As Amended through
July 18, 1996
Time Warner
1986 Stock Option Plan
1. ADOPTION AND PURPOSE OF THE PLAN.
Time Incorporated, a Delaware corporation (hereinafter called the
Company), hereby adopts this stock option plan (hereinafter called the Plan),
providing for the granting of stock options to key employees of the Company and
its subsidiaries. The general purpose of the Plan is to promote the interests of
the Company and its stockholders by providing to key employees of the Company
and its subsidiaries additional incentives to continue and increase their
efforts with respect to, and to remain in the employ of, the Company or its
subsidiaries.
So that the maximum incentive may be provided to particular employees
participating in the Plan, the Plan provides for the granting of "incentive"
stock options (hereinafter called incentive stock options), within the meaning
of Section 422A(b) of the Internal Revenue Code of 1954, as amended (hereinafter
called the Code), and for the granting of "nonqualified" stock options.
2. STOCK SUBJECT TO THE PLAN.
There will be reserved for issuance upon the exercise of options and
stock appreciation rights to be granted from time to time under the Plan an
aggregate of 2,500,000 shares of the Company's Common Stock, par value $1 per
share (hereinafter called Common Stock). Such shares may be, in whole or in
part, authorized and unissued shares of Common Stock or issued shares of Common
Stock which shall have been reacquired by the Company. If any option granted
under the Plan shall expire or terminate for any reason without having been
exercised (or without having been considered to have been exercised as provided
in paragraphs 8 and 9 hereof) in full, the unpurchased shares subject thereto
shall again be available for purposes of the Plan.
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3. ADMINISTRATION.
The Plan shall be administered by the Board of Directors of the Company
(hereinafter called the Board). Subject to the express provisions of the Plan,
the Board shall have plenary authority, in its discretion, to determine the
terms of all options granted under the Plan (which need not be identical),
including, without limitation, the purchase price of the shares covered by each
option, the individuals to whom, and the time or times at which, options shall
be granted, the number of shares to be subject to each option (provided that the
maximum aggregate number of shares which may be granted to an individual
employee under the Plan shall be 100,000), whether an option shall be an
incentive stock option or a nonqualified stock option, when an option can be
exercised and whether in whole or in installments (which terms may be altered,
subject to paragraph 14 hereof). In making such determinations, the Board may
take into account the nature of the services rendered by the respective
employees, their present and potential contributions to the Company's success
and such other factors as the Board in its discretion shall deem relevant.
Subject to the express provisions of the Plan, the Board shall have plenary
authority to interpret the Plan, to prescribe, amend and rescind the rules and
regulations relating to it and to make all other determinations deemed necessary
or advisable for the administration of the Plan. The determinations of the Board
on the matters referred to in this paragraph 3 shall be conclusive.
Notwithstanding anything to the contrary contained herein, the Board may
at any time, or from time to time, appoint a committee (hereinafter called the
Committee) of at least three members, who shall be members of the Personnel and
Compensation Committee of the Board (or such other members of the Board as the
Board may designate), and delegate to such Committee the authority of the Board
to administer the Plan. Upon such appointment and delegation, the Committee
shall have all the powers, privileges and duties of the Board in the
administration of the Plan, except the power to appoint members of the Committee
and to terminate, modify or amend the Plan. The Board may from time to time
appoint members of any such Committee in substitution for or in addition to
members previously appointed, may fill vacancies in the Committee and may
discharge the Committee. The Committee shall select one of its members as its
chairman and shall hold its meetings at such
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times and places as it shall deem advisable. A majority of its members shall
constitute a quorum and all determinations shall be made by a majority of such
quorum. Any determination reduced to writing and signed by a majority 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.
4. ELIGIBILITY.
Options may be granted only to key salaried employees (which term shall
be deemed to include officers) of the Company and of its present and future
subsidiary corporations as defined in Section 425 of the Code, as the same shall
be amended from time to time (hereinafter called subsidiaries). A director of
the Company or of a subsidiary who is not also such an employee of the Company
or of one of its subsidiaries will not be eligible to receive any options under
the Plan. No option shall be granted to any person who, at the time the option
is granted, owns (or is considered as owning within the meaning of Section
425(d) of the Code) stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of any subsidiary, unless at the
time the option is granted the option price is at least 110% of the fair market
value of the Common Stock subject to the option and the option by its terms is
not exercisable after the expiration of five years from the date it is granted.
Options may be granted to employees who hold or have held options under previous
plans. An employee who has been granted an option may be granted an additional
option or options.
Notwithstanding anything to the contrary contained herein, in the case
of incentive stock options granted on or prior to December 31, 1986, the maximum
aggregate fair market value (determined at the time each incentive stock option
is granted) of the shares of Common Stock for which any individual employee may
be granted incentive stock options under the Plan in any calendar year (and
under all other plans of the Company or any subsidiary which provide for the
granting of incentive stock options) shall not exceed $100,000 plus the amount
of any unused limit carryover to such year. If $100,000 exceeds the aggregate
fair market value (determined at the time each incentive stock option is
granted) of the Common Stock for which an employee was granted incentive stock
options in any calendar year under the Plan (and under all other plans of the
Company or any subsidiary which provide for the granting of incentive stock
options), one-half of such excess shall be an
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unused limit carryover to each of the three succeeding calendar years, under the
rules of Section 422A(c)(4) of the Code. In the case of incentive stock options
granted after December 31, 1986, the aggregate fair market value (determined at
the time the option is granted) of the shares of Common Stock covered by
incentive stock options which first become exercisable in any calendar year
under the Plan by any individual employee (and under all other plans of the
Company or any subsidiary which provide for the granting of incentive stock
options) shall not exceed $100,000. For purposes of this paragraph, fair market
value of Common Stock shall be the mean between the high and low sales prices of
a share of Common Stock as reported on the New York Stock Exchange Composite
Tape on the date of grant of an incentive stock option under the Plan.
5. OPTION PRICES.
Except as otherwise specifically provided in paragraph 4 hereof, the
purchase price of the Common Stock under each option shall be determined by the
Board, but shall not be less than 100% of the fair market value of the Common
Stock at the time of the granting of such option. Such fair market value shall
be determined by the Board and shall not be less than the mean between the high
and low sales prices of a share of Common Stock as reported on the New York
Stock Exchange Composite Tape on the day on which the option is granted.
6. TERM OF OPTIONS.
The term of each option shall be for such period as the Board shall
determine, but not more than ten years from the date of grant in the case of
each incentive stock option and not more than ten and one-half years from the
date of grant in the case of each nonqualified stock option, or such shorter
period as is prescribed in paragraphs 4, 11 and 12 hereof.
7. EXERCISE OF OPTIONS.
Unless otherwise provided in the option agreement, an option granted
under the Plan shall be exercisable in whole, or in part, at any time during the
term of the option. Each incentive stock option granted under the Plan on or
prior to December 31, 1986 shall by its terms comply with the requirements of
Section 422A(b)(7) of the Code, as in effect
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prior to December 31, 1986.
The Board shall be authorized to establish the procedure for the
exercise of an option, provided that the Company shall not be required to
deliver certificates for shares with respect to which an option is exercised
until the purchase price of such shares shall have been paid in full. Payment
shall be made in cash or, unless otherwise provided in the option agreement, in
whole shares of Common Stock already owned by the holder of the option or,
unless otherwise provided in the option agreement, partly in cash and partly in
such Common Stock. An option shall be exercised by written notice to the
Company. Such notice shall state that the holder of the option elects to
exercise the option, the number of shares in respect of which it is being
exercised and the manner of payment for such shares, and shall either (i) be
accompanied by payment of the full purchase price of such shares, or (ii) fix a
date (not more than 10 business days from the date of exercise) for the payment
of the full purchase price of such shares. Cash payments shall be made by
certified or bank cashier's check, or by the wire transfer of immediately
available funds, in each case payable to the order of the Company. Common Stock
payments (valued at the mean between the high and low sales prices of a share of
Common Stock as reported on the New York Stock Exchange Composite Tape on the
date of exercise) shall be made by delivery of stock certificates in negotiable
form. If certificates representing Common Stock are used to pay all or part of
the purchase price of an option, separate certificates shall be delivered by the
Company representing the same number of shares as each certificate so used, and
an additional certificate shall be delivered representing any additional shares
to which the holder of the option is entitled as a result of the exercise of the
option. Except as provided in paragraphs 11 and 12 hereof, no option may be
exercised at any time unless the employee to whom the option was granted under
the Plan is then an employee of the Company or of a subsidiary or, if the option
agreement so provides, an Employee of an Affiliated Entity. For the purposes of
this Plan, "Employee of an Affiliated Entity" shall mean an employee of any
entity other than the Company or a subsidiary, whether or not incorporated,
which is controlled by or under common control with the Company (an "Affiliated
Entity"); provided, however, that no director, officer or holder of ten percent
or more of any class of equity securities of the Company who was subject,
directly or indirectly, to Section 16(b) of the Securities Exchange Act of 1934,
as amended, at any time on or after May 14, 1991, shall be considered an
Employee of an Affiliated
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Entity. The holder of an option shall have none of the rights of a stockholder
with respect to the shares subject to the option until such shares shall be
transferred to the holder upon the exercise of his or her option.
Notwithstanding any contrary waiting period or installment period in any
option agreement or in the Plan, each outstanding option granted under the Plan
shall, except as otherwise provided in the option agreement, become exercisable
in full for the aggregate number of shares covered thereby, in the event (i) the
Board (or, if approval of the Board is not required as a matter of law, the
stockholders of the Company) shall approve (a) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation
or pursuant to which shares of Common Stock would be converted into cash,
securities or other property, other than a merger of the Company (x) as
contemplated in the Amended and Restated Agreement and Plan of Merger dated as
of September 22, 1995 among Time Warner Inc., TW Inc., Time Warner Acquisition
Corp., TW Acquisition Corp. and Turner Broadcasting System, Inc., as the same
may be amended from time to time, or (y) in which the holders of Common Stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or (b) any
sale, lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company, or (c) the adoption of any plan or proposal for the liquidation or
dissolution of the Company, or (ii) any person (as such term is defined in
Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (hereinafter called the Exchange Act)), corporation or other entity (a)
shall purchase any Common Stock of the Company (or securities convertible into
the Company's Common Stock) for cash, securities or any other consideration
pursuant to a tender offer or exchange offer, without the prior consent of the
Board, or (b) any such person, corporation or other entity (other than the
Company or any benefit plan sponsored by the Company or any subsidiary) shall
become the "beneficial owner" (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
20 percent or more of the combined voting power of the then outstanding
securities of the Company ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the election of directors
(calculated as provided in paragraph (d) of such Rule 13d-3 in the case of
rights to acquire the Company's securities), or (iii) during any period of two
consecutive
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years, individuals who at the beginning of such period constitute the entire
Board shall cease for any reason to constitute a majority thereof unless the
election, or the nomination for election by the Company's stockholders, of each
new director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period. Any
transaction referred to in the foregoing clause (i) is hereinafter called an
Approved Transaction, any purchase pursuant to a tender offer or exchange offer
or otherwise as described in the foregoing clause (ii) is hereinafter called a
Control Purchase and the cessation of individuals constituting a majority of the
Board as described in the foregoing clause (iii) is hereinafter called a Board
Change. The option agreement evidencing an option granted under the Plan may
contain such provisions limiting the acceleration of the exercise of options as
the Board deems appropriate to ensure that the penalty provisions of Section
4999 of the Code, or any successor thereto in effect at the time of such
acceleration, will not apply to any stock or cash received by the holder from
the Company.
8. GENERAL STOCK APPRECIATION RIGHTS.
The Board may (but shall not be obligated to) grant general stock
appreciation rights (hereinafter called SARs) pursuant to the provisions of this
paragraph to the holder of any option granted under the Plan (hereinafter in
this paragraph 8 called a related option) with respect to all or a portion of
the shares subject to the related option. An SAR may only be granted
concurrently with the grant of the related option. Subject to the terms and
provisions of this paragraph 8, each SAR shall be exercisable only at the same
time and to the same extent the related option is exercisable, and in no event
after the termination or exercise of the related option.
Notwithstanding the foregoing, no SAR may be exercised within a period of six
months after the date of grant of the SAR. SARs shall be exercisable only when
the fair market value (determined as of the date of exercise of the SARs) of
each share of Common Stock with respect to which the SARs are to be exercised
shall exceed the option price per share of Common Stock subject to the related
option. SARs granted under the Plan shall be exercisable in whole or in part by
notice to the Company. Such notice shall state that the holder of the SARs
elects to exercise the SARs and the number of shares in respect of which the
SARs are being exercised.
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Subject to the terms and provisions of this paragraph 8, upon the
exercise of SARs, the holder thereof shall be entitled to receive from the
Company consideration (in the form hereinafter provided) equal in value to the
excess of the fair market value (determined as of the date of exercise of the
SARs) of each share of Common Stock with respect to which such SARs have been
exercised over the option price per share of Common Stock subject to the related
option. Upon the exercise of an SAR, the holder may specify the form of
consideration to be received by such holder, which shall be in shares of Common
Stock (valued at fair market value on the date of exercise of the SAR), or in
cash, or partly in cash and partly in shares of Common Stock as the holder shall
request; provided, however, that the Board in its sole discretion may disapprove
the form of consideration requested and instead authorize the payment of such
consideration in shares of Common Stock (valued as aforesaid), or in cash, or
partly in cash and partly in shares of Common Stock. Notwithstanding the
foregoing, any election by the holder of an SAR to receive cash in full or
partial settlement of the SAR, as well as any exercise of an SAR for such cash,
shall be made only during the period beginning on the third business day
following the date of release for publication of quarterly or annual summary
statements of sales and earnings and ending on the twelfth business day
following such date (such period is hereinafter called the Exercise Period).
Notwithstanding the foregoing, the number of SARs which may be exercised for
cash, or partly for cash and partly for shares of Common Stock, during any
Exercise Period may not exceed twenty percent of the aggregate number of shares
of Common Stock originally subject to the related option (as such original
number, without giving effect to the exercise of any portion of the related
option, shall have been retroactively adjusted by application of the
adjustment(s), if any, determined in accordance with paragraph 13 hereof or the
corresponding provisions of any outstanding option agreement), but such SARs
shall be exercisable only to the extent the related option is exercisable. For
purposes of this paragraph 8, (a) fair market value of Common Stock shall be the
mean between the high and low sales prices thereof as reported on the New York
Stock Exchange Composite Tape on the date of exercise of an SAR, and (b) the
date of exercise of an SAR shall mean the date on which the Company shall have
received notice from the holder of the SAR of the exercise of such SAR.
Notwithstanding the foregoing, upon the exercise during the Exercise Period of
an SAR granted in tandem with a nonqualified stock option, the date of exercise
of such SAR shall be deemed to be the date during the Exercise Period on which
the highest
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reported closing sales price of a share of Common Stock as reported on the New
York Stock Exchange Composite Tape occurred and the fair market value of such
shares shall be deemed to be such highest reported closing sales price.
Upon the exercise of SARs, the related option shall be considered to
have been exercised to the extent of the number of shares of Common Stock with
respect to which such SARs are exercised, and shall be considered to have been
exercised to that extent for purposes of determining the number of shares of
Common Stock available for the grant of options under the Plan. Upon the
exercise or termination of the related option, the SARs with respect to such
related option shall be considered to have been exercised or terminated to the
extent of the number of shares of Common Stock with respect to which the related
option was so exercised or terminated.
The provisions of paragraphs 3, 6, 10 through 16, and 18 through 20 of
the Plan (to the extent that such provisions are applicable to options granted
under the Plan) shall also be applicable to SARs unless the context otherwise
requires. The effective date of the grant of an SAR shall be the date on which
the Board approves the grant of such SAR. Each grantee of an SAR shall be
notified promptly of the grant of an SAR in such manner as the Board shall
prescribe.
Notwithstanding anything to the contrary contained in this paragraph 8,
SARs shall not be exercisable unless at the time of such exercise (i) the holder
of the SARs is directly or indirectly subject to Section 16 of the Exchange Act
or (ii) sales of Common Stock by the person exercising the SARs would be
reportable under Section 16 by the original holder of the related option.
9. LIMITED STOCK APPRECIATION RIGHTS.
The Board may (but shall not be obligated to) grant limited stock
appreciation rights (hereinafter called limited rights) pursuant to the
provisions of this paragraph to the holder of any option granted under the Plan
(hereinafter in this paragraph 9 called a related option) with respect to all or
a portion of the shares subject to the related option. A limited right may only
be granted concurrently with the grant of the related option. A limited right
may be exercised only during the period (a) beginning on the first day following
either (i) the date of approval by the stockholders of the
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Company of an Approved Transaction (as defined in the last paragraph of
paragraph 7 hereof), (ii) the date of a Control Purchase (as defined in the last
paragraph of paragraph 7 hereof), or (iii) the date of a Board Change (as
defined in the last paragraph of paragraph 7 hereof), and (b) ending on the
thirtieth day following such date. Each limited right shall be exercisable only
to the extent the related option is exercisable, and in no event after the
termination of the related option. Notwithstanding the provisions of the two
immediately preceding sentences, no limited right may be exercised within a
period of six months after the date of grant of the limited right. Limited
rights shall be exercisable only when the fair market value (determined as of
the date of exercise of the limited rights) of each share of Common Stock with
respect to which the limited rights are to be exercised shall exceed the option
price per share of Common Stock subject to the related option.
Upon the exercise of limited rights, the related option shall be
considered to have been exercised to the extent of the number of shares of
Common Stock with respect to which such limited rights are exercised, and shall
be considered to have been exercised to that extent for purposes of determining
the number of shares of Common Stock available for the grant of options under
the Plan. Upon the exercise or termination of the related option, the limited
rights with respect to such related option shall be considered to have been
exercised or terminated to the extent of the number of shares of Common Stock
with respect to which the related option was so exercised or terminated.
The provisions of paragraphs 3, 6, 10 through 16, and 18 through 20 of
the Plan (to the extent that such provisions are applicable to options granted
under the Plan) shall also be applicable to limited rights unless the context
otherwise requires. The effective date of the grant of a limited right shall be
the date on which the Board approves the grant of such limited right. Each
grantee of a limited right shall be notified promptly of the grant of the
limited right in such manner as the Board shall prescribe.
Limited rights granted under the Plan shall be exercisable in whole or
in part by notice to the Company. Such notice shall state that the holder of the
limited rights elects to exercise the limited rights and the number of shares in
respect of which the limited rights are being exercised. The effective date of
exercise of a limited right shall be deemed to be the
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date on which the Company shall have received such notice. Upon the exercise of
limited rights granted in tandem with an incentive stock option, except as
otherwise provided in the option agreement, the holder thereof shall receive in
cash an amount equal to the excess of the fair market value (determined as of
the date of exercise of such limited rights) of each share of Common Stock with
respect to which such limited right shall have been exercised over the option
price per share of Common Stock subject to the related incentive stock option.
For purposes of this paragraph 9, the fair market value of a share of Common
Stock shall be the mean between the high and low sales price thereof as reported
on the New York Stock Exchange Composite Tape on the date of exercise of a
limited right.
Upon the exercise of limited rights granted in tandem with a
nonqualified stock option, except as otherwise provided in the option agreement,
the holder thereof shall receive in cash an amount equal to the product computed
by multiplying (i) the excess of (a) the higher of (x) the Minimum Price Per
Share (as hereinafter defined), or (y) the highest reported closing sales price
of a share of Common Stock as reported on the New York Stock Exchange Composite
Tape at any time during the period beginning on the sixtieth day prior to the
date on which such limited rights are exercised and ending on the date on which
such limited rights are exercised, over (b) the option price per share of Common
Stock subject to the related nonqualified stock option, by (ii) the number of
shares of Common Stock with respect to which such limited rights are being
exercised.
For purposes of this paragraph 9, the term "Minimum Price Per Share"
shall mean the highest gross price (before brokerage commissions, soliciting
dealers' fees and similar charges) paid or to be paid for any share of Common
Stock (whether by way of exchange, conversion, distribution, liquidation or
otherwise) in, or in connection with, any Approved Transaction or Control
Purchase which occurs at any time during the period beginning on the sixtieth
day prior to the date on which such limited rights are exercised and ending on
the date on which such limited rights are exercised. For purposes of this
definition, if the consideration paid or to be paid in any such Approved
Transaction or Control Purchase shall consist, in whole or in part, of
consideration other than cash, the Board shall take such action, as in its
judgment it deems appropriate, to establish the cash value of such
consideration, but such valuation shall not be less than the value, if any,
attributed to such consideration by any other party to such Approved
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Transaction or Control Purchase.
Notwithstanding anything to the contrary contained in this paragraph 9,
limited rights shall not be exercisable unless at the time of the occurrence of
an Approved Transaction, Control Purchase or Board Change, (i) the holder of the
limited rights is directly or indirectly subject to Section 16 of the Exchange
Act or (ii) sales of Common Stock by the person exercising the limited rights
would be reportable under Section 16 by the original holder of the related
option. The option agreement evidencing an option granted under the Plan may
contain such provisions limiting the exercise of limited rights as the Board
deems appropriate to ensure that the penalty provisions of Section 4999 of the
Code, or any successor thereto in effect at the time of such exercise, will not
apply to any stock or cash received from the Company by the holder of the
limited rights.
10. NONTRANSFERABILITY OF OPTIONS.
Except as set forth in this paragraph 10, no option granted under the
Plan shall be transferable otherwise than by will or the laws of descent and
distribution, and an option may be exercised during the lifetime of the holder
thereof only by such holder. The option agreement may provide that nonqualified
stock options and SARs are transferable by gift to such persons or entities and
upon such terms and conditions as specified in the option agreement.
11. TERMINATION OF EMPLOYMENT.
In the event that an employee to whom an option has been granted under
the Plan ceases to be an employee of the Company and/or one or more of its
subsidiaries otherwise than by reason of death, such option may, subject to the
provisions of the last paragraph of this paragraph 11, be exercised (to the
extent exercisable by the employee at the effective date of the termination of
his or her employment) at any time (i) in the case of either a nonqualified or
incentive stock option, within one year (or such shorter period as may be
specified in the option agreement) after the termination of his or her
employment due to his or her "permanent and total disability", as defined in
Section 22(e)(3) of the Code, as the same shall be amended from time to time
(hereinafter called total disability); (ii) in the case of a nonqualified stock
option, (x) within five years (or such shorter period as may be
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specified in the option agreement) after the termination of his or her
employment upon retirement pursuant to any retirement plan of the Company or a
subsidiary, or (y) within three months after the termination of his or her
employment for any reason other than as specifically provided in this paragraph
(or such shorter period as may be specified in the option agreement); or (iii)
in the case of an incentive stock option, within three months after the
termination of his or her employment for any reason other than as specifically
provided in this paragraph (or such shorter period as may be specified in the
option agreement), but, in any case, in no event after the expiration date of
such option. Options granted under the Plan shall not be affected by any change
of employment so long as the employee to whom the option was granted under the
Plan continues to be an employee of the Company or of a subsidiary. Retirement
pursuant to any retirement plan of the Company or of a subsidiary shall be
deemed to be a termination of employment for the purpose of this paragraph. The
option agreement may contain such provisions as the Board may approve with
reference to the effect of approved leaves of absence. Nothing in the Plan or in
any option granted pursuant to the Plan shall confer on any individual any right
to continue in the employ of the Company or any of its subsidiaries or to
interfere in any way with the right of the Company or any of its subsidiaries to
terminate his or her employment at any time, with or without cause,
notwithstanding the possibility that the number of shares purchasable under an
option may thereby be reduced or eliminated.
Anything herein to the contrary notwithstanding, in the event the
employment of an employee to whom an option has been granted under the Plan
shall be terminated by the Company or a subsidiary for cause, then, in such
event, any option or options held by such employee or any permitted transferee
pursuant to paragraph 10 under the Plan, to the extent not theretofore
exercised, shall immediately terminate; provided, however, that the foregoing
shall not apply to any employee employed under a separate written employment
agreement if the termination of such employee's employment for cause hereunder
would constitute a breach of such employment agreement. For purposes of this
paragraph 11, termination for cause shall include, but shall not be limited to,
termination of the employee's employment by reason of insubordination,
dishonesty, incompetence, moral turpitude, other misconduct of any kind, and the
refusal to perform his or her normal duties and responsibilities for any reason
other than illness or incapacity; provided, however, that if such termination
occurs
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within 12 months after an Approved Transaction, Control Purchase or Board
Change, termination for cause shall only include fraud, misappropriation or
embezzlement on the part of the employee. For purposes of this paragraph 11,
whether or not such employment shall have been terminated for cause shall be
determined by the Board and the determination of the Board shall be conclusive.
If the option agreement provides that an option may be exercised by an employee
who is an Employee of an Affiliated Entity, then the provisions of this
paragraph 11 shall apply to such Employee of an Affiliated Entity to the same
extent they would apply to an employee of the Company or a subsidiary and
termination of employment under this paragraph 11 shall include termination of
employment with such Affiliated Entity.
12. DEATH OF HOLDER OF OPTION.
In the event of the death of an employee to whom an option has been
granted under the Plan, unless the option shall have been previously terminated
pursuant to the provisions of paragraph 11 hereof, (i) in the case of an
incentive stock option, if the employee dies while employed by the Company or a
subsidiary or within three months after termination of his or her employment,
such option may be exercised (to the extent exercisable by the employee at the
time of death) by a legatee or legatees of such employee under his or her last
will, or by his or her personal representatives or distributees, or by such
employee's permitted transferee pursuant to paragraph 10, at any time within a
period of one year after his or her death (or such shorter period as may be
specified in the option agreement), but in no event after the expiration date of
such option; and (ii) in the case of a nonqualified stock option (x) if the
employee dies while employed by the Company or a subsidiary, then such option
may be exercised at any time within a period of five years after his or her
death (or such shorter period as may be specified in the option agreement), or
(y) if the employee dies within three months after termination of his or her
employment, then such option may be exercised at any time within a period of one
year after his or her death (or such shorter period as may be specified in the
option agreement) by a legatee or legatees of such employee under his or her
last will, or by his or her personal representatives or distributees, or by such
employee's permitted transferee pursuant to paragraph 10, and, in each case, to
the extent exercisable by such employee at the time of his or her death, but in
no event after the expiration date of such option;
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provided, however, that a nonqualified stock option agreement may provide that
if the employee dies within five years (or such shorter period as may be
specified in the option agreement) after his or her retirement pursuant to any
retirement plan of the Company or a subsidiary, then such option may be
exercised to the same extent and during the same period such option would
otherwise have been exercisable by the employee at the time of his or her death
by a legatee or legatees of such employee under his or her last will or by his
or her personal representatives or distributees, or by such employee's permitted
transferee pursuant to paragraph 10, but not after the expiration date of such
option. Notwithstanding the foregoing, in the event of the death of an employee
to whom an option has been granted under the Plan within one year after the
termination of such employee's employment due to his or her total disability,
such option (unless the option shall have been previously terminated pursuant to
the provisions of paragraph 11 hereof, or unless otherwise provided in such
holder's option agreement) may be exercised to the same extent and during the
same period such option would otherwise have been exercisable by such employee
at the time of his or her death by a legatee or legatees of such employee under
his or her last will, or by his or her personal representatives or distributees,
or by such employee's permitted transferee pursuant to paragraph 10, but not
after the expiration date of such option. If the option agreement provides that
an option may be exercised by an employee who is an Employee of an Affiliated
Entity, then the provisions of this paragraph 12 shall apply to such Employee of
an Affiliated Entity to the same extent they would apply to an employee of the
Company or a subsidiary.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Notwithstanding any other provisions of the Plan, option agreements may
contain such provisions as the Board shall determine to be appropriate for the
adjustment of the number and class of shares subject to each outstanding option
and the option prices in the event of changes in the outstanding Common Stock of
the Company by reason of any stock dividend, distribution, split-up,
recapitalization, combination or exchange of shares, merger, consolidation or
liquidation and the like, and, in the event of any such change in the
outstanding Common Stock of the Company, the aggregate number and class of
shares available under the Plan and the maximum number of shares as to which
options may be granted to any
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individual shall be appropriately adjusted by the Board, whose
determination shall be conclusive.
14. TERMINATION AND AMENDMENT.
Unless the Plan shall theretofore have been terminated as hereinafter
provided, the Plan shall terminate on, and no option shall be granted after,
December 31, 1991. The Board may at any time prior to December 31, 1991
terminate the Plan, and the Board may at any time also modify or amend the Plan
in such respects as it shall deem advisable; provided, however, that the Board
may not, without approval of the holders of a majority of the voting securities
of the Company present, or represented, and entitled to vote at a meeting (i)
increase (except as provided in paragraph 13 hereof) the maximum number of
shares as to which options may be granted under the Plan, (ii) change the class
of employees eligible to receive options, (iii) change the manner of determining
the minimum option prices other than to change the manner of determining the
fair market value of the Common Stock, as set forth in paragraph 5 hereof, or
(iv) extend the period during which options may be granted or exercised. No
termination, modification or amendment of the Plan may, without the consent of
the holder of an option, adversely affect the rights of such holder under such
option.
15. EFFECTIVENESS OF THE PLAN.
The Plan shall become effective upon approval by the vote of a majority
of the voting securities of the Company present, or represented, and entitled to
vote at the 1986 Annual Meeting of Stockholders to be held on April 17, 1986, or
any adjournment thereof. Prior to such approval, the Board may, in its
discretion, grant or authorize the granting of options under the Plan the
exercise of which shall be expressly subject to the condition that the Plan
shall have been so approved. Unless the Plan shall be so approved, the Plan and
all options theretofore granted thereunder shall be and become null and void.
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16. GOVERNMENT AND OTHER REGULATIONS.
The obligation of the Company to sell and deliver shares under the
options granted under the Plan shall be subject to (i) all applicable laws,
rules and regulations and such approvals by any governmental agencies as may be
required, including, without limitation, the effectiveness of a registration
statement under the Securities Act of 1933, and (ii) the condition that the
shares of Common Stock reserved for issuance upon the exercise of options
granted under the Plan shall have been duly listed on the New York Stock
Exchange.
17. TIME OF GRANTING OF OPTIONS.
The effective date of the granting of an option (hereinafter called the
Granting Date) shall be the date on which the Board approves the granting of
such option. Each grantee of an option shall be notified promptly of the grant
of the option and a written option agreement shall promptly be executed and
delivered by or on behalf of the Company and the grantee, provided that such
grant of an option shall expire if a written option agreement is not signed by
such grantee (or his or her agent or attorney) and delivered to the Company
within 60 days after the Granting Date.
18. WITHHOLDING.
The Company's obligation to deliver shares of Common Stock or to pay
cash upon the exercise of any nonqualified stock option or any stock
appreciation right granted under the Plan shall be subject to applicable
federal, state and local tax withholding requirements. Federal, state and local
withholding taxes paid upon the exercise of any nonqualified stock option may be
paid in shares of Common Stock upon such terms and conditions as the Board shall
determine; provided, however, that the Board in its sole discretion may
disapprove such payment and require that such taxes be paid in cash.
19. SEPARABILITY.
If any of the terms or provisions of this Plan conflict with the
requirements of Rule 16b-3 under the Exchange Act (as the same shall be amended
from time to time) and/or Section 422A of the Code (as the same shall be amended
from time to
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time), then such terms or provisions shall be deemed inoperative to the extent
they so conflict with the requirements of said Rule 16b-3 and/or Section 422A of
the Code.
If this Plan does not contain any provision required to be included
herein under Section 422A of the Code (as the same shall be amended from time to
time), such provision shall be deemed to be incorporated herein with the same
force and effect as if such provision had been set out at length herein.
20. NON-EXCLUSIVITY OF THE PLAN.
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
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