EXHIBIT 10(a)
DIGI INTERNATIONAL INC.
STOCK OPTION PLAN
AS AMENDED AND RESTATED
AS OF JANUARY 22, 2003
1. Purpose of Plan. The purpose of this Digi International Inc. Stock Option
Plan (the "Plan"), is to promote the interests of Digi International Inc., a
Delaware corporation (the "Company"), and its stockholders by providing key
personnel of the Company and its subsidiaries with an opportunity to acquire a
proprietary interest in the Company and thereby develop a stronger incentive to
put forth maximum effort for the continued success and growth of the Company and
its subsidiaries. In addition, the opportunity to acquire a proprietary interest
in the Company will aid in attracting and retaining key personnel of outstanding
ability.
2. Administration of Plan. This Plan shall be administered by a committee of two
or more directors (the "Committee") appointed by the Company's board of
directors (the "Board"). No person shall serve as a member of the Committee
unless such person shall be a "Non-Employee Director" as that term is defined in
Rule 16b-3(a)(3)(i), promulgated under the Securities Exchange Act of 1934, as
amended (the "Act"), or any successor statute or regulation comprehending the
same subject matter. A majority of the members of the Committee shall constitute
a quorum for any meeting of the Committee, and the acts of a majority of the
members present at any meeting at which a quorum is present or the acts
unanimously approved in writing by all members of the Committee shall be the
acts of the Committee. Subject to the provisions of this Plan, the Committee may
from time to time adopt such rules for the administration of this Plan as it
deems appropriate. The decision of the Committee on any matter affecting this
Plan or the rights and obligations arising under this Plan or any option granted
hereunder, shall be final, conclusive and binding upon all persons, including
without limitation the Company, stockholders, employees and optionees. To the
full extent permitted by law, (i) no member of the Committee or the CEO Stock
Option Committee (as defined in this paragraph 2) shall be liable for any action
or determination taken or made in good faith with respect to this Plan or any
option granted hereunder and (ii) the members of the Committee and the CEO Stock
Option Committee shall be entitled to indemnification by the Company against and
from any loss incurred by such member or person by reason of any such actions
and determinations. The Committee may delegate all or any part of its authority
under this Plan to a one person committee consisting of the Chief Executive
Officer of the Company as its sole member (the "CEO Stock Option Committee") for
purposes of granting and administering awards granted to persons other than
persons who are then subject to the reporting requirements of Section 16 of the
Exchange Act ("Section 16 Individuals").
3. Shares Subject to Plan. The shares that may be made subject to options
granted under this Plan shall be authorized and unissued shares of common stock
(the "Common Shares") of the Company, $.01 par value, or Common Shares held in
treasury, and they shall not exceed 4,129,400 in the aggregate, except that, if
any option lapses or terminates for any reason before such option has been
completely exercised, the Common Shares covered by the unexercised portion of
such option may
again be made subject to options granted under this Plan. Appropriate
adjustments in the number of shares and in the purchase price per share may be
made by the Committee in its sole discretion to give effect to adjustments made
in the number of outstanding Common Shares of the Company through a merger,
consolidation, recapitalization, reclassification, combination, stock dividend,
stock split or other relevant change, provided that fractional shares shall be
rounded to the nearest whole share.
4. Eligible Participants. Options may be granted under this Plan to any key
employee of the Company or any subsidiary thereof, including any such employee
who is also an officer or director of the Company or any subsidiary thereof.
Nonstatutory stock options, as defined in paragraph 5(a) hereof, also shall be
granted to directors of the Company who are not employees of the Company or any
subsidiary thereof (the "Outside Directors") in accordance with paragraph 6
hereof and may also be granted to other individuals or entities who are not
"employees" but who provide services to the Company or a parent or subsidiary
thereof in the capacity of an Outside Director, advisor or consultant.
References herein to "employed," "employment" and similar terms (except
"employee") shall include the providing of services in any such capacity or as a
director. The employees and other individuals and entities to whom options may
be granted pursuant to this paragraph 4 are referred to herein as "Eligible
Participants."
5. Terms and Conditions of Employee Options.
(a) Subject to the terms and conditions of this Plan, the Committee
may, from time to time prior to December 1, 2006, grant to such
Eligible Participants as the Committee may determine options to
purchase such number of Common Shares of the Company on such terms and
conditions as the Committee may determine; provided, however, that no
Eligible Participant may be granted options with respect to more than
250,000 Common Shares during any calendar year. In determining the
Eligible Participants to whom options shall be granted and the number
of Common Shares to be covered by each option, the Committee may take
into account the nature of the services rendered by the respective
Eligible Participants, their present and potential contributions to the
success of the Company, and such other factors as the Committee in its
sole discretion shall deem relevant. The date and time of approval by
the Committee of the granting of an option shall be considered the date
and the time of the grant of such option. The Committee in its sole
discretion may designate whether an option granted to an employee is to
be considered an "incentive stock option" (as that term is defined in
Section 422 of the Internal Revenue Code of 1986, as amended, or any
amendment thereto (the "Code")) or a nonstatutory stock option (an
option granted under this Plan that is not intended to be an "incentive
stock option"). The Committee may grant both incentive stock options
and nonstatutory stock options to the same employee. However, if an
incentive stock option and a nonstatutory stock option are awarded
simultaneously, such options shall be deemed to have been awarded in
separate grants, shall be clearly identified, and in no event shall the
exercise of one such option affect the right to exercise the other. To
the extent that the aggregate Fair Market Value (as defined in
paragraph 5(c)) of Common Shares with respect to which incentive stock
options (determined without regard to this sentence) are exercisable
for the first time by any individual during any calendar year (under
all plans of the Company and its
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parent and subsidiary corporations) exceeds $100,000, such options
shall be treated as nonstatutory stock options.
(b) The purchase price of each Common Share subject to an
option granted pursuant to this paragraph 5 shall be fixed by the
Committee. For nonstatutory stock options, such purchase price may be
set at not less than 50% of the Fair Market Value (as defined below) of
a Common Share on the date of grant. For incentive stock options, such
purchase price shall be no less than 100% of the Fair Market Value of a
Common Share on the date of grant, provided that if such incentive
stock option is granted to an employee who owns, or is deemed under
Section 424(d) of the Code to own, at the time such option is granted,
stock of the Company (or of any parent or subsidiary of the Company)
possessing more than 10% of the total combined voting power of all
classes of stock therein (a "10% Stockholder"), such purchase price
shall be no less than 110% of the Fair Market Value of a Common Share
on the date of grant.
(c) For purposes of this Plan, the "Fair Market Value" of a
Common Share at a specified date shall, unless otherwise expressly
provided in this Plan, mean the closing sale price of a Common Share on
the date immediately preceding such date or, if no sale of such shares
shall have occurred on that date, on the next preceding day on which a
sale of such shares occurred, on the Composite Tape for New York Stock
Exchange listed shares or, if such shares are not quoted on the
Composite Tape for New York Stock Exchange listed shares, on the
principal United States securities exchange registered under the Act,
on which the shares are listed, or, if such shares are not listed on
any such exchange, on the Nasdaq Stock Market or any similar system
then in use or, if such shares are not included on the Nasdaq Stock
Market or any similar system then in use, the mean between the closing
"bid" and the closing "asked" quotation of such a share on the date
immediately preceding the date as of which such Fair Market Value is
being determined, or, if no closing bid or asked quotation is made on
that date, on the next preceding day on which a quotation is made, on
an NASD System or any similar system then in use, provided that if the
shares in question are not quoted on any such system, Fair Market Value
shall be what the Committee determines in good faith to be 100% of the
fair market value of such a share as of the date in question.
Notwithstanding anything stated in this paragraph, if the applicable
securities exchange or system has closed for the day by the time the
determination is being made, all references in this paragraph to the
date immediately preceding the date in question shall be deemed to be
references to the date in question.
(d) Each option agreement provided for in paragraph 14 hereof
shall specify when each option granted under this Plan shall become
exercisable.
(e) Each option granted pursuant to this paragraph 5 and all
rights to purchase shares thereunder shall cease on the earliest of:
(i) ten years after the date such option is granted
(or in the case of an incentive stock option granted to a 10%
Stockholder, five years after the date such option is granted)
or on such date prior thereto as may be fixed by the Committee
on or before the date such option is granted;
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(ii) the expiration of the period after the
termination of the optionee's employment within which the
option is exercisable as specified in paragraph 8(b) or 8(c),
whichever is applicable; or
(iii) the date, if any, fixed for cancellation
pursuant to paragraph 9 of this Plan.
In no event shall any option be exercisable at any time after its original
expiration date. When an option is no longer exercisable, it shall be deemed to
have lapsed or terminated and will no longer be outstanding.
6. Terms and Conditions of Outside Director Options.
(a) Subject to the terms and conditions of this Plan, the
Committee shall grant options to each Outside Director who is not on
the date such option would be granted the beneficial owner (as defined
in Rule 13d-3 under the Act) of more than 5% of the outstanding Common
Shares, on the terms and conditions set forth in this paragraph 6.
During the term of this Plan and provided that sufficient Common Shares
are available pursuant to paragraph 3:
(i) each person who is elected to be an Outside
Director and who was not at any time previously a director of
the Company shall be granted a nonstatutory stock option. The
date such person is elected to be an Outside Director of the
Company shall be the date of grant for such options granted
pursuant to this subparagraph 6(a)(i). The number of Common
Shares covered by each such option shall be 7,500;
(ii) each person who is an Outside Director at the
conclusion of an Annual Meeting of Stockholders shall be
granted a nonstatutory stock option on the date of such Annual
Meeting of Stockholders. The date of such Annual Meeting of
Stockholders shall also be the date of grant for options
granted pursuant to this subparagraph 6(a)(ii). The number of
Common Shares covered by each such option shall be 2,500;
(iii) each person who is elected to be an Outside
Director between Annual Meetings of Stockholders shall be
granted a nonstatutory stock option. The date such person is
elected to be an Outside Director of the Company by the Board
shall be the date of grant for such options granted pursuant
to this subparagraph 6(a)(iii). The number of Common Shares
covered by each such option shall be 2,500 multiplied by a
fraction, the numerator of which shall be 12 minus the number
of whole 30-day months that have elapsed from the date of the
most recent Annual Meeting of Stockholders to the date such
person is elected to be an Outside Director, and the
denominator of which shall be 12;
(iv) each person who is an Outside Director at the
conclusion of an Annual Meeting of Stockholders may elect in
writing to be granted a nonstatutory stock option on the date
of such Annual Meeting of Stockholders in lieu of all cash
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compensation to which such Outside Director would be entitled
for the Board year of the Company commencing with such Annual
Meeting of Stockholders. The date of such Annual Meeting of
Stockholders shall also be the date of grant for options
granted pursuant to this subparagraph 6(a)(iv). The number of
Common Shares covered by each such option shall be 9,500. Any
such election by an Outside Director shall be subject to prior
approval by the Committee; and
(v) each person who is elected to be an Outside
Director between Annual Meetings of Stockholders may elect in
writing to be granted a nonstatutory stock option in lieu of
all cash compensation to which such Outside Director would
otherwise be entitled for the period commencing with the date
such person is elected to be an Outside Director of the
Company by the Board and ending on the date of the next Annual
Meeting of Stockholders. The date such person is elected to be
an Outside Director of the Company by the Board shall be the
date of grant for such options granted pursuant to this
subparagraph 6(a)(v). The number of Common Shares covered by
each such option shall be 9,500 multiplied by a fraction, the
numerator of which shall be 12 minus the number of whole
30-day months that have elapsed from the date of the most
recent Annual Meeting of Stockholders to the date such person
is elected to be an Outside Director, and the denominator of
which shall be 12. Such election by an Outside Director shall
be subject to prior approval by the Committee.
(b) The purchase price of each Common Share subject to an
option granted to an Outside Director pursuant to this paragraph 6
shall be the Fair Market Value of a Common Share on the date of grant.
(c)(i) Subject to the provisions of paragraphs 6(d) and 6(e)
hereof, (x) options granted to Outside Directors pursuant to
subparagraph 6(a)(ii) and (iv) and (y) options granted to Outside
Directors pursuant to subparagraph 6(a)(i) if the date of grant of such
options is the date of an Annual Meeting of Stockholders shall vest and
become exercisable in accordance with the following schedule:
Annual Meeting Cumulative Percentage
of Stockholders Becoming Exercisable
--------------- ---------------------
One Year After Grant 50%
Two Years After Grant 100%
(ii) Subject to the provisions of paragraph 6(d) and
6(e) hereof, (x) the options granted to Outside Directors
pursuant to subparagraphs 6(a)(iii) and (v) and (y) options
granted to Outside Directors pursuant to subparagraph 6(a)(i)
if the date of grant of such options is a date other than the
date of an Annual Meeting of Stockholders shall vest and
become exercisable in accordance with the following schedule:
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Anniversary of the Cumulative Percentage
Date of Grant Becoming Exercisable
------------------ ---------------------
One Year After Grant 50%
Two Years After Grant 100%
(d) Notwithstanding the vesting schedules set forth in
paragraph 6(c) hereof, an option held by an Outside Director shall vest
and become immediately exercisable upon the latest of (i) the date on
which such Outside Director attains 62 years of age, (ii) the date on
which such Outside Director has completed five years of Service (as
hereinafter defined) and (iii) the first anniversary of the date of
grant of such option or, if applicable, the Annual Meeting of
Stockholders next succeeding the Annual Meeting at which such option
was granted. Any option granted to an Outside Director on or after the
first accelerated vesting date for such Outside Director shall
automatically vest on the Annual Meeting of Stockholders next
succeeding the Annual Meeting at which such option was granted. As used
herein, "Service" shall mean service to the Company or any subsidiary
thereof in the capacity of any advisor, consultant, employee, officer
or director, and Service as a director from an Annual Meeting of
Stockholders to the next succeeding Annual Meeting shall constitute a
year of Service, notwithstanding that such period may actually be more
or less than one year.
(e) Each option granted to an Outside Director pursuant to
this paragraph 6 and all rights to purchase shares thereunder shall
terminate on the earliest of:
(i) ten years after the date such option is granted;
(ii) the expiration of the period specified in
paragraph 8(b) or 8(c), whichever is applicable, after an
Outside Director ceases to be a director of the Company; or
(iii) the date, if any, fixed for cancellation
pursuant to paragraph 9 of this Plan.
In no event shall such option be exercisable at any time after its original
expiration date. When an option is no longer exercisable, it shall be deemed to
have lapsed or terminated and will no longer be outstanding.
(f) The provisions of this Section 6 are not intended to be
exclusive; the Committee, in its discretion, may grant additional
Options to an Outside Director.
7. Manner of Exercising Options. A person entitled to exercise an option granted
under this Plan may, subject to its terms and conditions and the terms and
conditions of this Plan, exercise it in whole at any time, or in part from time
to time, by delivery to the Company at its principal executive office, to the
attention of its President, of written notice of exercise, specifying the number
of shares with respect to which the option is being exercised, accompanied by
payment in full of the purchase price of the shares to be purchased at the time.
The purchase price of each share on the exercise of any option shall be paid in
full in cash (including check, bank draft or money
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order) at the time of exercise or, at the discretion of the holder of the
option, by delivery to the Company of unencumbered Common Shares having an
aggregate Fair Market Value on the date of exercise equal to the purchase price,
or by a combination of cash and such unencumbered Common Shares. Provided,
however, that a person exercising a stock option shall not be permitted to pay
any portion of the purchase price with stock if, in the opinion of the
Committee, payment in such manner could have adverse financial accounting
consequences for the Company. No shares shall be issued until full payment
therefor has been made, and the granting of an option to an individual shall
give such individual no rights as a stockholder except as to shares issued to
such individual.
8. Transferability and Termination of Options.
(a) During the lifetime of an optionee, only such optionee or
his or her guardian or legal representative may exercise options
granted under this Plan, and no option granted under this Plan shall be
assignable or transferable by the optionee otherwise than by will or
the laws of descent and distribution or pursuant to a domestic
relations order as defined in the Code or Title I of the Employee
Retirement Income Security Act ("ERISA"), or the rules thereunder;
provided, however, that any optionee may transfer a nonstatutory stock
option granted under this Plan to a member or members of his or her
immediate family (i.e., his or her children, grandchildren and spouse)
or to one or more trusts for the benefit of such family members or
partnerships in which such family members are the only partners, if (i)
the option agreement with respect to such options, which must be
approved by the Committee, expressly so provides either at the time of
initial grant or by amendment to an outstanding option agreement and
(ii) the optionee does not receive any consideration for the transfer.
Any options held by any such transferee shall continue to be subject to
the same terms and conditions that were applicable to such options
immediately prior to their transfer and may be exercised by such
transferee as and to the extent that such option has become exercisable
and has not terminated in accordance with the provisions of the Plan
and the applicable option agreement. For purposes of any provision of
this Plan relating to notice to an optionee or to vesting or
termination of an option upon the death, disability or termination of
employment of an optionee, the references to "optionee" shall mean the
original grantee of an option and not any transferee.
(b) During the lifetime of an optionee, an option may be
exercised only while the optionee is employed by the Company or a
parent or subsidiary thereof, and only if such optionee has been
continuously so employed since the date the option was granted, except
that:
(i) unless otherwise provided in a stock option
agreement, an option granted to an optionee who is not an
Outside Director shall continue to be exercisable for three
months after termination of such optionee's employment but,
unless otherwise provided in a stock option agreement, only to
the extent that the option was exercisable immediately prior
to such optionee's termination of employment, and unless
otherwise provided in a stock option agreement, an option
granted to an optionee who is an Outside Director shall
continue to be exercisable after such Outside Director ceases
to be a director of the Company but, unless
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otherwise provided in a stock option agreement, only to the
extent that the option was exercisable immediately prior to
such Outside Director's ceasing to be a director;
(ii) in the case of an optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code) while
employed, the option granted to such optionee may be exercised
within one year after termination of such optionee's
employment; and
(iii) as to any optionee whose termination occurs
following a declaration pursuant to paragraph 9 of this Plan,
the option granted to such optionee may be exercised at any
time permitted by such declaration.
(c) An option may be exercised after the death of the
optionee, but only within one year after the death of such optionee.
(d) In the event of the disability (within the meaning of
Section 22(e)(3) of the Code) or death of an optionee, any option
granted to such optionee that was not previously exercisable shall
become immediately exercisable in full if the disabled or deceased
optionee shall have been continuously employed by the Company or a
parent or subsidiary thereof between the date such option was granted
and the date of such disability, or, in the event of death, a date not
more than three months prior to such death.
9. Dissolution, Liquidation, Merger. In the event of (a) a proposed merger or
consolidation of the Company with or into any other corporation, regardless of
whether the Company is the surviving corporation, unless appropriate provision
shall have been made for the protection of the outstanding options granted under
this Plan by the substitution, in lieu of such options, of options to purchase
appropriate voting common stock (the "Survivor's Stock") of the corporation
surviving any such merger or consolidation or, if appropriate, the parent
corporation of the Company or such surviving corporation, or, alternatively, by
the delivery of a number of shares of the Survivor's Stock which has a Fair
Market Value as of the effective date of such merger or consolidation equal to
the product of (i) the excess of (x) the Event Proceeds per Common Share (as
hereinafter defined) covered by the option as of such effective date, over (y)
the option price per Common Share, times (ii) the number of Common Shares
covered by such option, or (b) the proposed dissolution or liquidation of the
Company (such merger, consolidation, dissolution or liquidation being herein
called an "Event"), the Committee shall declare, at least ten days prior to the
actual effective date of an Event, and provide written notice to each optionee
of the declaration, that each outstanding option, whether or not then
exercisable, shall be cancelled at the time of, or immediately prior to the
occurrence of, the Event (unless it shall have been exercised prior to the
occurrence of the Event) in exchange for payment to the holder of each cancelled
option, within ten days after the Event, of cash equal to the amount (if any),
for each Common Share covered by the cancelled option, by which the Event
Proceeds per Common Share (as hereinafter defined) exceeds the exercise price
per Common Share covered by such option. At the time of the declaration provided
for in the immediately preceding sentence, each option shall immediately become
exercisable in full and each holder of an option shall have the right, during
the period preceding the time of cancellation of the option, to exercise his or
her option as to all or any part of the Common Shares covered thereby. Each
outstanding option granted pursuant to this Plan that shall not have been
exercised prior to the
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Event shall be cancelled at the time of, or immediately prior to, the Event, as
provided in the declaration, and this Plan shall terminate at the time of such
cancellation, subject to the payment obligations of the Company provided in this
paragraph 9. For purposes of this paragraph, "Event Proceeds per Common Share"
shall mean the cash plus the fair market value, as determined in good faith by
the Committee, of the non-cash consideration to be received per Common Share by
the stockholders of the Company upon the occurrence of the Event.
10. Substitution Options. Options may be granted under this Plan from time to
time in substitution for stock options held by employees of other corporations
who are about to become employees of the Company or a subsidiary of the Company,
or whose employer is about to become a subsidiary of the Company, as the result
of a merger or consolidation of the Company or a subsidiary of the Company with
another corporation, the acquisition by the Company or a subsidiary of the
Company of all or substantially all the assets of another corporation or the
acquisition by the Company or a subsidiary of the Company of at least 50% of the
issued and outstanding stock of another corporation. The terms and conditions of
the substitute options so granted may vary from the terms and conditions set
forth in this Plan to such extent as the Board at the time of the grant may deem
appropriate to conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted, but with respect to stock
options which are incentive stock options, no such variation shall be permitted
which affects the status of any such substitute option as an incentive stock
option under Section 422A of the Code.
11. Tax Withholding. Delivery of Common Shares upon exercise of any nonstatutory
stock option granted under this Plan shall be subject to any required
withholding taxes. A person exercising such an option may, as a condition
precedent to receiving the Common Shares, be required to pay the Company a cash
amount equal to the amount of any required withholdings. In lieu of all or any
part of such a cash payment, the Committee may, but shall not be required to,
permit the optionee to elect to cover all or any part of the required
withholdings, and to cover any additional withholdings up to the amount needed
to cover such optionee's full FICA and federal, state and local income tax
liability with respect to income arising from the exercise of the option,
through a reduction of the number of Common Shares delivered to the person
exercising the option or through a subsequent return to the Company of shares
delivered to the person exercising the option.
12. Termination of Employment. Neither the transfer of employment of an optionee
between any combination of the Company, a parent corporation or a subsidiary
thereof, nor a leave of absence granted to such optionee and approved by the
Committee, shall be deemed a termination of employment for purposes of this
Plan. The terms "parent" or "parent corporation" and "subsidiary" as used in
this Plan shall have the meaning ascribed to "parent corporation" and
"subsidiary corporation", respectively, in Sections 424(e) and (f) of the Code.
13. Other Terms and Conditions. The Committee shall have the power, subject to
the other limitations contained herein, to fix any other terms and conditions
for the grant or exercise of any option under this Plan. Nothing contained in
this Plan, or in any option granted pursuant to this Plan, shall confer upon any
optionee any right to continued employment by the Company or any parent or
subsidiary of the Company or limit in any way the right of the Company or any
such parent or subsidiary to terminate an optionee's employment at any time.
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14. Option Agreements. All options granted under this Plan shall be evidenced by
a written agreement in such form or forms as the Committee may from time to time
determine, which agreement shall, among other things, designate whether the
options being granted thereunder are nonstatutory stock options or incentive
stock options under Section 422 of the Code.
15. Amendment and Discontinuance of Plan. The Board may at any time amend,
suspend or discontinue this Plan; provided, however, that no amendment by the
Board shall, without further approval of the Stockholders of the Company, if
required in order for the Plan to continue to meet the requirements of the Code:
(a) change the persons eligible to receive options;
(b) except as provided in paragraph 3 hereof, increase the total
number of Common Shares of the Company which may be made
subject to options granted under this Plan;
(c) except as provided in paragraph 3 hereof, change the minimum
purchase price for the exercise of an option; or
(d) extend the term of this Plan beyond December 1, 2006.
No amendment to this Plan shall, without the consent of the holder of the
option, alter or impair any options previously granted under this Plan.
16. Effective Date. This Plan shall be effective July 26, 1989.
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