HOOPER HOLMES, INC.
1999 STOCK OPTION PLAN
TABLE OF CONTENTS
Page
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ARTICLE 1. DEFINITIONS................................................ 1
1.1 Beneficiary......................................... 1
1.2 Board............................................... 1
1.3 Code................................................ 1
1.4 Committee........................................... 1
1.5 Common Stock........................................ 1
1.6 Company............................................. 1
1.7 Effective Date...................................... 1
1.8 Employee............................................ 1
1.9 Employment Period................................... 1
1.10 Exchange Act........................................ 1
1.11 Fair Market Value................................... 2
1.12 Grantee............................................. 2
1.13 Incentive Stock Option.............................. 2
1.14 Insider Participant................................. 2
1.15 Noninsider Participant.............................. 2
1.16 Nonqualified Option................................. 3
1.17 Option.............................................. 3
1.18 Option Agreement.................................... 3
1.19 Optionee............................................ 3
1.20 Option Price........................................ 3
1.21 Plan................................................ 3
1.22 Reload Option....................................... 3
1.23 Retirement.......................................... 3
1.24 Rule 16b-3.......................................... 3
1.25 Stock Appreciation Right............................ 4
1.26 Stock Appreciation Right Agreement.................. 4
1.27 Subsidiary.......................................... 4
1.28 Total Disability.................................... 4
ARTICLE 2 PURPOSE.................................................... 4
2.1 Purpose............................................. 4
2.2 Effective Date...................................... 5
ARTICLE 3 ELIGIBILITY................................................ 5
3.1 Persons Eligible.................................... 5
3.2 Notice.............................................. 5
3.3 Grant Contingent Upon Written Agreement............. 6
ARTICLE 4 COMMON STOCK COVERED BY THE PLAN........................... 6
4.1 Maximum Number of Shares............................ 6
4.2 Source of Shares.................................... 6
4.3 Adjustment to Number of Shares...................... 6
ARTICLE 5 TERMS AND CONDITIONS OF OPTIONS............................ 6
5.1 Option Price........................................ 7
5.2 Date of Option Grant................................ 7
5.3 Exercise of Option.................................. 7
5.4 Sales of Stock Underlying Options................... 7
5.5 Option Period....................................... 9
5.6 Accelerated Vesting in the Event of Death,
Disability, Retirement, Change in Control or Other
Transactions........................................ 9
5.7 Exercise in the Event of Death, Disability,
Retirement, or Termination of Employment............ 11
5.8 Payment of Option Price............................. 12
5.9 Reload Options...................................... 12
5.10 Additional Terms Applicable to Incentive Stock
Options............................................. 13
ARTICLE 6 STOCK APPRECIATION RIGHTS.................................. 16
6.1 General............................................. 16
6.2 Exercise and Payments............................... 17
6.3 Restrictions........................................ 18
ARTICLE 7 LOANS...................................................... 20
7.1 Loans............................................... 20
7.2 Promissory Note..................................... 20
7.3 Pledge.............................................. 21
ARTICLE 8 DESIGNATION................................................ 21
8.1 Designation and Change of Designation............... 21
8.2 Absence Of Valid Designation........................ 21
ARTICLE 9 ADMINISTRATION OF THE PLAN................................. 22
9.1 Committee........................................... 22
9.2 Powers of Committee................................. 22
9.3 Action by Committee................................. 22
9.4 Grant of Option and/or Stock Appreciation Right..... 23
9.5 Indemnification..................................... 23
9.6 Reliance............................................ 24
9.7 Agents.............................................. 24
ARTICLE 10 AMENDMENT AND TERMINATION..................................
10.1 Amendment........................................... 25
10.2 Termination......................................... 25
10.3 Periodic Review of Plan............................ 25
ARTICLE 11 MISCELLANEOUS PROVISIONS................................... 26
11.1 No Rights as Shareholder............................ 26
11.2 No Rights to Continued Employment................... 26
11.3 Compliance with Other Laws and Regulations.......... 26
11.4 Payments to Person Other Than Employee.............. 27
11.5 Use of Proceeds..................................... 27
11.6 No Right to Options and Stock Appreciation Rights... 27
11.7 Withholding......................................... 27
11.8 Nontransferability.................................. 28
11.9 Investment Representation........................... 28
11.10 No Right, Title, or Interest in Company's Assets.... 29
11.11 Headings............................................ 29
11.12 Governing Law....................................... 29
11.13 Pronouns............................................ 29
ARTICLE I
DEFINITIONS
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1.1 Beneficiary shall mean the individual or entity designated in
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accordance with Article 8 of the Plan to receive any amounts payable under the
Plan upon the death of an Optionee or Grantee.
1.2 Board shall mean the Board of Directors of the Company.
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1.3 Code shall mean the Internal Revenue Code of 1986, as amended.
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1.4 Committee shall mean those individuals who are appointed by the
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Board to administer the Plan in accordance with the provisions of Article 9 of
the Plan, or if no Committee is appointed, then the Board shall constitute the
Committee.
1.5 Common Stock shall mean the common stock of the Company.
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1.6 Company shall mean Hooper Holmes, Inc., its Subsidiaries and their
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successors and assigns.
1.7 Effective Date shall have the meaning ascribed to such term in Section
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2.2 of the Plan.
1.8 Employee shall mean a person employed by the Company.
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1.9 Employment Period shall have the meaning ascribed to such term in
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Section 3.3 of the Plan.
1.10 Exchange Act shall mean the Securities Exchange Act of 1934, as
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amended.
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1.11 Fair Market Value shall mean, as applied to a specific date, the
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closing price for the Common Stock on such date as reported on the principal
stock exchange upon which the Company's Common Stock is listed, or if the Common
Stock is not listed on any stock exchange, then the closing price on the
National Association of Securities Dealers Automated Quotation Service
("NASDAQ"); or if the Common Stock is not listed on NASDAQ, then the mean
between the most recent bid and asked prices on any other recognized trading
market or if no common Stock was traded on the relevant date, on the next
preceding day on which Common Stock was so traded. If no such market exists,
then the Committee shall determine in good faith the fair market value of the
Common Stock.
1.12 Grantee shall mean an Employee to whom a Stock Appreciation Right has
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been granted under this Plan.
1.13 Incentive Stock Option shall mean any Option granted under this Plan
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which the Committee intends (at the time it is granted) to be an Incentive Stock
Option within the meaning of Section 422 of the Code.
1.14 Insider Participant shall mean any Employee who is selected by the
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Committee to receive options and/or Stock Appreciation Rights under the Plan and
who is subject to the requirements of Section 16(a) of the Exchange Act, and the
rules and regulations thereunder.
1.15 Noninsider Participant shall mean any person who is selected by the
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Committee to receive options and/or Stock Appreciation Rights under the Plan who
is not an Insider Participant.
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1.16 Nonqualified Option shall mean any Option granted under this Plan
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which is not an Incentive Stock Option.
1.17 Option shall mean the right of an Optionee selected pursuant to
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Section 9.4 of the Plan, to purchase Common Stock in accordance with the
provisions of this Plan.
1.18 Option Agreement shall mean the agreement evidencing the grant of an
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Option entered into between the Optionee and the Company pursuant to Section 3.3
of the Plan.
1.19 Optionee shall mean any Employee who satisfies the eligibility
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requirements of Article 3 of the Plan and who is selected by the Committee to
receive an Option under the Plan.
1.20 Option Price shall mean the price per share of Common Stock to be
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paid by an Optionee upon exercise of an Option, as stated in the Option
Agreement.
1.21 Plan shall mean the Hooper Holmes, Inc. 1999 Stock Option Plan and any
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amendments thereto.
1.22 Reload Option shall have the meaning ascribed to such term in Section
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5.9.
1.23 Retirement shall mean a termination of employment, for reasons other
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than Total Disability or death, upon or following an Optionee's or Grantee's
attainment of age fifty-five (55) and completion of at least ten (10) years of
service with the Company, or at such earlier time as the Committee may
determine.
1.24 Rule 16b-3 shall mean Rule 16b-3 of the General Rules and Regulations
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under the Exchange Act or any successor act then in effect.
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1.25 Stock Appreciation Right shall mean a right to receive a payment from
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the Company, granted in the discretion of the Committee in accordance with
Article 6.
1.26 Stock Appreciation Right Agreement shall mean the agreement evidencing
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the grant of a Stock Appreciation Right entered into between the Grantee and the
Company pursuant to Section 3.3 of the Plan.
1.27 Subsidiary shall mean any subsidiary of the Company which meets the
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definition of a "subsidiary corporation" set forth in Section 424(f) of the
Code, at the time of granting of the Option or Stock Appreciation Right in
question.
1.28 Total Disability shall mean the complete and permanent inability by
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reason of illness or accident to perform the duties of the occupation at which
an Optionee or Grantee was employed by the Company when such disability
commenced. The Committee in its sole discretion shall determine based on the
aforementioned standard whether an Optionee or Grantee is totally disabled. All
determinations as to the date and extent of disability of any Optionee or
Grantee shall be made by the Committee, upon the basis of such evidence,
including independent medical reports and data, as the Committee deems necessary
and desirable, and all such determinations of the Committee shall be final.
Notwithstanding the foregoing, for purposes of Sections 5.7 (a) and 5.10 (d) ,
the impairment shall also meet the definition of permanent and total disability
set forth in Section 22(e) of the Code.
ARTICLE II
PURPOSE
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2.1 Purpose. The purpose of this Plan is to reward key managers and
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Employees for exerting their best efforts on behalf of the Company, to induce
such Employees to remain in the
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employ of the Company, to attract talented individuals to join the Company, to
motivate such Employees to continue to exert their best efforts on behalf of the
Company, and to encourage such Employees to secure or increase on reasonable
terms their stock ownership in the Company through the grant of Options and
Stock Appreciation Rights. The Board believes the Plan will promote the
continuity of management and provide increased incentive and personal interest
in the welfare of the Company by those who are primarily responsible for shaping
and carrying out the long-range plans of the Company and securing its continued
growth and financial success.
2.2 Effective Date. The Plan shall become effective on January 26, 1999,
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provided that, with respect to Incentive Stock Options, the Plan is approved by
the stockholders of the Company within twelve (12) months after the date of such
adoption. No Option or Stock Appreciation Right shall be granted after the
expiration of ten (10) years from the date the Plan was adopted by the Board.
ARTICLE III
ELIGIBILITY
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3.1 Persons Eligible. An Option and/or Stock Appreciation Right may be
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granted under the Plan by the Committee only to a present or future key manager
or Employee of the Company. The Committee shall determine, in its sole
discretion, who is a key manager or Employee and its decision shall be final,
binding and conclusive.
3.2 Notice. Within thirty (30) days from the date of the decision by the
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Committee to grant an Option and/or Stock Appreciation Right to an Employee
pursuant to Section 9.4 of the Plan, the Committee shall provide such individual
with written notice of such decision.
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3.3 Grant Contingent Upon Written Agreement. An Employee shall be granted
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the Option and/or Stock Appreciation Right only if he enters into an Option or
Stock Appreciation Right Agreement with the Company within thirty (30) days
after the date upon which he receives the notice required by Section 3.2 of the
Plan. The Option or Stock Appreciation Right Agreement shall provide that he
will remain in the employment of the Company for a period of at least twenty-
four (24) months from the date on which the Option and/or Stock Appreciation
Right is granted under the Plan (the "Employment Period"), or until his earlier
Retirement, and at such compensation as the Company shall reasonably determine
from time to time. Unless the Option or Stock Appreciation Right Agreement
provides otherwise, the Option and/or Stock Appreciation Right shall not be
exercisable prior to the completion of the Employment Period. An Option
Agreement shall specify whether the Option is a Nonqualified Option or an
Incentive Stock Option and shall also contain the terms and conditions set forth
in Article 5 of the Plan. A Stock Appreciation Right Agreement shall specify
whether the Stock Appreciation Right is related to the exercise of an option
(such that the exercise of one automatically cancels the right to exercise all
or a portion of the other) or is granted independently of any Option (such that
the exercise of one does not cancel the right to exercise all or a portion of
the other) and shall also contain the terms and conditions set forth in Article
6 of the Plan.
ARTICLE IV
COMMON STOCK COVERED BY THE PLAN
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4.1 Maximum Number of Shares. The maximum number of shares of Common
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Stock which may be issued pursuant to the exercise of Options and Stock
Appreciation Rights granted under this Plan is one million (1,000,000), subject
to the adjustments provided in Section 4.3 of the Plan.
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4.2 Source of Shares. Shares of authorized but previously unissued Common
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Stock, Common Stock held in the treasury of the Company, or Common Stock
purchased on the open market by the Company (at such time or times and in such
manner as the Company may determine) will be reserved for issue upon the
exercise of the Options and Stock Appreciation Rights granted under this Plan
subject to Section 4.3 of the Plan. If any Option or Stock Appreciation Right
granted under the Plan shall terminate or expire, without having been exercised
in full, or be canceled as to any shares, new Options and Stock Appreciation
Rights may thereafter be granted covering such shares.
4.3 Adjustment to Number of Shares. In the event (a) any stock dividend,
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recapitalization, reorganization, merger, consolidation, split-up, combination,
or exchange of shares results in any change in Common Stock; or (b) any other
similar change affects the Common Stock, the number and kind of shares which
thereafter may be covered by an Option or Stock Appreciation Right granted under
the Plan and the number and kind of shares subject to outstanding Option and
Stock Appreciation Right Agreements and the price per share of such shares shall
be proportionately adjusted by the Committee to prevent substantial dilution or
enlargement of the rights granted to, or available for, Optionees and Grantees
in the Plan.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
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Each Option granted under the Plan shall be subject to the following
express terms and conditions and to such other terms and conditions as the
Committee may deem appropriate as evidenced in the Option Agreement.
5.1 Option Price.
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(a) Incentive Stock Options. The price per share of Common Stock
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subject to an Incentive Stock Option shall be no less than one hundred percent
(100%) of the Fair Market Value of a share of Common Stock on the date such
Incentive Stock Option is granted, except as provided in Section 5.10(c) below.
(b) Nonqualified Options. The price per share of Common Stock
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subject to a Nonqualified Option shall be no less than one hundred percent
(100%) of the Fair Market Value of the Common Stock on the date such
Nonqualified Option is granted.
5.2 Date of Option Grant. An Option shall be deemed to be granted on the
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date the Committee acts to grant the Option provided that the Optionee enters
into an Option Agreement within the period specified in Section 3.3.
5.3 Exercise of Option. The Committee, in its sole discretion, may
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provide that an entire Option or any portion of an Option, may not be exercised
until completion of the Employment Period and thereafter only on or following
such date or dates specified in the Option Agreement. An Option shall be
exercised by (a) written notice to the Committee of the intent to exercise the
Option with respect to a specified number of shares of Common Stock and (b)
payment for such shares as specified in Section 5.8 of the Plan.
5.4 Sales of Stock Underlying Options. Notwithstanding anything in the
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Plan to the contrary, except in the case of sales by an executor or
administrator of the estate of a deceased Insider Participant, shares of Common
Stock acquired through the exercise of an Option granted hereunder to an Insider
Participant may not be disposed of until a date at least six months after the
date of the grant of such option as specified in the Option Agreement, unless
such disposition would not otherwise result in liability under Section 16(b) of
the Exchange Act.
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5.5 Option Period. Each Option Agreement shall specify the period during
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which the Option may be exercised and shall provide that the Option shall expire
at the end of such period. The Committee may, in its sole discretion, extend
such period. However, in no event shall such period, including any extensions,
exceed ten years from the date of grant. Subject to Section 5.7 of the Plan, the
Option may be exercised by the Optionee only while he remains employed by the
Company.
5.6 Accelerated Vesting in the Event of Death, Disability, Retirement,
Change in Control or Other Transactions.
(a) Unless specifically stated otherwise in the Option Agreement, an
Option granted under this Plan that is not fully vested and exercisable as of
the date the Optionee terminates his employment with the Company because of his
death, Total Disability, or Retirement shall become vested and exercisable in
full on such date.
(b) Unless specifically stated otherwise in the Option Agreement,
all outstanding Options will become vested and exercisable immediately in the
event there is an actual or threatened change in control of the Company.
(1) Change in Control. A "change in control of the Company"
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is defined as a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act, whether or not the Company in fact is required to comply
with Regulation 14A thereunder; provided that, without limitation, such a change
in control shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), is or becomes, after the
Effective Date, the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or
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indirectly, of securities of the Company representing twenty percent (20%) or
more of the combined voting power of the Company's then outstanding securities,
(ii) during any period of twenty-four consecutive months during the term of an
Option or Stock Appreciation Right, individuals who at the beginning of such
period constitute the Board cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by the
Company's stockholders, of each director who was not a director at the date of
grant has been approved in advance by directors representing at least two-thirds
of the directors then in office who were directors at the beginning of the
period, or (iii) upon the first purchase of the Company's Common Stock pursuant
to a tender or exchange offer (other than a tender or exchange offer made by the
Company).
(2) Threatened Change in Control. A "threatened change in
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control of the Company" is defined as any set of circumstances which in the
opinion of the Board, as expressed through a resolution, poses a real,
substantial and immediate possibility of leading to a change in control of the
Company as defined in clause (1) above.
(c) If, in connection with any merger, consolidation, sale or
transfer by the Company of substantially all its assets, any Option or Stock
Appreciation Right is not to be assumed by the surviving corporation or the
purchaser, then the Committee, in its sole discretion, may advance the date of
termination of such Option or Stock Appreciation Right, and the date on which
such option or Stock Appreciation Right or any portion of such Option or Stock
Appreciation Right, not then exercisable, may be exercised. However, such date
shall be not more than fifteen days prior to such merger, consolidation, sale or
transfer.
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5.7 Exercise in the Event of Death, Disability, Retirement, or
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Termination of Employment.
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(a) Death, Disability and Retirement. If an Optionee dies (i) while
an Employee of the Company or (ii) within three months after termination of his
employment with the Company because of a Total Disability, his Options may be
exercised by his Beneficiary at any time, or from time to time, but not later
than the expiration date specified in the Option Agreement in accordance with
Section 5.5 of the Plan. If an Optionee's employment with the Company terminates
due to Total Disability and such Optionee has not died within three months
following the Optionee's termination of employment, the Optionee may exercise
his Options at any time, or from time to time, but not later than the expiration
date specified in the Option Agreement in accordance with Section 5.5 of the
Plan or twelve months after termination of employment, whichever is earlier. If
an Optionee's employment terminates by reason of his Retirement all rights to
exercise his Option shall terminate no later than the expiration date specified
in the Option Agreement in accordance with Section 5.5 of the Plan or twelve
months after termination of employment or on such other date determined by the
Committee, whichever is earlier.
(b) Termination of Employment. If an Optionee's employment
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terminates voluntarily or involuntarily for any reason other than death, Total
Disability or Retirement, all rights to exercise his Options shall terminate no
later than the expiration date specified in the Option Agreement in accordance
with Section 5.5 of the Plan or thirty days from the date of such termination of
employment, whichever is earlier, unless the Committee decides that such Option
shall terminate on the date of such termination of employment.
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5.8 Payment of Option Price. Each Option Agreement shall provide that the
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Option Price of the shares subject to an Option shall be paid to the Company at
the time of exercise either in cash or in such other consideration as the
Committee deems appropriate, including, but not limited to, (a) Common Stock
already owned by the Optionee having a total fair market value equal to the
Option Price, or (b) a combination of cash and Common Stock having a total fair
market value equal to the Option Price.
5.9 Reload Options. The Committee, in its sole discretion, may provide in
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the Option Agreement for the automatic award of a new Option (a "Reload Option")
in the event an Optionee exercises his original Option, in whole or in part, by
surrendering previously acquired shares of Common Stock or a portion of the
shares being acquired upon exercise of the Option. Any such Reload Option shall
be for a number of shares of Common Stock equal to the number of surrendered
shares, shall become exercisable only in the event the shares purchased with the
original Option are held for a minimum period of time established by the
Committee and set forth in the Option Agreement, and shall be subject to such
other terms and conditions as provided in this Section 5.9 and as the Committee
may otherwise determine. The Option Price of a Reload Option shall be no less
than the Fair Market Value on the date of grant of the Reload Option. If the
shares of Common Stock which are issued upon exercise of the original Option are
sold prior to the expiration of the minimum period established by the Committee,
then the Reload option shall immediately terminate and the Optionee shall have
no further rights with respect to that Reload Option. The Option Agreement shall
state whether any Reload Options that may be issued under such Option Agreement
shall be Incentive Stock Options or Nonqualified Options.
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5.10 Additional Terms Applicable to Incentive Stock Options. All Options
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issued under the Plan as Incentive Stock Options will be subject, in addition to
the terms detailed in Sections 5.1-5.9 above, to those contained in this Section
5.10.
(a) Special Limitation on Incentive Stock Option Grants.
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Notwithstanding any contrary provisions contained elsewhere in this Plan, the
aggregate Fair Market Value, determined as of the time an Incentive Stock Option
is granted, of the Common Stock (and stock of a Subsidiary) with respect to
which Incentive Stock Options granted under this Plan and stock Options that
satisfy the requirements of Section 422 of the Code granted under any other
stock option plan or plans maintained by the Company (or any Subsidiary) are
exercisable for the first time by an Optionee during any calendar year shall not
exceed $100,000 for such year. The foregoing limitation shall not take into
account stock Options which, by their terms, provide that they shall not be
treated as Incentive Stock Options.
(b) Special Limitation on Incentive Stock Option Treatment.
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(1) In General. To the extent that, as a result of the
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rules described in Section 5.6 or otherwise, the aggregate Fair Market Value of
Common Stock with respect to which Incentive Stock Options granted to an
Optionee are exercisable for the first time during any calendar year exceeds
$100,000, such Options shall not be treated as Incentive Stock Options or
otherwise as stock Options which satisfy the requirements of Section 422 of the
Code.
(2) Ordering Rule. Clause (1) shall be applied by taking
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Incentive Stock Options into account in the order that they were granted.
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(3) Allocation Rule. To the extent that the Fair Market Value of
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Common Stock for which the Optionee has been granted an Incentive Stock Option
causes the aggregate Fair Market Value of all Common Stock with respect to which
the Optionee has been granted Incentive Stock Options exercisable for the first
time during any calendar year to exceed $100,000, such Option shall be treated
as not qualifying as an Incentive Stock Option, and, unless the Company
designates which Common Stock acquired by such Option is to be treated as stock
acquired pursuant to the exercise of an Incentive Stock Option by issuing a
separate certificate (or certificates) for such stock and identifying such
certificate (or certificates) as Incentive Stock Option stock in its stock
transfer records, an equal proportion of each share of Common Stock acquired
pursuant to such Option shall be treated as if acquired pursuant to the exercise
of an Option that does not satisfy the requirements of Section 422 of the Code.
(4) Special Definitions. For purposes of this subsection (b),
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Stock Options granted to an Optionee under any other stock option plan or plans
maintained by the Company (or any subsidiary) that satisfy the requirements of
Section 422 of the Code shall be included within the term Incentive Stock
Options, stock of a Subsidiary shall be included within the term Common Stock,
and Options which, by their terms, provide that they shall not be treated as
Incentive Stock Options shall not be taken into account.
(c) Limits on Ten Percent Shareholders. The price at which shares of
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Common Stock may be purchased upon exercise of an Incentive Stock Option granted
to an individual who, at the time such Incentive Stock Option is granted, owns,
directly or indirectly, more than ten percent (10%) of the total combined voting
power of all classes of stock issued to shareholders of the Company or any
Subsidiary, shall be no less than one hundred and ten percent (110%) of the Fair
Market Value of a share of the Common Stock of the Company at the
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time of grant, such Incentive Stock Option shall by its terms not be exercisable
after the earlier of the date determined under Section 5.5 or the expiration of
five (5) years from the date such Incentive Stock Option is granted.
(d) Federal Income Tax Treatment. A share of Common Stock transferred
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to an Optionee pursuant to his exercise of an Incentive Stock Option shall not
be treated as a share transferred pursuant to the exercise of an Incentive Stock
Option for federal income tax purposes unless (i) no disposition of such share
is made by the Optionee within two (2) years from the date of the granting of
the Incentive Stock Option nor within one (1) year after the transfer of such
share to the Optionee, and (ii) at all times during the period beginning on the
date of the granting of the Incentive Stock Option and ending on the day three
(3) months before the date of exercise of the Incentive Stock Option, the
optionee was an employee of either the Company, a parent of the Company or any
Subsidiary. The employment requirement of Section 5.10(d)(ii) shall be waived if
the Optionee's employment ceases as a result of death and the three month
employment requirement of Section 5.10(d)(ii) shall be expanded to twelve (12)
months if the Optionee's employment ceases as a result of a Total Disability.
Section 5.10(d)(i) shall not apply to an Incentive Stock Option exercised after
the death of the Optionee.
(e) Notice of Disposition; Withholding; Escrow. An Optionee shall
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immediately notify the Company in writing of any sale, transfer, assignment or
other disposition (or action constituting a disqualifying disposition within the
meaning of Section 421 of the Code) of any shares of Common Stock acquired
through exercise of an Incentive Stock Option, within two (2) years after the
grant of such Incentive Stock Option or within one (1) year after the
acquisition of such shares, setting forth the date and manner of disposition,
the number of shares disposed of, and the price at which such shares were
disposed of. The Company or any Subsidiary shall be
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entitled to withhold from any compensation or other payments then or thereafter
due to the Optionee such amounts as may be necessary to satisfy any withholding
requirements of federal or state law or regulation and, further, to collect from
the Optionee any additional amounts which may be required for such purpose. The
Committee may, in its discretion, require shares of Common Stock acquired by an
Optionee upon exercise of an Incentive Stock Option to be held in an escrow
arrangement for the purpose of enabling compliance with the provisions of this
Section 5.10(e).
ARTICLE VI
STOCK APPRECIATION RIGHTS
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6.1 General. The Committee may grant Stock Appreciation Rights to any
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individual who satisfies the eligibility requirements of Article 3 of the Plan.
The Committee may grant Stock Appreciation Rights that cover (a) the same shares
of Common Stock that are covered by an Option granted to an Optionee (or such
lesser number of shares of Common Stock as the Committee may determine), or (b)
shares of Common Stock that are not covered by an Option. Stock Appreciation
Rights that are related to an Option granted under the Plan (such that the
exercise of one automatically cancels the right to exercise all or a portion of
the other) may be granted either at the time of the grant of such Option or at
any time thereafter during the term of the Option and shall, except as provided
in Section 6.3 hereof, be subject to the same terms and conditions as the
related Option and such further terms and conditions not inconsistent with the
Plan as shall from time to time be determined by the Committee. Any Stock
Appreciation Right granted under the Plan that is granted independently of any
Option (such that the exercise of one does not cancel the right to exercise all
or a portion of the other) shall be exercisable at such time and under such
circumstances as set forth in the grant of the Stock Appreciation Right but in
no
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event shall any Stock Appreciation Right be exercisable later than the 10th
anniversary of the date of its grant.
6.2 Exercise and Payments.
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(a) Each Stock Appreciation Right that is related to any Option shall
entitle the holder of the related Option to surrender to the Company unexercised
the related Option, or any portion thereof, and to receive from the Company in
exchange therefore an amount equal to the excess of the Fair Market Value of one
share of Common Stock on the date the right is exercised over the Option Price
times the number of shares covered by the Option, or portion thereof, which is
surrendered.
(b) Upon exercise in whole or in part of a Stock Appreciation Right
that is granted independently of any Option, the holder thereof shall be
entitled to receive from the Company an amount equal to the excess of the Fair
Market Value of one share of Common Stock on the date the right is exercised
over the price per share stated in the grant of the Stock Appreciation Right
times the number of shares covered by the Stock Appreciation Right, or portion
thereof, which is exercised. The price per share stated in the grant of the
Stock Appreciation Right shall be no less than one hundred percent (100%) of the
Fair Market Value of the Common Stock on the date such Stock Appreciation Right
is granted.
(c) The grant of a Stock Appreciation Right shall state whether
payment upon exercise shall be made solely in cash, in shares of Common Stock
valued at Fair Market Value as of the date the right is exercised, or partly in
shares and partly in cash, in the discretion of the Committee.
17
(d) Subject to Sections 6.1, 6.2(c) and 6.3, Stock Appreciation Rights
may be exercised from time to time upon actual receipt by the Company of written
notice stating the number of shares of Common Stock with respect to which the
Stock Appreciation Right is being exercised. The value of any fractional shares
shall be paid in cash.
6.3 Restrictions.
------------
(a) Subject to Sections 3.3, 6.1 and 6.2(c), each Stock Appreciation
Right shall be exercisable at such time or times that any Option to which it
relates shall be exercisable or at such other times as the Committee may
determine in the grant of the right; provided, however, unless specifically
stated otherwise in the Stock Appreciation Right Agreement, upon the occurrence
of an actual or threatened change in control of the Company, as defined in
Section 5.6(b)(1) or (2) or in the event of the termination of the Grantee's
employment by the Company as a result of the Grantee's death, Total Disability
or Retirement, all Stock Appreciation Rights, to the extent not then fully
exercisable, shall become immediately exercisable in full.
(b) The Committee in its sole discretion may approve or deny in whole
or in part a request to exercise a Stock Appreciation Right. Denial or approval
of such request shall not require a subsequent request to be similarly treated
by the Committee.
(c) If an Optionee is granted a Stock Appreciation Right that is
related to an Option, the right of an Optionee to exercise the Stock
Appreciation Right shall be canceled if and to the extent the related Option is
exercised. To the extent that a Stock Appreciation Right is exercised, a related
Option shall be deemed to have been surrendered. The number of shares of Common
Stock as to which the related Option was forfeited shall not become available
for use under the Plan.
18
(d) A holder of a Stock Appreciation Right shall have none of the
rights of a stockholder unless and until shares of Common Stock are issued to
him pursuant to his exercise of such right.
(e) Notwithstanding any other Plan provisions to the contrary, in the
event a Stock Appreciation Right is granted together with an Incentive Stock
Option such that the exercise of one affects the right to exercise the other,
the Stock Appreciation Right shall satisfy the following requirements:
(1) the Stock Appreciation Right shall expire no later than the
related Incentive Stock Option;
(2) the Stock Appreciation Right shall be exercisable for no more
than one hundred percent (100%) of the difference between the Option Price of
the related Incentive Stock Option and the Fair Market Value of the Common
Stock, subject to the Incentive Stock Option at the time the Stock Appreciation
Right is exercised;
(3) the Stock Appreciation Right shall be transferable only when
the related Incentive Stock Option is transferable, and under the same
conditions;
(4) the Stock Appreciation Right may be exercised only when the
related Incentive Stock Option is eligible to be exercised; and
(5) the Stock Appreciation Right may be exercised only when the
Fair Market Value of the Common Stock subject to the related Incentive Stock
Option exceeds the Option Price.
19
ARTICLE VII
LOANS
-----
7.1 Loans. The Board or Committee may cause the Company to give or
-----
arrange for financial assistance, in accordance with Section 7.2 of the Plan, to
an Optionee or Beneficiary, for the purpose of providing funds for the purchase
of Common Stock pursuant to the exercise of an Option granted under the Plan.
Such a loan shall be made if, in the judgment of the Board or the Committee,
such assistance may reasonably be expected to be in the best interests of the
Company, shall be consistent with the certificate of incorporation and bylaws of
the Company and applicable laws, and will permit the Common Stock to be fully
paid and nonassessable when issued. The Board or Committee may not grant funds
pursuant to this Section 7.1 in excess of ninety percent (90%) of the purchase
price of the Common Stock. The amount of the funds granted to the Optionee or
Beneficiary shall be determined in the Board's or the Committee's sole
discretion.
7.2 Promissory Note. Upon the grant of financial assistance to an
---------------
Optionee or Beneficiary pursuant to Section 7.1 of the Plan, the Optionee or
Beneficiary shall execute and deliver to the Company, or to any third party
which the Company may designate, a negotiable promissory note or notes for such
amount. The note shall be payable to the Company or its order, and payable in
installments at such times and in such amounts as determined by the Committee,
with the term of such note not to exceed five (5) years, and with interest on
the unpaid balance at such rate as shall be fixed by the Committee (but not less
than the applicable federal rate, as defined in the Code, compounded
semiannually), payable with each installment. Upon delivery of the note to the
Company, the Common Stock certificates shall be issued and delivered to the
Optionee, or to his Beneficiary.
20
7.3 Pledge. The shares shall be pledged under an instrument or
------
instruments approved by the Committee, with the Company, or with any third party
which the Company may designate, as security until payment for such shares is
made in full or such shares are sold, canceled or forfeited upon default. During
the period of such pledge, the Optionee or Beneficiary shall have all rights of
ownership including, but not limited to, the right to vote such shares and
receive dividends thereon, subject to the security interest of the pledgee.
ARTICLE VIII
DESIGNATION
-----------
8.1 Designation and Change of Designation. Each Optionee shall file with
-------------------------------------
the Committee a written designation of one or more persons as the Beneficiary
who shall be entitled to receive the amount, if any, payable under the Plan upon
his death. An Optionee may, from time to time, revoke or change his Beneficiary
designation without the consent of any prior Beneficiary by filing a new
designation with the Committee. The last such designation received by the
Committee shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the
Committee prior to the Optionee's death, and in no event shall it be effective
as of any date prior to such receipt.
8.2 Absence Of Valid Designation. If no such Beneficiary designation is
----------------------------
in effect at the time of an Optionee's death, or if no designated Beneficiary
survives the Optionee, or if such designation conflicts with law, the Optionee's
estate shall be deemed to have been designated his Beneficiary and shall receive
the payment of the amount, if any, payable under the Plan upon his death. If the
Committee is in doubt as to the right of any person to receive such amount, the
Committee may retain such amount, without liability for any interest thereon,
until the rights thereto are determined, or the Committee may pay such amount
into any court of appropriate
21
jurisdiction and such payment shall be a complete discharge of the liability of
the Plan and the Company.
ARTICLE IX
ADMINISTRATION OF THE PLAN
--------------------------
9.1 Committee. The Plan shall be administered by a Committee consisting
---------
of at least the minimum number of members required in order for the Plan to
satisfy the requirements of Rule 16b-3 promulgated under the Exchange Act and
Section 162(m) of the Code. Each member of the Committee shall be both a "non-
employee director" within the meaning of Rule 16b-3 and an "outside director"
within the meaning of Section 162(m). Any vacancy occurring in the membership of
the Committee shall be filled by appointment by the Board.
9.2 Powers of Committee. The Committee may interpret the Plan, prescribe,
-------------------
amend, and rescind any rules and regulations necessary or appropriate for the
administration of the Plan, and make such other determinations under, and
interpretations of, the Plan, and take such other action, as it deems necessary
or advisable. Any interpretation, determination or other action made or taken
by the Committee shall be final, binding and conclusive upon all parties.
9.3 Action by Committee. A majority of the members of the Committee shall
-------------------
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by all of the members shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held. The Committee shall also
have express authority to hold Committee meetings by means of conference
telephone or similar communications equipment by which all persons participating
in the meeting can hear each other.
22
9.4 Grant of Option and/or Stock Appreciation Right. Subject to the
-----------------------------------------------
Provisions of the Plan, and after consultation with the Chief Executive officer
of the Company, the Committee shall (a) determine and designate from time to
time those Employees to whom Options and/or Stock Appreciation Rights are to be
granted; (b) authorize the grant of Nonqualified Options, Incentive Stock
Options, and/or Stock Appreciation Rights; (c) determine the number of shares
subject to each Option and/or Stock Appreciation Right; and (d) determine the
time or times when and the manner in which each Option and Stock Appreciation
Right shall be exercisable and the duration of the exercise period. In making
these determinations, the Committee may take into account the nature of the
service rendered by respective Employees, their present and potential
contributions to the success of the Company and such other factors as the
Committee in its discretion shall deem relevant.
For purposes of accrual of an Optionee's rights under his or her
Options and/or Stock Appreciation Rights, any period not exceeding 90 days
during which an Optionee is on military leave of absence from the Company, or a
longer period if such Optionee's reemployment is guaranteed by contract, will be
treated as a period of employment of such Optionee. Unless an Optionee's
reemployment is guaranteed by contract, beginning with the 91/st/ day, the
Committee shall have the discretion to treat all or any portion of any period in
excess of 90 days during which an Optionee is on military leave of absence as a
period of employment of such Optionee by the Company. The Committee may also,
in its discretion, treat all or any portion of any period during which an
Optionee is on an approved leave of absence from the Company as a period of
employment of such Optionee by the Company.
9.5 Indemnification. Current and past members of the Board or Committee
---------------
shall be indemnified and held harmless by the Company against and from any and
all loss, cost, liability
23
or expense that may be imposed upon or reasonably incurred by such member in
connection with or resulting from any claim, action, suit or proceeding to which
such member may be or become a party or in which such member may be or become
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by such member in settlement thereof
(with the Company's written approval) or paid by such member in satisfaction of
a judgment in any such action, suit or proceeding, except a judgment in favor of
the Company based upon a finding of such member's lack of good faith.
Indemnification pursuant to this provision is subject to the condition that,
upon the institution of any claim, action, suit or proceeding against such
member, such member shall in writing give the Company an opportunity, at its own
expense, to handle and defend the same before such member undertakes to handle
and defend it on such member's behalf. The foregoing right of indemnification
shall not be exclusive of any other right to which such member may be entitled
as matter of law or otherwise, or any power that the Company may have to
indemnify or hold such member harmless.
9.6 Reliance. Each member of the Board or of the Committee, and each
--------
officer and Employee of the Company, shall be fully justified in relying or
acting in good faith upon any information furnished in connection with the
administration of the Plan by any appropriate person or persons. In no event
shall any current or past member of the Board or Committee, or an officer or
Employee of the Company, be held liable for any determination made or other
action taken or any omission to act in reliance upon any such information, or
for any action (including the furnishing of information) taken or any failure to
act, if in good faith.
9.7 Agents. In administering the Plan, the Committee may employ, with the
------
approval of the Chief Executive Officer of the Company, accountants and counsel
(who may be the
24
independent auditors and outside counsel for the Company) and other persons to
assist or render advice to it, all at the expense of the Company.
ARTICLE X
AMENDMENT AND TERMINATION
-------------------------
10.1 Amendment. The Committee from time to time and without further
---------
approval of the stockholders, may amend the Plan in such respects as the
Committee may deem advisable; provided, however, that no amendment shall become
effective without prior approval of the stockholders which would (a) materially
increase the number of securities which may be issued under the Plan to Insider
Participants or (b) materially modify the requirements as to eligibility for
participation in the Plan to add a class of Insider Participants; provided,
further, that any increase in the number of shares available under the Plan for
grant as Incentive Stock Options and any change in the designation of the group
of employees eligible to receive Incentive Stock Options under the Plan shall be
subject to shareholder approval in accordance with Section 422 of the Code. No
amendment shall, without the Optionee's or Grantee's (or Beneficiary's) consent,
alter or impair any of the rights or obligations under any Option or Stock
Appreciation Right, previously granted to him under the Plan.
10.2 Termination. The Board, without further approval of the
-----------
stockholders, may terminate the Plan at any time, but no termination shall,
without the Optionee's or Grantee's (or Beneficiary's) consent, alter or impair
any of the rights under any Option or Stock Appreciation Right, previously
granted to him under the Plan.
10.3 Periodic Review of Plan. In order to assure the continued
------------------------
realization of the purposes of the Plan, the Board and the Committee shall
periodically review the Plan.
25
ARTICLE XI
MISCELLANEOUS PROVISIONS
------------------------
11.1 No Rights as Shareholder. No Optionee, Grantee, or Beneficiary shall
------------------------
have any rights as a shareholder with respect to any shares of Common Stock
subject to his Option or Stock Appreciation Right, prior to the date of issuance
to him of a certificate or certificates for such shares.
11.2 No Rights to Continued Employment. The Plan and any Option or Stock
---------------------------------
Appreciation Right granted under the Plan shall not confer upon any Optionee or
Grantee any right with respect to continued employment by the Company, nor shall
they interfere in any way with the right of the Company, or the right of the
Optionee, to terminate the employment of the Optionee or Grantee at any time.
11.3 Compliance with Other Laws and Regulations. The Plan, the grant and
------------------------------------------
exercise of Options or Stock Appreciation Rights thereunder, and the obligation
of the Company to sell and deliver shares hereunder, shall be subject to all
applicable federal and state laws, rules, and regulations and to such approvals
as may be required by any government or regulatory agency. The Company shall
not be required to issue or deliver any certificates for shares of Common Stock
prior to (a) the obtaining of any approval or ruling from the Securities and
Exchange Commission, the Internal Revenue Service or any other governmental
agency which the Company, in its sole discretion, shall determine to be
necessary or advisable, (b) the listing of such shares on any stock exchange on
which the Common Stock may then be listed, and (c) the completion of any
registration or qualification of such shares under any federal or state law, or
any rule or regulation of any government body which the Company shall, in its
sole discretion,
26
determine to be necessary or advisable. In making such a determination, the
Committee shall rely upon an opinion of counsel for the Company.
11.4 Payments to Person Other Than Employee. If the Committee shall find
--------------------------------------
that any person to whom any amount is payable under the Plan is unable to care
for his affairs because of illness or accident, or because he is a minor, then
any payment due him (unless a prior claim therefor has been made by a duly
appointed legal representative), may, if the Committee so directs the Company,
be paid to his spouse, a child, a relative, an institution maintaining or having
custody of such person, or any other person deemed by the Committee to be a
proper recipient on behalf of such person otherwise entitled to payment. Any
such payment shall be a complete discharge of the liability of the Committee and
the Company therefor.
11.5 Use of Proceeds. Proceeds from the sale of Common Stock under this
---------------
Plan shall be added to the general funds of the Company.
11.6 No Right to Options and Stock Appreciation Rights. The adoption of
-------------------------------------------------
this Plan shall not be deemed to give any Employee any right to be granted an
Option or Stock Appreciation Right, except to the extent and upon such terms and
conditions as may be determined by the Committee.
11.7 Withholding. The Company shall not issue or transfer shares of Common
-----------
Stock to an Optionee, Grantee, or Beneficiary upon the exercise of an Option or
Stock Appreciation Right until the Optionee, Grantee, or Beneficiary pays the
Company, either in cash, or in such other consideration as the Committee deems
appropriate, the amount necessary to satisfy the Company's obligation to
withhold federal, state or local income or other taxes incurred with respect to
the exercise of such Option or Stock Appreciation Right. Such other
consideration
27
may include, but not limited to, (a) Common Stock already owned by the Optionee,
Grantee or Beneficiary or (b) a combination of cash and Common Stock. The
Company shall determine the amount of such withholding liability and its
decision shall be final, binding and conclusive upon the parties. The Company
shall be entitled to withhold from any compensation or other payments then or
thereafter due to an Employee such amounts as may be necessary to satisfy any
tax withholding requirements.
11.8 Nontransferability. Options and Stock Appreciation Rights granted
------------------
under the Plan shall not be transferable other than by will or by the Laws of
descent and distribution; provided, however, that the designation of a
Beneficiary pursuant to Article 8 shall not constitute a transfer. During the
lifetime of the Optionee or Grantee, an Option or Stock Appreciation Right shall
be exercisable only by such Optionee or Grantee.
11.9 Investment Representation. Each Option and Stock Appreciation Right
-------------------------
Agreement shall provide that, upon demand by the Committee, the Optionee or
Grantee (or his Beneficiary) shall deliver to the Committee at the time an
Option or Stock Appreciation Right, or any portion of an Option or Stock
Appreciation Right, is exercised, a written representation that the shares to be
acquired upon such exercise are to be acquired for investment and not for resale
or with a view to the distribution thereof and/or that Optionee or Grantee will
comply with such restrictions as may be necessary to satisfy the requirements of
the federal or state securities law. Delivery of the representation required by
this section shall be a condition precedent to the right of the Optionee,
Grantee, or Beneficiary to purchase any shares of Common stock under this Plan.
28
11.10 No Right, Title, or Interest in Company's Assets. An Optionee or
------------------------------------------------
Grantee shall have no right, title, or interest whatsoever in or to any
investments which the Company may make to aid it in meeting its obligations
under the Plan. Nothing contained in the Plan, and no action taken pursuant to
its provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any Optionee, Grantee, or any
other person. To the extent that any person acquires a right to receive
payments from the Company under this Plan, such right shall be no greater than
the right of an unsecured general creditor of the Company. All payments to be
made hereunder shall be paid from the general funds of the Company and no
special or separate fund shall be established and no segregation of assets shall
be made to assure payment of such amounts.
11.11 Headings. Any headings preceding the text of the sections of this
--------
Plan are inserted for convenience of reference only, and shall neither
constitute a part of this Plan nor affect its meaning, construction, or effect.
11.12 Governing Law. All rights under this Plan shall be governed by and
-------------
construed in accordance with the laws of New York.
11.13 Pronouns. The use of the masculine gender shall be extended to
--------
include the feminine gender wherever appropriate.
29