. If the Committee
exercises its discretion to permit payment of the exercise price of an ISO by
means of the methods set forth in clauses (b), (c), (d) or (e) of the preceding
sentence, such discretion shall be exercised in writing at the time of the grant
of the ISO in question. The holder of a Stock Right shall not have the rights
of a shareholder with respect to the shares covered by his Stock Right until the
date of issuance of a stock certificate to him for such shares. Except as
expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board as of
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September 16, 1997, subject (with respect to the validation of ISOs granted
under the Plan) to approval of the Plan by the stockholders of the Company at
the next Meeting of Stockholders or, in lieu thereof, by unanimous written
consent. If the approval of stockholders is not obtained by September 16, 1998,
any grants of Options under the Plan made prior to that date will be rescinded.
The Plan shall expire at the end of the day on September 15, 2007 (except as to
Options outstanding on that date). Subject to the provisions of paragraph 5
above, Stock Rights may be granted under the Plan prior to the date of
stockholder approval of the Plan. The Board may terminate or amend the Plan in
any respect at any time, except that, without the approval of the stockholders
obtained within 12 months before or after the Board adopts a resolution
authorizing any of the following actions: (a) the total number of shares that
may be issued under the Plan may not be increased (except by adjustment pursuant
to paragraph 13); (b) the benefits accruing to participants under the Plan may
not be materially increased; (c) the requirements as to eligibility for
participation in the Plan may not be materially modified; (d) the provisions of
paragraph 3 regarding eligibility for grants of ISOs may not be modified; (e)
the provisions of paragraph 6(B) regarding the exercise price at which shares
may be offered pursuant to ISOs may not be modified (except by adjustment
pursuant to paragraph 13); (f) the expiration date of the Plan may not be
extended; and (g) the Board may not take any action which would cause the Plan
to fail to comply with Rule 16b-3. Except as otherwise provided in this
paragraph 15, in no event may action of the Board or stockholders alter or
impair the rights of a grantee, without his consent, under any Stock Right
previously granted to him.
16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS.
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Subject to paragraph 13(D), without the prior written consent of the holder of
an ISO, the Committee shall not alter the terms of such ISO (including the means
of exercising such ISO) if such alteration would constitute a
modification (within the meaning of Section 424(h)(3) of the Code). The
Committee, at the written request or with the written consent of any Optionee,
may in its discretion take such actions as may be necessary to convert such
Optionee's ISOs (or any installments or portions of installments thereof) that
have not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
Optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At the time of such conversion, the Committee (with
the consent of the Optionee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Committee in its discretion may
determine, provided that such conditions shall not be inconsistent with this
Plan. Nothing in the Plan shall be deemed to give any Optionee the right to have
such Optionee's ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Committee takes appropriate action.
Upon the taking of such action, the Company shall issue separate certificates to
the Optionee with respect to Options that are Non-Qualified Options and Options
that are ISOs.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
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sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
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shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a Non-
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Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 20), the making of a distribution or other
payment with respect to such stock or securities, or the vesting or transfer of
restricted Common Stock acquired on the exercise of a Stock Right hereunder, the
Company may withhold income and/or employment taxes in respect of amounts that
constitute compensation includible in gross income, or otherwise treated by law
as wages for withholding for income or employment tax purposes. The Committee
in its discretion may condition (i) the exercise of an Option, (ii) the grant of
an Award, (iii) the making of a Purchase of Common Stock for less than its fair
market value, or (iv) the vesting or transferability of restricted Common Stock
acquired by exercising a Stock Right, on the grantee's making satisfactory
arrangement for such withholding. Such arrangement may include payment by the
grantee in cash or by check of the amount of the withholding taxes or, at the
discretion of the Company, by the grantee's delivery of previously held shares
of Common Stock or the withholding from the shares of Common Stock otherwise
deliverable upon exercise of Option shares having an aggregate fair market value
equal to the amount of such withholding taxes. The use of any method of payment
other than by cash or check in some cases may require or cause additional
withholding obligations.
20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
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granted under the Plan, each ISO Optionee thereby agrees to notify the Company
in writing immediately after such Optionee makes a Disqualifying Disposition of
any Common Stock acquired pursuant to the exercise of an ISO. Generally, a
Disqualifying Disposition is any disposition (including any sale) of such Common
Stock occurring on or before the later of the date (a) two years after the date
the employee was granted the ISO, or (b) one year after the date the employee
acquired Common Stock by exercising the ISO.
21. NO EXERCISE OF OPTION IF ENGAGEMENT OR EMPLOYMENT TERMINATED FOR
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CAUSE. If the employment of the Optionee is terminated for "Cause," this option
shall terminate on the date of such termination and the Option shall thereupon
not be exercisable to any extent whatsoever. "Cause" is conduct, as determined
by the Board of Directors, involving one or more of the following: (i) gross
misconduct by the employee which is materially injurious to the Company; or (ii)
the commission of an act of embezzlement, fraud or deliberate disregard of the
rules or policies of the Company which results in material economic loss, damage
or injury to the Company; or (iii) the unauthorized disclosure of any trade
secret or confidential information of the Company or any third party who has a
business relationship with the Company or the violation of any noncompetition
covenant or assignment of inventions obligation with the Company; or (iv) the
commission of an act which induces any customer or prospective customer of the
Company to break a contract with the Company or to decline to do business with
the Company; or (v) the conviction of the employee of a felony involving any
financial impropriety or which would materially interfere with the employee's
ability to perform his or her services or otherwise be injurious to the Company;
or (vi) the failure of the employee to perform in a material respect his or her
employment obligations without proper cause. In making such determination, the
Board shall act fairly and in utmost good faith. For the purposes of this
Section 21, termination of employment shall be deemed to occur when the employee
receives notice that his employment is terminated.
22. ACCELERATION AND VESTING OF OPTION FOR BUSINESS COMBINATIONS. Upon
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any merger, consolidation, sale of all (or substantially all) of the assets of
the Company, or other business combination involving the sale or transfer of all
(or substantially all) of the capital stock or assets of the Company in which
the Company is not the surviving entity, or, if it is the surviving entity, does
not survive as an operating going concern in substantially the same line of
business (an "Acquisition"), then the remaining unvested portions of any Option
outstanding to any Optionee shall, immediately prior to the consummation of any
of the foregoing events, become vested and immediately exercisable by the
Optionee according to the following formula and dependent upon the length of the
Optionee's continuous months of employment or engagement by the Company prior to
the consummation of the Acquisition, provided, however, that this Section shall
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not apply to any reincorporation of the Company in a different State pursuant to
a migratory merger:
For an Optionee:
(i) If the Optionee has been employed by the Company for 36 months or
more, then the remaining unvested portion of any Option held by such Optionee
shall become fully vested and exercisable.
(ii) If the Optionee has been employed by the Company for more than 30 but
less than 36 months, then 80% of the remaining unvested portion of any Option
held by such Optionee shall become fully vested and exercisable.
(iii) If the Optionee has been employed by the Company for more than 24
but less than 30 months, then 50% of the remaining unvested portion of any
Option held by such Optionee shall become fully vested and exercisable.
(iv) If the Optionee has been employed by the Company for more than 18 but
less than 24 months, then 40% of the remaining unvested portion of any Option
held by such Optionee shall become fully vested and exercisable.
(v) If the Optionee has been employed by the Company for more than 12 but
less than 18 months, then 30% of the remaining unvested portion of any Option
held by such Optionee shall become fully vested and exercisable.
(vi) If the Optionee has been employed by the Company for more than 6 but
less than 12 months, then 20% of the remaining unvested portion of any Option
held by such Optionee shall become fully vested and exercisable.
(vii) If the Optionee has been employed by the Company for more than 1 but
less than 6 months, then 10% of the remaining unvested portion of any Option
held by such Optionee shall become fully vested and exercisable.
23. GOVERNING LAW; CONSTRUCTION. The validity and construction of the
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Plan and the instruments evidencing Stock Rights shall be governed by the laws
of the Commonwealth of Massachusetts or the laws of any jurisdiction in which
the Company or its successors in interest may be organized. In construing this
Plan, the singular shall include the plural and the masculine gender shall
include the feminine and neuter, unless the context otherwise requires.