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EXHIBIT 10.18
BAKER HUGHES INCORPORATED
1993 STOCK OPTION PLAN
ARTICLE I
INTRODUCTION
1. PURPOSE. This 1993 Stock Option Plan, which shall be known as the "1993
STOCK OPTION PLAN" and which is hereinafter referred to as the "PLAN," is
intended to promote the interests of Baker Hughes Incorporated ("COMPANY") and
its stockholders by encouraging employees of the Company and its subsidiaries
and non-employee directors of the Company to acquire or increase their equity
interest in the Company, thereby giving them an added incentive to work toward
the continued growth and success of the Company. The Board of Directors also
contemplates that through the adoption of the Plan, the Company, its
subsidiaries and affiliated entities will be better able to compete for the
services of personnel needed for the continued growth and success of the
Company.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in Article
I, Section 4, Article II, Paragraph 3(e), Article III, Paragraph 3(e), and
Article IV, Paragraph 5(e), the aggregate number of shares of Common Stock, $1
par value per share, of the Company ("COMMON STOCK") to be delivered upon
exercise of all options granted under the Plan shall not exceed 6,500,000
shares. In the event the number of shares to be delivered upon the exercise in
full of any option granted under the Plan is reduced for any reason whatsoever
or in the event any option granted under the Plan can no longer under any
circumstances be exercised, the number of shares no longer subject to such
option shall thereupon be released from such option and shall thereafter be
available to be re-optioned under the Plan. Shares issued pursuant to the
exercise of options granted under the Plan shall be fully paid and
nonassessable.
3. ADMINISTRATION OF THE PLAN. Subject to the provisions of the Plan, the
Compensation Committee of the Board of Directors of the Company (the
"COMMITTEE") shall interpret the Plan and all options granted under the Plan,
shall make such rules as it deems necessary for the proper administration of
the Plan, shall make all other determinations necessary or advisable for the
administration of the Plan and shall correct any defect or supply any omission
or reconcile any inconsistency in the Plan or in any option granted under the
Plan in the manner and to the extent that the Committee deems desirable to
carry the Plan or any option into effect. Any action taken or determination
made by the Committee pursuant to this and the other paragraphs of the Plan
shall be conclusive on all parties. The act or determination of a majority of
the Committee shall be deemed to be the act or determination of the Committee.
The Committee shall consist of at least three members of the Board of
Directors of the Company appointed by and holding office during the pleasure of
the Board of Directors of the Company. Other than options granted to Non-
Employee Directors (as hereinafter defined) pursuant to Article IV, no options
may be granted under the Plan to any member of the Committee during the term of
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his membership on the Committee. No person shall be eligible to serve on the
Committee unless he is then a "disinterested person" within the meaning of
Paragraph (d)(3) of Rule 16b-3 ("RULE 16B-3") promulgated under the Securities
Exchange Act of 1934, as amended (the "ACT"), if and as the Rule is then in
effect. The members of the Committee shall be solely "outside directors,"
within the meaning of section 162(m) of the Internal Revenue Code of 1986, as
amended (the "CODE") and applicable interpretive authority thereunder.
4. AMENDMENT AND DISCONTINUANCE OF THE PLAN. The Board of Directors of the
Company may amend, suspend or terminate the Plan; provided, however, that each
such amendment of the Plan (a) extending the period within which options may be
granted under the Plan, (b) increasing the aggregate number of shares of Common
Stock to be optioned under the Plan except as provided in Article II, Paragraph
3(e), Article III, Paragraph 3(e), Article IV, Paragraph 5(e) and the next
succeeding sentence, (c) changing the class of employees to whom options may be
granted under Article II or III, (d) materially increasing the benefits to
optionees under the Plan, (e) modifying the provisions of Article IV, or (f)
granting options to Non-Employee Directors other than pursuant to Article IV,
shall, in each case, be subject to approval by the stockholders of the Company;
provided, further, however, that no amendment, suspension or termination of the
Plan may cause the Plan to fail to meet the requirements of Rule 16b-3 or may,
without the consent of the holder of an option granted under Article II, III, or
IV, terminate such option or adversely affect such person's rights in any
material respect (unless such change is required in order to cause the benefits
under the Plan to qualify as "performance based compensation" within the meaning
of section 162(m) of the Code and applicable interpretive authority thereunder).
The Board of Directors of the Company may increase the aggregate number of
shares of Common Stock that may be issued under the Plan provided that the full
amount of such increase shall be reserved solely for issuance as provided in
Article I, Paragraph 5(a), and provided that the number of shares issuable to
persons subject to Section 16(a) of the Act in connection with such increases
shall not, in the aggregate, exceed 650,000 shares.
5. GRANTING OF OPTIONS TO EMPLOYEES. The Committee shall have authority to
grant, prior to the expiration date of the Plan, to employees of the Company
and its subsidiaries (as defined in section 424 of the Code) ("EMPLOYEE
OPTIONEES"), options to purchase, on the terms and conditions hereinafter set
forth in Articles II and III, authorized but unissued, or reacquired, shares of
Common Stock as follows:
(a) to a broad-based group of Employee Optionees, including those
described in Paragraph 5(b) below, options granted pursuant to Article II,
provided such grants under this Paragraph 5(a) shall, unless increased by
the Board of Directors, be limited to options to purchase 1,500,000 shares
of Common Stock and shall be made only to those Employee Optionees, in such
amounts and at such times as determined in the discretion of the Committee;
and
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(b) to Employee Optionees who are key employees (including officers and
directors who are also key employees), options granted pursuant to Article
II and/or Article III, provided such grants shall be made only to those
Employee Optionees, in such amounts and at such times as determined in the
discretion of the Committee, and, for this purpose, the Committee may
consider the Employee Optionee's office or position, degree of
responsibility for and contribution to the growth and success of the
Company, length of service, age, promotions, potential and any other
factors which it may deem relevant.
Options granted to Employee Optionees under Article III shall be "incentive
stock options," within the meaning of section 422(b) of the Code, and are
hereinafter referred to as "incentive stock options." All other options granted
to Employee Optionees under the Plan shall be granted pursuant to Article II,
and are hereinafter referred to as "nonqualified options." Notwithstanding the
foregoing, grants of options to any one Employee Optionee under the Plan shall
be limited to options to purchase no more than 400,000 shares of Common Stock
per calendar year.
6. GRANTING OF OPTIONS TO NON-EMPLOYEE DIRECTORS. All options granted to Non-
Employee Directors shall be options to purchase, on the terms and conditions
hereinafter set forth in Article IV, authorized but unissued, or reacquired,
shares of Common Stock and shall be nonqualified options.
7. OPTION AGREEMENTS. Each option under the Plan shall be evidenced by a
written agreement between the Company and the Eligible Optionee which shall
contain such terms and conditions, and may be exercisable for such periods, as
may be approved by the Committee, which terms and conditions need not be
identical.
8. EFFECTIVE DATE. The Plan shall become effective as of October 27, 1993,
provided the Plan is approved by the Board of Directors of the Company and
approved by the shareholders of the Company within twelve months thereafter.
Notwithstanding any other provisions of the Plan, no option under the Plan
shall be exercisable prior to such shareholder approval. Except with respect to
options then outstanding, if not sooner terminated under the provisions of
Article I, Paragraph 4, the Plan shall terminate upon and no further options
shall be granted after the expiration of ten years from October 27, 1993.
9. MISCELLANEOUS. All references in the Plan to "Articles," "Paragraphs," and
other subdivisions refer to the corresponding Articles, Paragraphs, and
subdivisions of the Plan.
10. RULE 16B-3 COMPLIANCE. The Company intends:
(a) that the Plan meet the requirements of Rule 16b-3;
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(b) that participation by Non-Employee Directors under Article IV of the
Plan will not prohibit them from being "disinterested persons" within the
meaning of Rule 16b-3(d)(3) with respect to administration of the Plan or
with respect to administration of any other plan of the Company;
(c) that transactions of the type specified in the first paragraph of
Rule 16b-3 by Non-Employee Directors pursuant to Article IV of the Plan
will be exempt from the operation of section 16(b) of the Act; and
(d) that transactions of the type specified in the first paragraph of
Rule 16b-3 by officers of the Company (whether or not they are directors)
pursuant to the Plan will be exempt from the operation of section 16(b) of
the Act. In all cases, the terms, provisions, conditions and limitations of
the Plan shall be construed and interpreted consistent with the Company's
intent as stated in this Article I, Paragraph 10.
11. RECAPITALIZATION OR REORGANIZATION. If (i) the Company shall not be the
surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company), (ii) the Company sells, leases or exchanges all or
substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary of the Company), (iii) the Company is to be dissolved
and liquidated, (iv) any person or entity, including a "group" as contemplated
by section 13(d)(3) of the Act, acquires or gains ownership or control
(including, without limitation, power to vote) of more than 50% of the
outstanding shares of the Company's voting stock (based upon voting power), or
(v) as a result of or in connection with a contested election of directors, the
persons who were directors of the Company before such election shall cease to
constitute a majority of the Board of Directors of the Company (each such event
is referred to herein as a "CORPORATE CHANGE"), no later than (a) ten days
after the approval by the shareholders of the Company of such merger,
consolidation, reorganization, sale, lease or exchange of assets or dissolution
or such election of directors or (b) thirty days after a change of control of
the type described in Clause (iv), the Committee, acting in its sole discretion
without the consent or approval of any optionee, shall act to effect one or
more of the following alternatives, which may vary among individual optionees
and which may vary among options held by any individual optionee: (1)
accelerate the time at which options then outstanding may be exercised so that
such options may be exercised in full for a limited period of time on or before
a specified date (before or after such Corporate Change) fixed by the
Committee, after which specified date all unexercised options and all rights of
optionees thereunder shall terminate, (2) require the mandatory surrender to
the Company by selected optionees of some or all of the outstanding options
held by such optionees (irrespective of whether such options are then
exercisable under the provisions of the Plan) as of a date, before or after
such Corporate Change, specified by the Committee, in which event the Committee
shall thereupon cancel such options and the Company shall pay to each optionee
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an amount of cash per share equal to the excess, if any, of the amount
calculated below (the "CHANGE OF CONTROL VALUE") of the shares subject to such
option over the exercise price(s) under such options for such shares, (3) make
such equitable adjustments to options then outstanding as the Committee deems
appropriate to reflect such Corporate Change (provided, however, that the
Committee may determine in its sole discretion that no adjustment is necessary
to options then outstanding) or (4) provide that thereafter upon any exercise of
an option theretofore granted the optionee shall be entitled to purchase under
such option, in lieu of the number of shares of Common Stock then covered by
such option the number and class of shares of stock or other securities or
property (including, without limitation, cash) to which the optionee would have
been entitled pursuant to the terms of the agreement of merger, consolidation or
sale of assets and dissolution if, immediately prior to such merger,
consolidation or sale of assets and dissolution the optionee had been the holder
of record of the number of shares of Common Stock then covered by such option.
For the purposes of clause (2) above, the "CHANGE OF CONTROL VALUE" shall equal
the amount determined in clause (i), (ii) or (iii), whichever is applicable, as
follows: (i) the per share price offered to shareholders of the Company in any
such merger, consolidation, reorganization, sale of assets or dissolution
transaction, (ii) the price per share offered to shareholders of the Company in
any tender offer or exchange offer whereby a Corporate Change takes place, or
(iii) if such Corporate Change occurs other than pursuant to a tender or
exchange offer, the fair market value per share of the shares into which such
options being surrendered are exercisable, as determined by the Committee as of
the date determined by the Committee to be the date of cancellation and
surrender of such options. In the event that the consideration offered to
shareholders of the Company in any transaction described herein consists of
anything other than cash, the Committee shall determine the fair cash equivalent
of the portion of the consideration offered which is other than cash. Any
adjustment provided for herein shall be subject to any required shareholder
action.
ARTICLE II
NONQUALIFIED STOCK OPTIONS
1. ELIGIBLE EMPLOYEES. All Employee Optionees shall be eligible to receive
nonqualified options under this Article II.
2. CALCULATION OF EXERCISE PRICE. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each nonqualified option
granted under Article II shall be equal to the fair market value per share of
Common Stock at the time of grant as determined by the Committee, based on the
composite transactions in the Common Stock as reported by The Wall Street
Journal, and shall be equal to the per share price of the last sale of Common
Stock on the trading day prior to the grant of such option. The exercise price
for each nonqualified option granted under Article II shall be subject to
adjustment as provided in Article II, Paragraph 3(e).
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3. TERMS AND CONDITIONS OF OPTIONS. Nonqualified options granted under
Article II shall be in such form as the Committee may from time to time
approve. Options granted under Article II shall be subject to the following
terms and conditions and may contain such additional terms and conditions, not
inconsistent with Article II, as the Committee shall deem desirable:
(a) OPTION PERIOD AND CONDITIONS AND LIMITATIONS ON EXERCISE. Subject to
Article II, Paragraph 4, no nonqualified option granted under Article II
shall be exercisable with respect to any of the shares subject to the
option later than the date which is ten years after the date of grant (the
"NONQUALIFIED OPTION EXPIRATION DATE"). To the extent not prohibited by
other provisions of the Plan, each nonqualified option granted under
Article II shall be exercisable at such time or times as the Committee in
its discretion may determine at or prior to the time such option is granted
(unless otherwise extended by the Committee pursuant to Article II,
Paragraph 3 (b)(2)(iii)); provided, however, that unless the Committee
determines otherwise, each nonqualified option granted under Article II
shall be exercisable from time to time, in whole or in part, at any time
prior to the Nonqualified Option Expiration Date.
(b) TERMINATION OF EMPLOYMENT AND DEATH. For purposes of Article II and
each nonqualified option granted under Article II, an Employee Optionee's
employment shall be deemed to have terminated at the close of business on
the day preceding the first date on which he is no longer for any reason
whatsoever (including his death) employed by the Company or a subsidiary of
the Company. An Employee Optionee shall be considered to be in the
employment of the Company or a subsidiary of the Company as long as he
remains an employee of the Company or a subsidiary of the Company, whether
active or on an authorized leave of absence. Any question as to whether and
when there has been a termination of such employment, and the cause of such
termination, shall be determined by the Committee and its determination
shall be final. If an Employee Optionee's employment is terminated for any
reason whatsoever (including his death), each nonqualified option granted
to him under Article II and all of his rights thereunder shall wholly and
completely terminate:
(1) With respect to options not then exercisable, at the time the
Employee Optionee's employment is terminated; and
(2) With respect to options then exercisable:
(i) At the time the Employee Optionee's employment is terminated
if his employment is terminated because he is discharged for fraud,
theft or embezzlement committed against the
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Company or a subsidiary, affiliated entity or customer of the
Company, or for conflict of interest (other than legitimate
competition); or
(ii) At the expiration of a period of one year after the Employee
Optionee's death (but in no event later than the Nonqualified Option
Expiration Date) if the Employee Optionee's employment is terminated
by reason of his death. A nonqualified option granted under Article
II may be exercised by the Employee Optionee's estate or by the
person or persons who acquire the right to exercise his option by
bequest or inheritance with respect to any or all of the shares
remaining subject to his option at the time of his death; or
(iii) Unless it is otherwise provided in the option agreement or
otherwise extended in the discretion of the Committee in the event
of the Employee Optionee's retirement, at the expiration of a period
of three years after the Employee Optionee's employment is
terminated because of retirement (such that the Employee Optionee's
age plus years of service with the Company and its subsidiaries
equals or exceeds sixty-five) or disability (but in no event later
than the Nonqualified Option Expiration Date); or
(iv) At the expiration of a period of three months after the
Employee Optionee's employment is terminated (but in no event later
than the Nonqualified Option Expiration Date) if the Employee
Optionee's employment is terminated for any reason other than his
death, retirement, disability or the reasons specified in Article
II, Paragraph 3 (b)(2)(i).
(c) MANNER OF EXERCISE. In order to exercise a nonqualified option
granted under Article II, the person or persons entitled to exercise it
shall deliver to the Company payment in full for the shares being
purchased, together with any required withholding tax. The payment of the
exercise price for each option granted under Article II and any required
withholding tax shall either be in cash or through delivery to the Company
of shares of Common Stock, or by any combination of cash or shares; the
value of each share of Common Stock delivered shall be deemed to be equal
to the per share price of the last sale of Common Stock on the trading day
prior to the date the option is exercised, based on the composite
transactions in the Common Stock as reported in The Wall Street Journal. If
the Committee so requires, such person or persons shall also deliver a
written representation that all shares being purchased are being acquired
for investment and not with a view to, or for resale in connection with,
any distribution of such shares. An option agreement may, in the discretion
of the Committee, provide for a "cashless exercise" of a nonqualified
option by establishing procedures whereby the Employee Optionee, by a
properly executed written notice, directs (1) an immediate market sale or
margin loan respecting all or a part of the shares of Common Stock to which
he is entitled upon exercise pursuant to an extension of credit by the
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Company to the Employee Optionee of the option price, (2) the delivery of
the shares of Common Stock from the Company directly to a brokerage firm
and (3) the delivery of the option price from sale or margin loan proceeds
from the brokerage firm directly to the Company. An option agreement may
also, in the discretion of the Committee, provide for the withholding of
Federal, state or local income tax upon exercise of a nonqualified option
from any cash or stock remuneration (from the Plan or otherwise) then or
thereafter payable by the Company to the Employee Optionee.
(d) OPTIONS NOT TRANSFERABLE. No nonqualified option granted under
Article II shall be transferable otherwise than by will or by the laws of
descent and distribution and, during the lifetime of the Employee Optionee
to whom any such option is granted, it shall be exercisable only by the
Employee Optionee. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar
process, any nonqualified option granted under Article II, or any right
thereunder, contrary to the provisions hereof, shall be void and
ineffective, shall give no right to the purported transferee, and shall, at
the sole discretion of the Committee, result in forfeiture of the option
with respect to the shares involved in such attempt.
(e) ADJUSTMENT OF SHARES. In the event that at any time after the effective
date of the Plan the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, or
combination of shares, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares subject to Article II (including
shares as to which all outstanding nonqualified options granted under Article
II, or portions thereof then unexercised, shall be exercisable), to the end
that after such event the shares subject to Article II of the Plan and each
Employee Optionee's proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in an outstanding nonqualified
option granted under Article II shall be made without change in the total
price applicable to the option or the unexercised portion of the option
(except for any change in the aggregate price resulting from rounding-off of
share quantities or prices) and with any necessary corresponding adjustment in
exercise price per share. Any such adjustment made by the Committee shall be
final and binding upon all Employee Optionees, the Company, and all other
interested persons.
(f) LISTING AND REGISTRATION OF SHARES. Each nonqualified option granted
under Article II shall be subject to the requirement that if at any time
the Committee determines, in its discretion, that the listing,
registration, or qualification of the shares subject to such option under
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any securities exchange or under any state or Federal law, or the consent
or approval of any governmental regulatory body, is necessary or desirable
as a condition of, or in connection with, the issue or purchase of shares
thereunder, such option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have
been effected or obtained and the same shall have been free of any
conditions not acceptable to the Committee.
4. AMENDMENT. The Committee may, with the consent of the person or persons
entitled to exercise any outstanding nonqualified option granted under Article
II, amend such nonqualified option; provided, however, that any such amendment
shall be subject to shareholder approval when required in Article I, Paragraph
4. The Committee may at any time or from time to time, in its discretion, in
the case of any nonqualified option previously granted under Article II which
is not then immediately exercisable in full, accelerate the time or times at
which such option may be exercised to any earlier time or times. The Committee,
in its absolute discretion, may grant to holders of outstanding nonqualified
options granted under Article II, in exchange for the surrender and
cancellation of such options, new options having exercise prices lower (or
higher) than the exercise price provided in the options so surrendered and
cancelled and containing such other terms and conditions, in accordance with
the terms of the Plan, as the Committee may deem appropriate.
5. OTHER PROVISIONS.
(a) The person or persons entitled to exercise, or who have exercised, a
nonqualified option granted under Article II shall not be entitled to any
rights as a stockholder of the Company with respect to any shares subject to
such option until he shall have become the holder of record of such shares.
(b) No nonqualified option granted under Article II shall be construed as
limiting any right which the Company or any subsidiary of the Company may have
to terminate at any time, with or without cause, the employment of any person
to whom such option has been granted.
(c) Notwithstanding any provision of the Plan or the terms of any
nonqualified option granted under Article II, the Company shall not be required
to issue any shares hereunder if such issuance would, in the judgment of the
Committee, constitute a violation of any state or Federal law or of the rules
or regulations of any governmental regulatory body.
ARTICLE III
INCENTIVE STOCK OPTIONS
1. ELIGIBLE EMPLOYEES. Key employees (including officers and directors who
are also key employees) of the Company and its subsidiaries (as defined in
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section 424 of the Code) shall be eligible to receive incentive stock options,
within the meaning of section 422(b) of the Code, under this Article III.
2. CALCULATION OF EXERCISE PRICE. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each incentive stock option
granted under Article III shall be equal to the fair market value per share of
Common Stock at the time of grant as determined by the Committee, based on the
composite transactions in the Common Stock as reported by The Wall Street
Journal, and shall be equal to the per share price of the last sale of Common
Stock on the trading day prior to the grant of such option; provided, however,
that in the case of an Employee Optionee who, at the time such option is
granted, owns more than 10% of the total combined voting power of all classes
of stock of the Company or any subsidiary corporation, within the meaning of
section 422(b)(6) of the Code, then the exercise price per share shall be at
least 110% of the fair market value per share of Common Stock at the time of
grant. The exercise price for each incentive stock option shall be subject to
adjustment as provided in Article III, Paragraph 3(e).
3. TERMS AND CONDITIONS OF OPTIONS. Incentive stock options granted under
Article III shall be in such form as the Committee may from time to time
approve. Options granted under Article III shall be subject to the following
terms and conditions and may contain such additional terms and conditions, not
inconsistent with Article III, as the Committee shall deem desirable:
(a) OPTION PERIOD AND CONDITIONS AND LIMITATIONS ON EXERCISE. Subject to
Article III, Paragraph 4, no incentive stock option granted under Article
III shall be exercisable with respect to any of the shares subject to such
option later than the date which is ten years after the date of grant;
provided, however, that in the case of an Employee Optionee who, at the
time such option is granted, owns more than 10% of the total combined
voting power of all classes of stock of the Company or any subsidiary
corporation, within the meaning of section 422(b)(6) of the Code, then such
option shall not be exercisable with respect to any of the shares subject
to such option later than five years after the date of grant. The date on
which an incentive stock option ultimately becomes unexercisable under the
previous sentence is hereinafter referred to as the "ISO EXPIRATION DATE."
To the extent not prohibited by other provisions of the Plan, each
incentive stock option granted under Article III shall be exercisable at
such time or times as the Committee in its discretion may determine at or
prior to the time such option is granted (unless otherwise extended by the
Committee pursuant to Article III, Paragraph 3 (b)(2)(iii)); provided,
however, that unless the Committee determines otherwise, each incentive
stock option granted under Article III shall be exercisable from time to
time, in whole or in part, subject to the dollar limitations set forth in
Article III, Paragraph 3(g), at any time prior to the ISO Expiration Date.
(b) TERMINATION OF EMPLOYMENT AND DEATH. For purposes of Article III and
each incentive stock option granted under Article III, an Employee
Optionee's employment shall be deemed to have terminated at the close of
business on the day preceding the first date on which he is no longer for
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any reason whatsoever (including his death) employed by the Company or a
subsidiary of the Company. An Employee Optionee shall be considered to be
in the employment of the Company or a subsidiary of the Company as long as
he remains an employee of the Company or a subsidiary of the Company,
whether active or on an authorized leave of absence. Any question as to
whether and when there has been a termination of such employment, and the
cause of such termination, shall be determined by the Committee and its
determination shall be final. If an Employee Optionee's employment is
terminated by any reason whatsoever (including his death), each incentive
stock option granted to him and all of his rights thereunder shall wholly
and completely terminate:
(1) With respect to options not then exercisable, at the time the
Employee Optionee's employment is terminated; and
(2) With respect to options then exercisable:
(i) At the time the Employee Optionee's employment is terminated
if his employment is terminated because he is discharged for fraud,
theft or embezzlement committed against the Company or a subsidiary,
affiliated entity or customer of the Company, or for conflict of
interest (other than legitimate competition); or
(ii) At the expiration of a period of one year after the Employee
Optionee's death (but in no event later than the ISO Expiration
Date) if the Employee Optionee's employment is terminated by reason
of his death. An incentive stock option granted under Article III of
the Plan may be exercised by the Employee Optionee's estate or by
the person or persons who acquire the right to exercise his option
by bequest or inheritance with respect to any or all of the shares
remaining subject to his option at the time of his death; or
(iii) Unless it is otherwise provided in the option agreement or
otherwise extended in the discretion of the Committee after the date
which is three months after the Employee Optionee's retirement, at
the expiration of a period of three years after the Employee
Optionee's employment is terminated because of retirement (such that
the Employee Optionee's age plus years of service with the Company
and its subsidiaries equals or exceeds sixty-five) or disability
(but in no event later than the ISO Expiration Date); or
(iv) At the expiration of a period of three months after the
Employee Optionee's employment is terminated (but in no event later
than the ISO Expiration Date) if the Employee Optionee's employment
is terminated for any other reason than his death, retirement,
disability or the reasons specified in Article III, Paragraph 3
(b)(2)(i).
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In the event and to the extent that an incentive stock option
granted under Article III is not exercised (i) within three months
after the Employee Optionee's employment is terminated because of
retirement or disability not within the meaning of section 22(e)(3)
of the Code or (ii) within one year after the Employee Optionee's
employment is terminated because of disability within the meaning of
section 22(e)(3) of the Code, such option shall be taxed as a
nonqualified option and shall be subject to the manner of exercise
provisions described in Article II, Paragraph 3(c).
(c) MANNER OF EXERCISE. In order to exercise an incentive stock option
granted under Article III, the person or persons entitled to exercise it
shall deliver to the Company payment in full for the shares being
purchased. The payment of the exercise price for each option granted under
Article III shall either be in cash or through delivery to the Company of
shares of Common Stock, or by any combination of cash or shares; the value
of each share of Common Stock delivered shall be deemed to be equal to the
per share price of the last sale of Common Stock on the trading day prior
to the date the option is exercised, based on the composite transactions in
the Common Stock as reported in The Wall Street Journal. If the Committee
so requires, such person or persons shall also deliver a written
representation that all shares being purchased are being acquired for
investment and not with a view to, or for resale in connection with, any
distribution of such shares. An option agreement may, in the discretion of
the Committee, provide for a "cashless exercise" of an incentive stock
option by establishing procedures whereby the Employee Optionee, by a
properly executed written notice, directs (1) an immediate market sale or
margin loan respecting all or a part of the shares of Common Stock to which
he is entitled upon exercise pursuant to an extension of credit by the
Company to the Employee Optionee of the option price, (2) the delivery of
the shares of Common Stock from the Company directly to a brokerage firm
and (3) the delivery of the option price from sale or margin loan proceeds
from the brokerage firm directly to the Company. An option agreement may
also, in the discretion of the Committee, provide for the withholding of
Federal, state or local income tax upon exercise of an incentive stock
option from any cash or stock remuneration (from the Plan or otherwise)
then or thereafter payable by the Company to the Employee Optionee.
(d) OPTIONS NOT TRANSFERABLE. No incentive stock option granted under
Article III shall be transferable otherwise than by will or by the laws of
descent and distribution and, during the lifetime of the Employee Optionee
to whom any option is granted, it shall be exercisable only by such
Employee Optionee. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar
process, any incentive stock option granted under Article III, or any right
thereunder, contrary to the provisions hereof, shall be void and
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ineffective, shall give no right to the purported transferee, and shall, at
the sole discretion of the Committee, result in forfeiture of the option
with respect to the shares involved in such attempt.
(e) ADJUSTMENT OF SHARES. In the event that at any time after the
effective date of the Plan the outstanding shares of Common Stock are
changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split, stock
dividend, or combination of shares, the Committee shall make an appropriate
and equitable adjustment in the number and kind of shares subject to
Article III (including shares as to which all outstanding incentive stock
options granted under Article III, or portions thereof then unexercised,
shall be exercisable), to the end that after such event the shares subject
to Article III of the Plan and each Employee Optionee's proportionate
interest shall be maintained as before the occurrence of such event. Such
adjustment in an outstanding incentive stock option shall be made without
change in the total price applicable to the option or the unexercised
portion of the option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in exercise price per share. Any such
adjustment made by the Committee shall be final and binding upon all
Employee Optionees, the Company, and all other interested persons. Any
adjustment of an incentive stock option under this paragraph shall be made
in such manner as not to constitute a "modification" within the meaning of
section 424(h)(3) of the Code.
(f) LISTING AND REGISTRATION OF SHARES. Each incentive stock option
granted under Article III shall be subject to the requirement that if at
any time the Committee determines, in its discretion, that the listing,
registration, or qualification of the shares subject to such option upon
any securities exchange or under any state or Federal law, or the consent
or approval of any governmental regulatory body, is necessary or desirable
as a condition of, or in connection with, the issue or purchase of shares
thereunder, such option may not be exercised in whole or in part unless
such listing, registration qualification, consent or approval shall have
been effected or obtained and the same shall have been free of any
conditions not acceptable to the Committee.
(g) LIMITATION ON AMOUNT. Notwithstanding any other provision of the
Plan, the aggregate fair market value (determined as of the time the
incentive stock option is granted) of the Common Stock with respect to
which incentive stock options are exercisable for the first time by an
Employee Optionee, under all incentive stock option plans of the Company
and its subsidiaries, during any calendar year cannot exceed $100,000 as
provided under section 422(d) of the Code.
4. AMENDMENT. The Committee may, with the consent of the person or persons
entitled to exercise any outstanding incentive stock option granted under
Article III, amend such incentive stock option; provided, however, that any
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such amendment shall be subject to shareholder approval when required in
Article I, Paragraph 4. Subject to Article III, Paragraph 3(g), the Committee
may at any time or from time to time, in its discretion, in the case of any
incentive stock option previously granted under Article III which is not then
immediately exercisable in full, accelerate the time or times at which such
option may be exercised to any earlier time or times.
5. OTHER PROVISIONS.
(a) The person or persons entitled to exercise, or who have exercised, an
incentive stock option granted under Article III shall not be entitled to
any rights as a stockholder of the Company with respect to any shares
subject to such option until he shall have become the holder of record of
such shares.
(b) No incentive stock option granted under Article III shall be
construed as limiting any right which the Company or any subsidiary of the
Company may have to terminate at any time, with or without cause, the
employment of any person to whom such option has been granted.
(c) Notwithstanding any provision of the Plan or the terms of any
incentive stock option granted under Article III, the Company shall not be
required to issue any shares hereunder if such issuance would, in the
judgment of the Committee, constitute a violation of any state or Federal
law or of the rules or regulations of any governmental regulatory body.
(d) The Committee may require any person who exercises an incentive stock
option to give prompt notice to the Company of any disposition of shares of
Common Stock acquired upon exercise of an incentive stock option within one
year after the transfer of shares to such person.
ARTICLE IV
NON-EMPLOYEE DIRECTOR STOCK OPTIONS
1. ELIGIBLE PERSONS. Persons who are members of the Board of Directors of the
Company but are not employees of the Company or of its subsidiaries ("NON-
EMPLOYEE DIRECTORS") shall be eligible to receive options under, and solely
under, this Article IV.
2. INITIAL AND ANNUAL GRANTING OF OPTIONS TO NON-EMPLOYEE DIRECTORS. Subject
to the limitation of the number of shares of Common Stock set forth in Article
I, Paragraph 2, (a) a nonqualified option to purchase 2,000 shares of Common
Stock is hereby granted to each Non-Employee Director who is elected or
appointed to the Board of Directors of the Company after the effective date of
the Plan and prior to the expiration of the Plan, effective on the date of his
initial election or appointment, if applicable (which date shall be the date of
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grant for purposes hereof), and (b) a nonqualified option to purchase 1,000
shares of Common Stock is hereby granted, effective the fourth Wednesday of
October of each year from and after the effective date of the Plan until the
expiration of the Plan, to each person who is a Non-Employee Director on each
such date (which date shall be the date of grant for purposes hereof). The Non-
Employee Director grants set forth in this Article IV, Paragraph 2 are provided
to replace and supersede, and not to supplement, the Non-Employee Director
grants provided in Article IV, Paragraph 2 and Paragraph 3 of the Company's
1987 Stock Option Plan.
3. ADDITIONAL GRANTING OF OPTIONS TO NON-EMPLOYEE DIRECTORS. Subject to the
limitation of the number of shares of Common Stock set forth in Article I,
Paragraph 2, Non-Employee Directors shall, in the discretion of the Committee,
be eligible to receive additional nonqualified options under this Article IV in
lieu of directors fees and/or retainers, in accordance with such terms as may
be approved by the Committee.
4. CALCULATION OF EXERCISE PRICE. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each option granted under
Article IV shall be equal to the fair market value per share of Common Stock at
the time of grant as determined by the Committee, based on the composite
transactions in the Common Stock as reported by The Wall Street Journal, and
shall be equal to the per share price of the last sale of Common Stock on the
trading day prior to the grant of such option, provided, that the exercise
price of each option granted under Article IV, Paragraph 3 may, in the
discretion of the Committee, be discounted from fair market value. The exercise
price for each option granted under Article IV shall be subject to adjustment
as provided in Article IV, Paragraph 5(e).
5. TERMS AND CONDITIONS OF OPTIONS. Subject to the provisions of this Article
IV, Paragraph 5, options granted under Article IV shall be in such form as the
Committee may from time to time approve. Options granted under Article IV shall
be subject to the following terms and conditions:
(a) OPTION PERIOD AND CONDITIONS AND LIMITATIONS ON EXERCISE. Each option
granted under Article IV shall be exercisable from time to time, in whole
or in part, at any time after one year from the date of grant and prior to
the date which is seven years after the date of grant (the "OPTION
EXPIRATION DATE").
(b) TERMINATION OF DIRECTORSHIP AND DEATH. For purposes of Article IV and
each option granted under Article IV, a Non-Employee Director's
directorship shall be deemed to have terminated at the close of business on
the day preceding the first date on which he ceases to be a member of the
Board of Directors of the Company for any reason whatsoever (including his
death). If a Non-Employee Director's directorship is terminated for any
reason whatsoever (including his death), each option granted to him under
Article IV and all of his rights thereunder shall wholly and completely
terminate:
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(1) With respect to each option granted within the one-year period
preceding such termination, at the time the Non-Employee Director's
directorship is terminated; and
(2) With respect to each option granted prior to the one-year period
preceding such termination:
(i) At the time the Non-Employee Director's directorship is
terminated if his directorship is terminated as a result of his
removal from the Board of Directors for cause (other than disability
or in accordance with the provision of the Company's Bylaws
regarding automatic termination of directors' terms of office); or
(ii) At the expiration of a period of one year after the Non-
Employee Director's death (but in no event later than the Option
Expiration Date) if the Non-Employee Director's directorship is
terminated by reason of his death. An option granted under Article
IV may be exercised by the Non-Employee Director's estate or by the
person or persons who acquire the right to exercise his option by
bequest or inheritance with respect to any or all of the shares
remaining subject to his option at the time of his death; or
(iii) At the expiration of a period of three years after the Non-
Employee Director's directorship is terminated as a result of such
person's resignation or removal from the Board of Directors of the
Company because of disability or in accordance with the provisions
of the Company's Bylaws regarding automatic termination of
directors' terms of office (but in no event later than the Option
Expiration Date); or
(iv) At the expiration of a period of three months after the Non-
Employee Director's directorship is terminated (but in no event
later than the Option Expiration Date) if the Non-Employee
Director's directorship is terminated for any reason other than the
reasons specified in Article IV, Paragraphs 5 (b)(2)(i) through 5
(b)(2)(iii).
(c) MANNER OF EXERCISE. In order to exercise an option granted under
Article IV, the person or persons entitled to exercise it shall deliver to
the Company payment in full for the shares being purchased, together with
any required withholding tax. The payment of the exercise price for each
option granted under Article IV and any required withholding tax shall
either be in cash or through delivery to the Company of shares of Common
Stock, or by any combination of cash or shares; the value of each share of
Common Stock delivered shall be deemed to be equal to the per share price
of the last sale of Common Stock on the trading day prior to the date the
option is exercised, based on the composite transactions in the Common
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Stock as reported in The Wall Street Journal. If the Committee so requires,
such person or persons shall also deliver a written representation that all
shares being purchased are being acquired for investment and not with a
view to, or for resale in connection with, any distribution of such shares.
An option agreement may, in the discretion of the Committee, provide for a
"cashless exercise" of a nonqualified option by establishing procedures
whereby the Non-Employee Director, by a properly executed written notice,
directs (1) an immediate market sale or margin loan respecting all or a
part of the shares of Common Stock to which he is entitled upon exercise
pursuant to an extension of credit by the Company to the Non-Employee
Director of the option price, (2) the delivery of the shares of Common
Stock from the Company directly to a brokerage firm and (3) the delivery of
the option price from sale or margin loan proceeds from the brokerage firm
directly to the Company. An option agreement may also, in the discretion of
the Committee, provide for the withholding of Federal, state or local
income tax upon exercise of a nonqualified option from any cash or stock
remuneration (from the Plan or otherwise) then or thereafter payable by the
Company to the Non-Employee Director.
(d) OPTIONS NOT TRANSFERABLE. No option granted under Article IV shall be
transferable otherwise than by will or by the laws of descent and
distribution and, during the lifetime of the Non-Employee Director to whom
any such option is granted, it shall be exercisable only by such Non-
Employee Director. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar
process, any option granted under Article IV, or any right thereunder,
contrary to the provisions hereof, shall be void and ineffective, shall
give no right to the purported transferee, and shall, at the sole
discretion of the Committee, result in forfeiture of the option with
respect to the shares involved in such attempt.
(e) ADJUSTMENT OF SHARES. In the event that at any time after the
effective date of the Plan the outstanding shares of Common Stock are
changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split, stock
dividend, or combination of shares, the Committee shall make an appropriate
and equitable adjustment in the number and kind of shares subject to
Article IV (including shares as to which all outstanding options granted
under Article IV, or portions thereof then unexercised, shall be
exercisable), to the end that after such event the shares subject to
Article IV of the Plan and each Non-Employee Director's proportionate
interest shall be maintained as before the occurrence of such event. Such
adjustment in an outstanding option granted under Article IV shall be made
without change in the total price applicable to the option or the
unexercised portion of the option (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices) and with
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any necessary corresponding adjustment in exercise price per share. Any
such adjustment made by the Committee shall be final and binding upon all
Non-Employee Directors, the Company, and all other interested persons.
(f) LISTING AND REGISTRATION OF SHARES. Each option granted under Article
IV shall be subject to the requirement that if at any time the Committee
determines, in its discretion, that the listing, registration, or
qualification of the shares subject to such option under any securities
exchange or under any state or Federal law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, the issue or purchase of shares thereunder, such
option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected
or obtained and the same shall have been free of any conditions not
acceptable to the Committee.
6. AMENDMENT. The Committee may, with the consent of the person or persons
entitled to exercise any outstanding nonqualified option granted under Article
IV, amend such nonqualified option; provided, however, that any such amendment
shall be subject to shareholder approval when required in Article I, Paragraph
4.
7. OTHER PROVISIONS.
(a) The person or persons entitled to exercise, or who have exercised, an
option granted under Article IV shall not be entitled to any rights as a
stockholder of the Company with respect to any shares subject to such
option until he shall have become the holder of record of such shares.
(b) No option granted under Article IV shall be construed as limiting any
right which either the stockholders of the Company or the Board of
Directors of the Company may have to remove at any time, with or without
cause, any person to whom such option has been granted from the Board of
Directors of the Company.
(c) Notwithstanding any provision of the Plan or the terms of any option
granted under Article IV, the Company shall not be required to issue any
shares hereunder if such issuance would, in the judgment of the Committee,
constitute a violation of any state or Federal law or of the rules or
regulations of any governmental regulatory body.
(d) Notwithstanding any provision of the Plan, the Committee may not
exercise any discretion with respect to this Article IV which would be
inconsistent with the intent that (i) the Plan meet the requirements of
Rule 16b-3 promulgated by the Securities Exchange Commission under the Act
and (ii) any Non-Employee Director who is eligible to receive a grant or to
whom a grant is made pursuant this Article IV will not for such reason
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cease to be a "disinterested person" within the meaning of such Rule 16b-3
with respect to the Plan and other stock related plans of the Company or
any of its affiliates. Specifically, in the event of a Corporate Change, as
defined in Article I, Paragraph 11, the Committee may, with respect to
options under this Article IV, only exercise the alternative in clause (2)
of Article I, Paragraph 11, or such other alternatives specified in Article
I, Paragraph 11 as would not, in the opinion of legal counsel of the
Company, violate the limitations contained in the immediately preceding
sentence.
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