NAVARRE CORPORATION
EXHIBIT 10.3
NAVARRE CORPORATION
1992 STOCK OPTION PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.2 Establishment. Navarre Corporation (the "Company") hereby
establishes a plan providing for stock-based compensation incentive awards for
the performance by certain eligible individuals of services for the Company.
This plan shall be known as the Navarre Corporation 1992 Stock Option Plan (the
"Plan").
1.2 Purpose. The purpose of the Plan is to advance the interests of the
Company and its shareholders by enabling the Company to attract and retain
persons of ability to perform services for the Company, by providing an
incentive to such persons through equity participation in the Company and by
rewarding such persons who contribute to the achievement by the Company of its
economic objectives.
ARTICLE 2. DEFINITIONS
The following terms shall have the meanings set forth below, unless the
context clearly otherwise requires:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Broker Exercise Notice" means the written notice described in
section 6.6(b) of the Plan.
2.3 "Change in Control" means an event described in Section 10.1 of
the Plan.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Committee" means a committee of the Board as may be designated by
the Board, from time to time, for the purpose of administering this Plan as
contemplated by Section 3 hereof.
2.6 "Common Stock" means the common stock of the Company, no par value,
or the number and kind of shares of stock or other securities into which such
Common Stock may be changed in accordance with Section 4.3 of the Plan.
2.7 "Disability" means the disability of the Participant as defined in
the long-term disability plan of the Company then covering the Participant or,
if no such plan exists, the permanent and total disability of the Participant
within the meaning of Section 22(e)(3) of the Code.
2.8 "Eligible Recipient" means all employees (including, without
limitation, officers and directors who are also employees and non-employee
directors, consultants and independent contractors of the Company or any
Subsidiary.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.10 "Fair Market Value" with respect to the Common Stock on any given
date shall be determined by the Committee as follows:
(a) If the Common Stock is listed for trading on one of more
national securities exchanges, or is traded on the Nasdaq Stock Market
(including the Nasdaq Small Cap Market), the last reported sales price
on such national securities exchange or the Nasdaq Stock Market on the
day prior to the date in question, or if such Common Stock shall not
have been traded on such principal exchange on such date, the last
reported sales price on such principal exchange on the first day prior
thereto on which such Common Stock was so traded; or
(b) If the Common Stock is not listed for trading on a
national securities exchange or the Nasdaq Stock Market, but is traded
in the over-the-counter market, including the Nasdaq OTC Bulletin
Board, the closing bid price for such Common Stock on day prior to the
date in question, or if there is no closing bid price for such Common
Stock on such date, the closing bid price on the first day prior
thereto on which such price existed; or
(c) If neither (i) nor (ii) is applicable, by any means fair
and reasonable by the Committee, which determination shall be final
and binding on all parties.
2.11 "Incentive Stock Option" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Article 6 of the Plan that
qualifies as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.12 "Non-Employee Director" means a "Non-Employee Director" within the
meaning of Rule 16b-3(b)(3) under the Exchange Act or any successor rule.
2.13 "Non-Qualified Stock Option" means a right to purchase Common
Stock granted to an Eligible Recipient pursuant to Article 6 of the Plan that
does not qualify as an Incentive Stock Option.
2.14 "Option" means an Incentive Stock Option or a Non-Qualified
Stock Option.
2.15 "Outside Director" means a director who (a) is not a current
employee of the Company or any member of an affiliated group which includes the
Company; (b) is not a former employee of the Company who receives compensation
for prior services (other than benefits under a tax-qualified retirement plan)
during the taxable year; (c) has not been an officer of the Company; (d) does
not receive remuneration from the Company, either directly or indirectly, in any
capacity other than as a director, except as otherwise permitted under Code
Section 162(m) and regulations thereunder. For this purpose, remuneration
includes any payment in exchange for goods or services. This definition shall be
further governed by the provisions of Code Section 162(m) and regulations
promulgated thereunder.
2.16 "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if each of
the corporations (other than the Company) owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain.
2.17 "Participant" means an Eligible Recipient who receives one or more
Options or Restricted Stock awards under the Plan.
2.18 "Person" means any individual, corporation, partnership, group,
association or other "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Company, a wholly owned subsidiary of the
Company or any employee benefit plan sponsored by the Company or a wholly owned
subsidiary of the Company.
2.19 "Previously Acquired Shares" means shares of Common Stock that are
already owned by the Participant and shares of Common Stock that are to be
acquired by the Participant pursuant to the exercise of an Option or the
termination of restrictions of a Restricted Stock award.
2.20 "Restricted Stock" means an award of shares of Common Stock that
are subject to restrictions under Article 7 below.
2.21 "Retirement" means the retirement of a Participant pursuant to and
in accordance with the regular or, if approved by the Board for purposes of the
Plan, early retirement/pension plan or practice of the Company or Subsidiary
then covering the Participant.
2.22 "Securities Act" means the Securities Act of 1933, as amended.
2.23 "Subsidiary" means any corporation (other than the Company),
foreign or domestic, in an unbroken chain of corporations (other than the last
corporation in the unbroken chain) that owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
2.24 "Tax Date" means the date any withholding tax obligation arises
under the Code for a Participant with respect to an Option or a Restricted Stock
award.
ARTICLE 3. PLAN ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the Board or by a
Committee of at least two directors, all of whom shall be Outside Directors and
Non-Employee Directors. The Committee may be a subcommittee of the Compensation
Committee of the Board. Members of such a Committee, if established, shall be
appointed from time to time by the Board, shall serve at the pleasure of the
Board and may resign at any time upon written notice to the Board. A majority of
the members of such a Committee shall constitute a quorum. Such a Committee
shall act by majority approval of the members, shall keep minutes of its
meetings and shall provide copies of such minutes to the Board. Action of such a
Committee may be taken without a meeting if unanimous written consent is given.
Copies of minutes of such a Committee's meetings and of its actions by written
consent shall be provided to the Board and kept with the corporate records of
the Company. As used in this Plan, the term "Committee" will refer to the Board
or to such a Committee, if established.
3.2 Authority of the Committee.
(a) In accordance with and subject to the provisions of the
Plan, the Committee shall have the authority to determine (i) the
Eligible Recipients who shall be selected as Participants, (ii) the
nature and extent of the Options to be granted to each Participant
(including the number of shares of Common Stock to be subject to each
Option, the exercise price and the manner in which Options will vest
or become exercisable), (iii) the time or times when Options will be
granted, (iv) the duration of each Option, (v) the restrictions on and
other conditions to the exercisability or vesting of Options, (vi)
such other provisions of the Options as the Committee may deem
necessary or desirable and as consistent with the terms of the Plan,
(vii) the nature and extent of Restricted Stock awards to be granted
to a Participant (including the number of shares of Common Stock to be
subject to such Restricted Stock award, the nature of restrictions and
the performance criteria of such awards), and (viii) such other
provisions of the Restricted Stock awards as the Committee may deem
necessary or desirable and as consistent with the terms of the Plan.
The Committee shall determine the form or forms of the agreements with
Participants which shall evidence the particular terms, conditions,
rights and duties of the Company and the Participants with respect to
Options or Restricted Stock awards granted pursuant to the Plan, which
agreements shall be consistent with the provisions of the Plan.
(b) The Committee may amend the terms of any Stock Option or
Restricted Stock award theretofore granted, prospectively or
retroactively, to the extent such amendment is consistent with the
terms of the Plan, but no such amendment shall impair the rights of
any optionee or recipient of a or Restricted Stock award without his
or her consent except to the extent authorized under the Plan.
(c) The Committee shall have the authority, subject to the
provisions of the Plan, to establish, adopt and revise such rules and
regulations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan. The Committee's decisions and
determinations under the Plan need not be uniform and may be made
selectively among Participants, whether or not such Participants are
similarly situated. Each determination, interpretation or other action
made or taken by the Committee pursuant to the provisions of the Plan
shall be conclusive and binding for all purposes and on all persons,
including, without limitation, the Company and its Subsidiaries, the
shareholders of the Company, the Committee and each of its members,
the directors, officers and employees of the Company and its
Subsidiaries, and the Participants and their respective successors in
interest. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any
Option or a Restricted Stock award granted under the Plan.
(d) Except to the extent prohibited by applicable law or the
applicable rules of a stock exchange, the Committee may delegate to
executive officers of the Company the authority to exercise the powers
specified in clauses (a),(b) and (c) above with respect to persons who
are not either the chief executive officer of the Company or the four
highest paid officers of the Company other than the chief executive
officer.
ARTICLE 4. STOCK SUBJECT TO THE PLAN.
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
below, the maximum number of shares of Common Stock that shall be authorized and
reserved for issuance under the Plan shall be 4,224,000 shares of Common Stock.
The maximum number of shares authorized may also be increased from time to time
by approval of the Board and, if required pursuant to Rule 16b-3 under the
Exchange Act, Section 422 of the Code, or the applicable rules of any securities
exchange or the NASD, the shareholders of the Company.
4.2 Shares Available for Use. Shares of Common Stock that may be issued
upon exercise of Options or as Restricted Stock awards shall be applied to
reduce the maximum number of shares of Common Stock remaining available for use
under the Plan. Any shares of Common Stock that are subject to an Option or a
Restricted Stock award (or any portion thereof) that lapses, expires or for any
reason is terminated unexercised shall automatically again become available for
use under the Plan. Upon a stock-for-stock exercise of an Option or upon the
withholding of shares of Common Stock for the payment of taxes, only the net
number of shares issued to the optionee shall be used to calculate the number of
shares remaining available for distribution under the Plan.
4.3 Adjustments to Shares. In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock dividend,
stock split, combination of shares, rights offering, extraordinary dividend or
divestiture (including a spin-off) or any other change in the corporate
structure or shares of the Company, the Committee (or, if the Company is not the
surviving corporation in any such transaction, the board of directors of the
surviving corporation) shall make appropriate adjustment (which determination
shall be conclusive) as to the number and kind of securities subject to and
reserved under the Plan and, in order to prevent dilution or enlargement of the
rights of Participants, the number, kind and exercise price of securities
subject to outstanding Options and Restricted Stock awards (subject to section
7.3(e). Without limiting the generality of the foregoing, in the event that any
of such transactions are effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities or assets, including cash, with
respect to or in exchange for such Common Stock, all Participants holding
outstanding Options or Restricted Stock awards shall upon the exercise of such
Options or upon the termination of restrictions of such Restricted Stock award
receive, in lieu of any shares of Common Stock they may be entitled to receive,
such stock, securities or assets, including cash, as would have been issued to
such Participants if their Options had been exercised or restrictions of a
Restricted Stock award had lapsed and such Participants had received Common
Stock prior to such transaction.
ARTICLE 5. PARTICIPATION.
Participants in the Plan shall be those Eligible Recipients who, in the
judgment of the Committee, have performed, are performing, or during the term of
an Option or during the period of restrictions under a Restricted Stock award
will perform, services in the management, operation and development of the
Company or any Subsidiary, and significantly contributed, are significantly
contributing or are expected to significantly contribute to the achievement of
corporate economic objectives. Eligible Recipients may be granted from time to
time one or more Options or Restricted Stock awards, as may be determined by the
Committee in its discretion. The number, type, terms and conditions of Options
or Restricted Stock awards granted to various Eligible Recipients need not be
uniform, consistent or in accordance with any plan, regardless of whether such
Eligible Recipients are similarly situated. Upon determination by the Committee
that an Incentive Stock Option is to be granted to an Eligible Recipient,
written notice shall be given such person, specifying the terms, conditions,
rights and duties related thereto. Each Eligible Recipient to whom an Option or
a Restricted Stock award is to be granted shall, if requested by the Committee,
enter into an agreement with the Company, in such form as the Committee shall
determine and which is consistent with the provisions of the Plan, specifying
such terms, conditions, rights and duties. Options or Restricted Stock awards
shall be deemed to be granted as of the date specified in the grant resolution
of the Committee, which date shall be the date of the related agreement with the
Participant.
ARTICLE 6. STOCK OPTIONS.
6.1 Grant. An Eligible Recipient may be granted one or more
Options under the Plan, and such Options shall be subject to such terms and
conditions, consistent with the other provisions of the Plan, as shall be
determined by the Committee in its discretion. The Committee may designate
whether an Option is to be considered an Incentive Stock Option or a
Non-Qualified Stock Option; provided, however, that an Incentive Stock Option
shall be granted only to an Eligible Recipient who is an employee of the Company
or a Subsidiary. The terms of the agreement relating to a Non-Qualified Stock
Option shall expressly provide that such Option shall not be treated as an
Incentive Stock Option. Notwithstanding the foregoing, no Participant shall
receive Options under this Plan which exceed 300,000 shares during any fiscal
year of the Company.
6.2 Exercise. An Option shall become exercisable at such times and in
such installments (which may be cumulative) as shall be determined by the
Committee, in its discretion, at the time the Option is granted. Upon the
completion of its exercise period, an Option, to the extent not then exercised,
shall expire.
6.3 Exercise Price. The per share price to be paid by the Participant
at the time an Option is exercised shall be determined by the Committee, in its
discretion, at the time the Option is granted; provided, however, that such
price shall not be less than (i) 100% of the Fair Market Value of one share of
Common Stock on the date the Option is granted, or (ii) 110% of the Fair Market
Value of one share of Common Stock on the date the Option is granted if the
Participant owns, or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code), more than 10% of the total combined voting power of
all classes of stock of the Company or any Subsidiary or Parent Corporation and
an Incentive Stock Option is granted.
6.4 Duration.
(a) Incentive Stock Options. The period during which an Incentive Stock
Option may be exercised shall be fixed by the Committee, in its discretion, at
the time the Option is granted; provided, however, that in no event shall such
period exceed 10 years from its date of grant or, in the case of a Participant
who owns, or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code), more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or Parent Corporation, five
years from its date of grant.
(b) Non-Qualified Stock Options. The period during which a
Non-Qualified Stock Option may be exercised shall be fixed by the Committee, in
its discretion, at the time the Option is granted.
(c) Effect of Termination of Employment or Other Service.
Notwithstanding this Section 6.4, and except as provided in Articles 9 and 10 of
the Plan, all Options granted to a Participant shall terminate and may no longer
be exercised if the Participant's employment or other service with the Company
and all Subsidiaries ceases.
6.5 Manner of Exercise. An Option may be exercised by a Participant in
whole or in part from time to time, subject to the conditions contained herein
and in the agreement evidencing such Option, by delivery, in person or through
certified or registered mail, of written notice of exercise to the Company at
its principal executive office in New Hope, Minnesota (Attention: President),
and by paying in full the total Option exercise price for the shares of Common
Stock purchased. Such notice shall be in a form satisfactory to the Committee
and shall specify the particular Option (or portion thereof) that is being
exercised and the number of shares with respect to which the Option is being
exercised. Subject to compliance with Section 13.1 of the Plan, the exercise of
the Option shall be deemed effective upon receipt of such notice and payment
complying with the terms of the Plan and the agreement evidencing such Option.
As soon as practicable after the effective exercise of the Option, the
Participant shall be recorded on the stock transfer books of the Company as the
owner of the shares purchased, and the Company shall deliver to the Participant
one or more duly issued stock certificates evidencing such ownership. If a
Participant exercises any Option with respect to some, but not all, of the
shares of Common Stock subject to such Option, the right to exercise such Option
with respect to the remaining shares shall continue until it expires or
terminates in accordance with its terms. An Option shall only be exercisable
with respect to whole shares.
6.6 Payment of Exercise Price.
(a) The total purchase price of the shares to be purchased upon
exercise of an Option shall be paid entirely in cash (including check, bank
draft or money order); provided, however, that the Committee, in its sole
discretion, may at the time of grant provide that such payments may be made, in
whole or in part, by delivery of a Broker Exercise
Notice or a promissory note (containing such terms and conditions as
the Committee may in its discretion determine). As determined by the Committee
at the time of grant or exercise, in its sole discretion, payment in full or
part may also be made by tendering , by either actual delivery of shares or
attestation, to the Company Previously Acquired Shares (which in the case of
stock acquired upon exercise of an option has been owned for more than six
months on the date of surrender); provided however, that in the case of an
Incentive Stock Option, the right to make a payment in the form of Previously
Acquired Shares may be authorized only at the time the Incentive Stock Option is
granted. In determining whether or upon what terms and conditions a Participant
will be permitted to pay the purchase price of an Option in a form other than
cash, the Committee may consider all relevant facts and circumstances,
including, without limitation, the tax and securities law consequences to the
Participant and the Company and the financial accounting consequences to the
Company. In the event the Participant is permitted to pay the total purchase
price of an Option in whole or in part with Previously Acquired Shares, the
value of such shares shall be equal to their Fair Market Value on the date of
exercise of the Option.
(b) For purposes of this Section 6.6, a "Broker Exercise Notice" shall
mean a written notice from a Participant to the Company at its principal
executive office in New Hope, Minnesota (Attention: President), made on a form
and in the manner as the Committee may from time to time determine, pursuant to
which the Participant irrevocably elects to exercise all or any portion of an
Option and irrevocably directs the Company to deliver the Participant's stock
certificates to be issued to such Participant upon such Option exercise directly
to a broker or dealer. A Broker Exercise Notice must be accompanied by or
contain irrevocable instructions to the broker or dealer (i) to promptly sell a
sufficient number of shares of such Common Stock or to loan the Participant a
sufficient amount of money to pay the exercise price for the Options and, if not
otherwise satisfied by the Participant, to fund any related employment and
withholding tax obligations due upon such exercise, and (ii) to promptly remit
such to the Company upon the broker's or dealer's receipt of the stock
certificates.
6.7 Rights as a Shareholder. The Participant shall have no rights as a
shareholder with respect to any shares of Common Stock covered by an Option
until the Participant shall have become the holder of record of such shares, and
no adjustments shall be made for dividends or other distributions or other
rights as to which there is a record date preceding the date the Participant
becomes the holder of record of such shares, except as the Committee may
determine pursuant to Section 4.3 of the Plan.
6.8 Aggregate Limitation of Stock Subject to Incentive Stock Options.
To the extent that the aggregate Fair Market Value (determined as of the date an
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which incentive stock options (within the meaning of Section 422 of the Code)
are exercisable for the first time by a Participant during any calendar year
(under the Plan and any other incentive stock option plans of the Company or any
subsidiary or any parent corporation of the company (within the meaning of
Sections 424(f) and 424(e), respectively, of the Code)) exceeds $100,000 (or
such other amount as may be prescribed by the Code from time to time), such
excess Options shall be treated as Non-Qualified Stock Options. The
determination shall be made by taking Incentive Stock Options into account in
the order in which they were granted. If such excess only applies to a portion
of an Incentive Stock Option, the Committee, in its discretion, shall designate
which shares shall be treated as shares to be acquired upon exercise of an
Incentive Stock Option.
ARTICLE 7. RESTRICTED STOCK.
7.1 Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers, key employees, members of the Board and consultants of
the Company and Subsidiaries to whom, and the time or times at which, grants of
Restricted Stock will be made, the number of shares to be awarded, the time or
times within which such awards may be subject to forfeiture, and all other
conditions of the awards. The Committee may also condition the grant of
Restricted Stock upon the attainment of specified performance goals. The
provisions of Restricted Stock awards need not be the same with respect to each
recipient.
7.2 Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
(a) Each Participant who has received a Restricted Stock award
shall be issued a stock certificate in respect of shares of Restricted
Stock awarded under the Plan. Such certificate shall be registered in
the name of the Participant, and shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to
such award, substantially in the following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Navarre Corporation
1992 Stock Option Plan and an agreement entered into between
the registered owner and Navarre Corporation. Copies of such
Plan and Agreement are on file in the offices of Navarre
Corporation, 7400 49th Ave. N., New Hope, MN 55428."
(b) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of
any Restricted Stock award, the Participant shall have delivered a
stock power, endorsed in blank, relating to the Common Stock covered
by such award.
7.3 Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(a) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the
date of such award (the "Restriction Period"), the Participant shall
not be permitted to sell, transfer, pledge or assign shares of
Restricted Stock awarded under the Plan. Within these limits, the
Committee may provide for the lapse of such restrictions in
installments where deemed appropriate.
(b) Except as provided in paragraph 7.3(a) of this Article 7,
the Participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a shareholder of the Company, including
the right to vote the shares and the right to receive any cash or
stock dividends. The Committee, in its sole discretion, may permit or
require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested in additional shares of Restricted
Stock (but only to the extent shares are available under Article 4).
Any shares of Common Stock, any other securities of the Company and
any other property (except for cash dividends) distributed with
respect to the Common Stock subject to a Restricted Stock award shall
be subject to the same restrictions, terms and conditions as such
Restricted Stock. Certificates for shares of unrestricted Common Stock
shall be delivered to the Participant promptly after, and only after,
the period of forfeiture shall have expired without forfeiture in
respect of such shares of Restricted Stock.
(c) Subject to the provisions of the award agreement and
paragraph (d) of this Section 7.3, upon termination of employment for
any reason during the Restriction Period, all shares still subject to
restriction shall be forfeited by the Participant.
(d) In the event of special hardship circumstances of a
Participant whose employment is terminated (other than for cause),
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a Participant still in service, the
Committee may, in its sole discretion, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in
part any or all remaining restrictions with respect to such
Participant's shares of Restricted Stock.
(e) Notwithstanding the foregoing, in the event of a Change in
Control (as defined in Section 10.1 below) prior to the termination of
any Restriction Period on any outstanding Restricted Stock awards, the
restrictions on all outstanding Restricted Stock awards shall be
removed and all outstanding Restricted Stock shall vest in full in the
Participants as of the date of such Change in Control if Participant
has been continuously employed by the Company or any of its
subsidiaries until the date of such Change in Control.
(f) Subject to Article 11 below, recipients of Restricted
Stock awards under the Plan are not required to make any payment or
provide consideration other than the rendering of services.
ARTICLE 8. CASH BONUSES.
In connection with any grant of Options or Restricted Stock awards or
at any time thereafter, the Committee may, in its discretion, grant a cash bonus
to a Participant in connection with the grant or vesting or exercise of an
Option or a Restricted Stock award. The determination of whether to grant such a
cash bonus, the nature and amount of any such cash bonus and the terms and
conditions of such cash bonus shall be within the discretion of the Committee.
ARTICLE 9. EFFECT OF OPTIONS ON TERMINATION OF EMPLOYMENT OR OTHER SERVICE.
9.1 Termination of Employment or Other Service Due to Death, Disability
or Retirement. Except as otherwise provided in Article 10 of the Plan, in the
event a Participant's employment or other service with the Company and all
Subsidiaries is terminated by reason of such Participant's death, Disability or
Retirement, all outstanding Options then held by the Participant shall remain
exercisable to the extent exercisable as of such termination for a period of
three months after such termination (but in no event after the expiration date
of any such Option).
9.2 Termination of Employment or Other Service for Reasons Other than
Death, Disability or Retirement. Except as otherwise provided in Article 10 of
the Plan, in the event a Participant's employment or other service is terminated
with the Company and all Subsidiaries for any reasons other than death,
Disability or Retirement, all rights of the Participant under the Plan shall
immediately terminate without notice of any kind, and no Options then held by
the Participant shall thereafter be exercisable.
9.3 Modification of Effect of Termination. Notwithstanding the
provisions of this Article 9, upon a Participant's termination of employment or
other service with the Company and all Subsidiaries, the Committee may, in its
discretion (which may be exercised before or following such termination), cause
Options, or any portions thereof, then held by such Participant to become
exercisable and remain exercisable following such termination in the manner
determined by the Committee; provided, however, that no Option shall be
exercisable after the expiration date thereof and any Incentive Stock Option
that remains unexercised more than three months following employment termination
by reason of Retirement or more than one year following employment termination
by reason of Disability shall thereafter be deemed to be a Non-Qualified Stock
Option.
9.4 Date of Termination. Unless the Committee shall otherwise determine
in its discretion, a Participant's employment or other service shall, for
purposes of the Plan, be deemed to have terminated on the date such Participant
ceases to perform services for the Company and all Subsidiaries, as determined
in good faith by the Committee.
ARTICLE 10. CHANGE OF CONTROL.
10.1 Change in Control. For purposes of this Article 10, a "Change in
Control" of the Company shall mean any of the following:
(a) the approval by the shareholders of the Company of (i) any
sale, lease, exchange or other transfer of all or substantially all of
the assets of the Company (in one transaction or in a series of related
transactions) to a corporation that is not controlled by the Company,
(ii) any plan or proposal for the liquidation or dissolution of the
Company, or (iii) any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation or pursuant
to which shares of Company stock would be converted into cash,
securities or other property, other than a merger of the Company in
which shareholders immediately prior to the merger have the same
proportionate ownership of stock of the surviving corporation
immediately after the merger;
(c) a change in control of the Company of a nature that would
be required to be reported (assuming such event has not been
"previously reported") in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act, whether or not the
Company is then subject to such reporting requirement;
(d) the public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed pursuant
to Section 13(d) of the Exchange Act) by the Company or any Person that
such Person has become the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the
Company's then outstanding securities,
(e) individuals who constitute the board of directors of the
Company prior to the transaction cease for any reason to constitute at
least a majority thereof.
10.2 Acceleration of Vesting. If a Change of Control of the Company
shall occur, then, without any action by the Committee or the Board, all
outstanding Options shall become immediately exercisable in full and shall
remain
exercisable during the remaining term thereof, regardless of whether the
Participants to whom such Options have been granted remain in the employ or
service of the Company or any Subsidiary.
10.3 Cash Payment. If a Change in Control of the Company shall occur,
then the Committee, in its discretion, and without the consent of any
Participant affected thereby, may determine that all Participants holding
outstanding Options shall receive, with respect to some or all of the shares of
Common Stock subject to such Options, as of the effective date of any such
Change in Control of the Company, cash in an amount equal to the excess of the
Fair Market Value of such shares immediately prior to the effective date of such
Change in Control of the Company over the exercise price per share of such
Options.
10.4 Limitation on Change in Control Payments. Notwithstanding anything
in Section 10.2 or 10.3 above to the contrary, if, with respect to a
Participant, the acceleration of the exercisability of an Option as provided in
Section 10.2 or the payment of cash in exchange for all or part of an Option as
provided in section 10.3 above (which acceleration or payment could be deemed a
"payment" within the meaning of Section 280G(b)(2) of the Code), together with
any other payments which such Participant has the right to receive from the
Company or any corporation which is a member of an "affiliated group" (as
defined in Section 1504(a) of the Code without regard to Section 1504(b) of the
Code) of which the Company is a member, would constitute a "parachute payment"
(as defined in Section 280G(b)(2) of the Code), then the payments to such
Participant pursuant to Section 10.2 or 10.3 above shall be reduced to the
largest amount as will result in no portion of such payments being subject to
the excise tax imposed by Section 4999 of the Code.
ARTICLE 11. RIGHT TO WITHHOLD; PAYMENT OF WITHHOLDING TAXES.
11.1 General Rules. The Company is entitled to (a) withhold and deduct
from future wages of the Participant (or from other amounts which may be due and
owing to the Participant from the Company), or make other arrangements for the
collection of, all legally required amounts necessary to satisfy any and all
federal, state and local withholding and employment-related tax requirements (i)
attributable to the grant or exercise of an Option or a Restricted Stock award
or to a disqualifying disposition of stock received upon exercise of an
Incentive Stock Option, or (ii) otherwise incurred with respect to an Option or
a Restricted Stock award, or (b) require the Participant promptly to remit the
amount of such withholding to the Company before taking any action with respect
to an Option or a Restricted Stock award.
11.2 Special Rules. Without limiting the generality of Section
11.1 above, the Committee may, in its discretion and subject to such
rules as the Committee may adopt, permit a Participant to satisfy, in
whole or in part, any withholding or employment-related tax
obligations described in Section 11.1 above by agreeing to deliver a
promissory note in payment of some or all of the necessary amounts
(containing such terms as the Committee in its discretion may
determine) or electing to have the Company accept a Broker Exercise
Notice. In addition, the Participant may elect to use Previously
Acquired Shares or to authorize the Company to retain from the number
of shares of Common Stock that would otherwise be delivered to the
Participant upon the exercise of the Option, that number of shares, in
any such case, having a Fair Market Value, on the Tax Date, equal to
the amount necessary to satisfy the withholding or employment-related
taxes due.
ARTICLE 12. RIGHTS OF ELIGIBLE RECIPIENTS AND PARTICIPANTS: TRANSFERABILITY.
12.1 Employment of Service. The adoption of the Plan shall not
interfere with or limit in any way the right of the Company or any Subsidiary to
terminate the employment or service of any Eligible Recipient or Participant at
any time, nor shall it confer upon any Eligible Recipient or Participant any
right to continue in the employ or service of the Company or any Subsidiary.
12.2 Restrictions on Transfer. Other than pursuant to a qualified
domestic relations order (as defined by the Code), no right or interest of any
Participant in an Option prior to the exercise of such Options shall be
assignable or transferable, or subjected to any lien, during the lifetime of the
Participant, either voluntarily or involuntarily, directly or indirectly, by
operation of law or otherwise, including execution, levy, garnishment,
attachment, pledge, divorce or bankruptcy. A Participant shall, however, be
entitled to designate a beneficiary to receive an Option upon such Participant's
death. In the event of a Participant's death, such Participant's rights and
interest in Options shall be transferable by testamentary will or the laws of
descent and distribution, and payment of any amounts due under the Plan shall be
made to, and exercise of any Options (to the extent permitted pursuant to
Article 9 of the Plan) may be made by, the Participant's legal representatives,
heirs or legatees. If in the opinion of the Committee a Participant holding an
Option is disabled from caring for his or her affairs because of mental
condition, physical condition or age, any payments due the Participant may be
made to, and any rights of the Participant under the Plan shall be exercised by,
such Participant's
guardian, conservator or other legal personal representative upon furnishing the
Committee with evidence satisfactory to the Committee of such status.
Notwithstanding the foregoing, the Board or the Committee may, in its
discretion, determine that an Option may be exercised by someone other than the
Optionee and that the Option may be transferable based on the tax and federal
securities laws then in effect for such Options.
12.3 Non-Exclusivity of the Plan. Nothing contained in the Plan is
intended to amend, modify or rescind any previously approved compensation plans
to programs entered into by the Company. The Plan will be construed to be in
addition to any and all such other plans or programs. Neither the adoption of
the Plan nor the submission of the Plan to the shareholders of the Company for
approval will be construed as creating any limitations on the power or authority
of the Board to adopt such additional or other compensation arrangements as the
Board may deem necessary or desirable.
ARTICLE 13. SECURITIES LAW RESTRICTIONS.
13.1 Share Issuances. Notwithstanding any other provision of the Plan
or any agreement entered into pursuant hereto, the Company shall not be required
to issue or deliver any certificate for shares of Common Stock under this Plan,
and an Option shall not be considered to be exercised notwithstanding the tender
by the Participant of any consideration therefor, unless and until each of the
following conditions has been fulfilled:
(a) (i) There shall be in effect with respect to such shares a
registration statement under the Securities Act and any applicable
state securities laws if the Committee, in its discretion, shall have
determined to file, cause to become effective and maintain the
effectiveness of such registration statement; or (ii) if the Committee
has determined not to so register the shares of Common Stock to be
issued under the Plan, (A) exemptions from registration under the
Securities Act and applicable state securities laws shall be available
for such issuance (as determined by counsel to the Company) and (B)
there shall have been received from the Participant (or, in the event
of death or disability, the Participant's heirs(s) or legal
representative(s)) any representations or agreements requested by the
Company in order to permit such issuance to be made pursuant to such
exemptions; and
(b) There shall have been obtained any other consent, approval
or permit from any state or federal governmental agency which the
Committee shall, in its discretion upon the advice of counsel, deem
necessary or advisable.
13.2 Share Transfers. Shares of Common Stock issued pursuant to Options
or Restricted Stock awards granted under the Plan may not be sold, assigned,
transferred, pledged, encumbered or otherwise disposed of, whether voluntarily
or involuntarily, directly or indirectly, by operation of law or otherwise,
except pursuant to registration under the Securities Act and applicable state
securities laws or pursuant to exemptions from such registrations. The Company
may condition the sale, assignment, transfer, pledge, encumbrance or other
disposition of such shares not issued pursuant to an effective and current
registration statement under the Securities Act and all applicable state
securities laws on the receipt from the party to whom the shares of Common Stock
are to be so transferred of any representations or agreements requested by the
Company in order to permit such transfer to be made pursuant to exemptions from
registration under the Securities Act and applicable state securities laws.
13.3 Legends.
(a) Unless a registration statement under the Securities Act
is in effect with respect to the issuance or transfer of shares of
Common Stock under the Plan, each certificate representing any such
shares shall be endorsed with a legend in substantially the following
form, unless counsel for the Company is of the opinion as to any such
certificate that such legend is unnecessary:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR UNDER
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND SUCH STATE LAWS OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE LAWS,
THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF THE COMPANY.
(b) The Committee, in its discretion, may endorse certificates
representing shares issued pursuant to the exercise of Incentive Stock
Options with a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF
ON OR BEFORE (THE LATER OF THE ONE-YEAR OR TWO-YEAR INCENTIVE
STOCK OPTION HOLDING PERIODS), WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMPANY.
ARTICLE 14. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may suspend or terminate the Plan or any portion thereof at
any time, and may amend the plan from time to time in such respects as the Board
may deem advisable in order that Options or Restricted Stock awards under the
Plan shall conform to any change in applicable laws or regulations or in any
other respect the Board may deem to be in the best interests of the Company;
provided, however, that no such amendment shall be effective, without approval
of the shareholders of the Company, if shareholder approval of the amendment is
then required pursuant to Rule 16b-3 under the Exchange Act or any successor
rule or Section 422 of the Code or under the applicable rules or regulations of
any securities exchange or the NASD. No termination, suspension or amendment of
the Plan shall alter or impair any outstanding Option or a Restricted Stock
award without the consent of the Participant affected thereby; provided,
however, that this sentence shall not impair the right of the Committee to take
whatever action it deems appropriate under Section 4.3 or Article 10 of the
Plan.
ARTICLE 15. EFFECTIVE DATE OF THE PLAN.
15.1 Effective Date. The Plan is effective as of September 1, 1992,
the date it was adopted by the Board.
15.2 Duration of the Plan. The Plan shall terminate at midnight on July
1, 2006, and may be terminated prior thereto by Board action. Incentive Stock
Options may only be granted within ten (10) years from the most recent
shareholder approved amendment to the Plan. In no event, however, may any Option
or a Restricted Stock award be granted after termination of the Plan. Options
outstanding upon termination of the Plan may continue to be exercised in
accordance with their terms.
ARTICLE 16. MISCELLANEOUS
16.1 Construction and Headings. The use of the masculine gender shall
also include within its meaning the feminine, and the singular may include the
plural and may include the singular, unless the context clearly indicates to the
contrary. The headings of the Articles, Sections and subparts of the Plan are
for convenience of reading only and are not meant to be of substantive
significance and shall not add or detract from the meaning of such Article,
Section or subpart.
16.2 Public Policy. No person shall have any claim or right to receipt
of an Option or a Restricted Stock award if, in the opinion of counsel to the
Company, such receipt conflicts with law or is opposed to governmental or public
policy.
16.3 Successors and Assigns. This Plan shall be binding upon and inure
to the benefit of the successors and permitted assigns of the Company,
including, without limitation, whether by way of merger, consolidation,
operation of law, assignment, purchase or other acquisition of substantially all
of the assets or business of the Company and any and all such successors and
assigns shall absolutely and unconditionally assume all of the Company's
obligations under the Plan.
16.4 Survival of Provisions. The rights, remedies, agreements,
obligations and covenants contained in or made pursuant to the Plan, any
agreement evidencing an Option or a Restricted Stock award and any other notices
or agreements in connection therewith, including, without limitation, any notice
of exercise of an Option, shall survive the execution and delivery of such
notices and agreements and the delivery and receipt of shares of Common Stock
and shall remain in full force and effect.
ARTICLE 17. GRANTING OF OPTIONS TO DIRECTORS WHO ARE NOT EMPLOYEES.
17.1 Each director who is not an employee of the Company on March 5,
1996 shall receive an Option to purchase 20,000 shares of the Company's Common
Stock at a price equal to the Fair Market Value on the date of grant. Such
Options shall be designated as Non-Qualified Stock Options and shall be subject
to the same terms and provisions as are then in effect with respect to granting
of Non-Qualified Stock Options to salaried officers and key employees of the
Company. Each option shall vest in increments of 20% of the original Option
grant beginning one year from the date of grant and shall expire six years from
the date of grant. Subject to the foregoing, all provisions of this Plan not
inconsistent with the foregoing shall apply to the Options granted to directors
who are not employees except that directors shall always have the right to make
payment by delivery of Broker Exercise Notice or by delivery of previously
acquired shares as provided in Section 6.6 of the Plan.
In addition, each director who is not an employee of the Company and
serves as a director on April 1 of each year, beginning on April 1, 1997, shall
receive an Option to purchase 6,000 shares of Common Stock at a price equal to
Fair Market Value on such date. Such Options shall be designated as
Non-Qualified Stock Options. Each Option shall vest in increments of 20% of the
original Option grant beginning one year from the date of grant and shall expire
on the earlier of (i) six years from the date of grant, and (ii) one year after
the person ceases to serve as a director.
In the event discretionary Options are granted to members of the
Committee, such Options shall be granted by the Board.
As amended by Board of Directors on July 26, 2001
Approved by shareholders on September 13, 2001.