EXHIBIT 10.5
KVH INDUSTRIES, INC.
2003 INCENTIVE AND NONQUALIFIED
STOCK OPTION PLAN
SECTION 1. PURPOSE
This 2003 Incentive and Nonqualified Stock Option Plan (the "Plan") of KVH
Industries, Inc., a Delaware corporation (the "Company"), is designed to provide
additional incentive to executives and other key employees of the Company and
its subsidiaries and for certain other individuals providing services to or
acting as directors of the Company and its subsidiaries. The Company intends
that this purpose will be effected by the granting of incentive stock options
("Incentive Stock Options") as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and nonqualified stock options
("Nonqualified Options") under the Plan which afford such executives, key
employees, directors and other eligible individuals an opportunity to acquire or
increase their proprietary interest in the Company through the acquisition of
shares of its Common Stock. The Company intends that Incentive Stock Options
issued under the Plan will qualify as "incentive stock options" as defined in
Section 422 of the Code and the terms of the Plan shall be interpreted in
accordance with this intention. The term "subsidiary" shall have the meaning set
forth in Section 424 of the Code.
SECTION 2. ADMINISTRATION
2.1 THE COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company, so long as each member of
such committee shall qualify as an Outside Director, as defined below. In the
event the Compensation Committee shall include any director who is not an
Outside Director, the Outside Directors then serving as members of the
Compensation Committee shall constitute the Stock Option Committee of the Board
of Directors to administer the Plan (the Compensation Committee or Stock Option
Committee, if appointed, being referred to herein as the "Committee"). The
Committee shall have at least two members at all times. As used herein, the term
"Outside Director" means any director who (i) is not an employee of the Company
or of any "affiliated group," as such term is defined in Section 1504(a) of the
Code, which includes the Company (an "Affiliate"), (ii) is not a former employee
of the Company or any Affiliate who is receiving compensation for prior services
(other than benefits under a tax-qualified retirement plan) during the Company's
or any Affiliate's taxable year, (iii) has not been an officer of the Company or
any Affiliate and (iv) does not receive remuneration from the Company or any
Affiliate, either directly or indirectly, in any capacity other than as a
director. None of the members of the Committee shall have been granted any
incentive stock option or nonqualified option under this Plan (other than
pursuant to Section 4.4) or any other stock option plan of the Company within
one year prior to service on the Committee. It is the intention of the Company
that the Plan shall be administered by "disinterested persons" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange
Act"), but the authority and validity of any act taken or not taken by the
Committee shall not be affected if any person administering the Plan is not a
disinterested person. Except as specifically reserved to the Company's Board of
Directors under the terms of the Plan, the Committee shall have full and final
authority to operate, manage and administer the Plan on behalf of the Company.
Action by the Committee shall require the affirmative vote of a majority of all
members thereof.
2.2 POWERS OF THE COMMITTEE. Subject to the terms and conditions of the
Plan, the Committee shall have the power:
(a) To determine from time to time the persons eligible to receive options
and the options to be granted to such persons under the Plan and to prescribe
the terms, conditions, restrictions, if any, and provisions (which need not be
identical) of each option granted under the Plan to such persons;
(b) To construe and interpret the Plan and options granted thereunder and
to establish, amend, and revoke rules and regulations for administration of the
Plan. In this connection, the Committee may correct any defect or supply any
omission, or reconcile any inconsistency in the
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Plan, or in any option agreement, in the manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective. All decisions and
determinations by the Committee in the exercise of this power shall be final and
binding upon the Company and optionees;
(c) Except as provided in Section 6.3 hereof, to make, in its sole
discretion, changes to any outstanding option granted under the Plan, including:
(i) to accelerate the vesting schedule or (ii) to extend the expiration date;
and
(d) Generally, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the Company with
respect to the Plan.
SECTION 3. STOCK
3.1 STOCK TO BE ISSUED. The stock subject to the options granted under the
Plan shall be shares of the Company's authorized but unissued Common Stock, $.01
par value (the "Common Stock"), or shares of the Company's Common Stock held in
treasury. The total number of shares that may be issued pursuant to options
granted under the Plan shall not exceed an aggregate of 1,000,000 shares of
Common Stock; provided, however, that the class and aggregate number of shares
which may be subject to options granted under the Plan shall be subject to
adjustment as provided in Section 8 hereof.
3.2 EXPIRATION, CANCELLATION OR TERMINATION OF OPTION. Whenever any
outstanding option under the Plan expires, is cancelled or is otherwise
terminated (other than by exercise), the shares of Common Stock allocable to the
unexercised portion of such option may again be the subject of options under the
Plan.
3.3 LIMITATION ON GRANTS. In no event may any Plan participant be granted
options with respect to more than 120,000 shares of Common Stock in any calendar
year. The number of shares of Common Stock issuable pursuant to an option
granted to a Plan participant in a calendar year that is subsequently forfeited,
cancelled or otherwise terminated shall continue to count toward the foregoing
limitation in such calendar year. In addition, if the exercise price of an
option is subsequently reduced, the transaction shall be deemed a cancellation
of the original
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option and the grant of a new one so that both transactions shall count toward
the maximum shares issuable in the calendar year of each respective transaction.
SECTION 4. ELIGIBILITY
4.1 PERSONS ELIGIBLE. Incentive Stock Options under the Plan may be
granted only to officers and other employees of the Company or its subsidiaries.
Nonqualified Options may be granted to officers or other employees of the
Company or its subsidiaries, and to members of the Board and consultants or
other persons who render services to the Company (regardless of whether they are
also employees), provided, however, that no such option may be granted to a
person who is a member of the Committee at the time of grant other than pursuant
to Section 4.4.
4.2 GREATER-THAN-TEN-PERCENT STOCKHOLDERS. Except as may otherwise be
permitted by the Code or other applicable law or regulation, no Incentive Stock
Option shall be granted to an individual who, at the time the option is granted,
owns (including ownership attributed pursuant to Section 424 of the Code) more
than ten percent of the total combined voting power of all classes of stock of
the Company or any subsidiary (a "greater-than-ten-percent stockholder"), unless
such Incentive Stock Option provides that (i) the purchase price per share shall
not be less than one hundred ten percent of the fair market value of the Common
Stock at the time such option is granted, and (ii) that such option shall not be
exercisable to any extent after the expiration of five years from the date it is
granted.
4.3 MAXIMUM AGGREGATE FAIR MARKET VALUE. The aggregate fair market value
(determined at the time the option is granted) of the Common Stock with respect
to which Incentive Stock Options are exercisable for the first time by any
optionee during any calendar year (under the Plan and any other plans of the
Company or its subsidiary for the issuance of incentive stock options) shall not
exceed $100,000 (or such greater amount as may from time to time be permitted
with respect to incentive stock options by the Code or any other applicable law
or regulation).
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4.4 OPTION GRANTS TO NON-EMPLOYEE DIRECTORS. (a) As compensation for
services to the Company, each director of the Company who is not an employee of
the Company or any subsidiary of the Company (a "Non-Employee Director") upon
his or her initial election to the Board shall be automatically granted a
Nonqualified Option to purchase 10,000 shares of Common Stock of the Company
(the "Initial Option Grant"). In addition, any director of the Company who is
elected to the Board but who is not a Non-Employee Director at the time of his
or her initial election and later becomes a Non-Employee Director shall
automatically receive an Initial Option Grant to purchase 10,000 shares of
Common Stock of the Company upon his or her first election to the Board as a
Non-Employee Director. Each Initial Option Grant shall vest with respect to
2,500 shares on each three-month anniversary of the date of grant, provided that
the optionee is a director of the Company on each such three-month anniversary,
and shall expire on the fifth annual anniversary of the date of grant. At the
first meeting of the Board of Directors following each annual meeting of
stockholders, each Non-Employee Director (other than any Non-Employee Director
who has received an Initial Option Grant as a result of election to the Board at
such meeting) shall be automatically granted an additional Nonqualified Option
to purchase 5,000 shares of Common Stock of the Company (the "Subsequent Option
Grant"). Each Subsequent Option Grant shall be exercisable in its entirety on
the date of grant and shall expire on the fifth annual anniversary of the date
of grant;
(b) Each Non-Employee Director appointed to serve on the Audit Committee
of the Board of Directors shall automatically receive an Option Grant to
purchase 5,000 shares of Common Stock upon his or her appointment to the Audit
Committee and an additional Option Grant of 5,000 shares of Common Stock on each
anniversary of such appointment, so long as such Director shall serve on the
Audit Committee. Each such Option shall vest with respect to 1,250 shares on
each three-month anniversary of the date of Grant, provided that such optionee
is a Director and member of the Audit Committee on each three-month anniversary,
and shall expire on the fifth anniversary of the date of Grant;
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(c) The exercise price per share of Common Stock of each Nonqualified
Option granted pursuant to this Section 4.4 shall be equal to the fair market
value of the Common Stock on the date the Nonqualified Option is granted, such
fair market value to be determined in accordance with the provisions of Section
6.3;
(d) No Nonqualified Option granted under this Section 4.4 shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and such Options shall be exercisable during the optionee's
lifetime only by the optionee. Any Nonqualified Option granted to a Non-Employee
Director and outstanding on the date of his or her death may be exercised by the
legal representative or legatee of the optionee until the expiration of the
stated term of the option;
Nonqualified Options granted under this Section 4.4 may be exercised only
by written notice to the Company specifying the number of shares to be
purchased. Payment of the full purchase may be made by one or more of the
methods specified in Section 7.2. An optionee shall have the rights of a
stockholder only as to shares acquired upon the exercise of an option and not as
to unexercised options.
(e) The provisions of this Section 4.4 shall apply only to options granted
or to be granted to Non-Employee Directors, and shall not be deemed to modify,
limit or otherwise apply to any other provision of this Plan or to any option
issued under this Plan to a participant who is not a Non-Employee Director of
the Company. To the extent inconsistent with the provisions of any other Section
of this Plan, the provisions of this Section 4.4 shall govern the rights and
obligations of the Company and Non-Employee Directors respecting options granted
or to be granted to Non-Employee Directors.
SECTION 5. TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE
5.1 TERMINATION OF EMPLOYMENT. Except as may be otherwise expressly
provided herein, options shall terminate on the earlier of:
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(a) the date of expiration thereof;
(b) the date of termination of the optionee's employment with or services
to the Company by it for cause (as determined by the Company), or voluntarily by
the optionee; or
(c) thirty days after the date of termination of the optionee's employment
with or services to the Company by it without cause;
provided, that Nonqualified Options granted to persons who are not employees of
the Company need not, unless the Committee determines otherwise, be subject to
the provisions set forth in clauses (b) and (c) above.
An employment relationship between the Company and the optionee shall be
deemed to exist during any period in which the optionee is employed by the
Company or any subsidiary. Whether authorized leave of absence, or absence on
military or government service, shall constitute termination of the employment
relationship between the Company and the optionee shall be determined by the
Committee at the time thereof.
As used herein, "cause" shall mean (x) any material breach by the optionee
of any agreement to which the optionee and the Company are both parties, (y) any
act or omission to act by the optionee which may have a material and adverse
effect on the Company's business or on the optionee's ability to perform
services for the Company, including, without limitation, the commission of any
crime (other than ordinary traffic violations), or (z) any material misconduct
or material neglect of duties by the optionee in connection with the business or
affairs of the Company or any affiliate of the Company.
5.2 DEATH OR PERMANENT DISABILITY OF OPTIONEE. In the event of the death
or permanent and total disability of the holder of an option prior to
termination of the optionee's employment with or services to the Company and
before the date of expiration of such option, such option shall terminate on the
earlier of such date of expiration or one year following the date of such death
or disability. After the death of the optionee, his/her executors,
administrators or any person or persons to whom his/her option may be
transferred by will or by the laws of descent and distribution, shall have the
right, at any time prior to such termination, to exercise
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the option to the extent the optionee was entitled to exercise such option
immediately prior to his/her death. An optionee is permanently and totally
disabled if he/she is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to last for a continuous period of not less than twelve months;
permanent and total disability shall be determined in accordance with Section
22(e)(3) of the Code and the regulations issued thereunder.
SECTION 6. TERMS OF THE OPTION AGREEMENTS
Each option agreement shall be in writing and shall contain such terms,
conditions, restrictions, if any, and provisions as the Committee shall from
time to time deem appropriate. Such provisions or conditions may include without
limitation restrictions on transfer, repurchase rights, or such other provisions
as shall be determined by the Committee; provided, that such additional
provisions shall not be inconsistent with any other term or condition of the
Plan and such additional provisions shall not cause any Incentive Stock Option
granted under the Plan to fail to qualify as an incentive option within the
meaning of Section 422 of the Code. Option agreements need not be identical, but
each option agreement by appropriate language shall include the substance of all
of the following provisions:
6.1 EXPIRATION OF OPTION. Subject to Section 4.4 hereof, notwithstanding
any other provision of the Plan or of any option agreement, each option shall
expire on the date specified in the option agreement, which date shall not, in
the case of an Incentive Stock Option, be later than the tenth anniversary
(fifth anniversary in the case of a greater-than-ten-percent stockholder) of the
date on which the option was granted, or as specified in Section 5 hereof.
6.2 EXERCISE. Subject to Sections 4.4 and 7.3 hereof, each option may be
exercised, so long as it is valid and outstanding, from time to time in part or
as a whole, subject to any limitations with respect to the number of shares for
which the option may be exercised at a particular time and to such other
conditions as the Committee in its discretion may specify upon granting the
option.
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6.3 PURCHASE PRICE. Subject to Section 4.4 hereof, the purchase price per
share under each option shall be determined by the Committee at the time the
option is granted; provided, however, (i) that the option price of any Incentive
Stock Option shall not, unless otherwise permitted by the Code or other
applicable law or regulation, be less than the fair market value of the Common
Stock on the date the option is granted (110% of the fair market value in the
case of a greater-than-ten-percent stockholder), and (ii) that, unless approved
by the holders of a majority of the shares present and entitled to vote at a
duly convened meeting of the Company's stockholders, the option price of any
stock option shall not be less than the fair market value of the Common Stock on
the date the option is granted and the exercise price of any outstanding stock
option grant under any existing or future stock option plan may not be reduced.
Subsection 6.3(ii) hereof may not be amended or repealed without the affirmative
vote of the holders of a majority of the shares of the Company present and
entitled to vote at a duly convened meeting of the Company's stockholders. For
the purpose of the Plan the fair market value of the Common Stock shall be the
closing price per share on the date of grant of the option as reported by a
nationally recognized stock exchange, or, if the Common Stock is not listed on
such an exchange, as reported by the National Association of Securities Dealers
Automated Quotation System, Inc. ("NASDAQ"), or, if the Common Stock is not
quoted on NASDAQ, the fair market value as determined by the Committee.
6.4 TRANSFERABILITY OF OPTIONS. Options shall not be transferable by the
optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during his or her lifetime, only by him or her.
6.5 RIGHTS OF OPTIONEES. No optionee shall be deemed for any purpose to be
the owner of any shares of Common Stock subject to any option unless and until
the option shall have been exercised pursuant to the terms thereof, and the
Company shall have issued and delivered the shares to the optionee.
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6.6 REPURCHASE RIGHT. The Committee may in its discretion provide upon the
grant of any option hereunder that the Company shall have an option to
repurchase upon such terms and conditions as determined by the Committee all or
any number of shares purchased upon exercise of such option. The repurchase
price per share payable by the Company shall be such amount or be determined by
such formula as is fixed by the Committee at the time the option for the shares
subject to repurchase is granted. In the event the Committee shall grant options
subject to the Company's repurchase option, the certificates representing the
shares purchased pursuant to such option shall carry a legend satisfactory to
counsel for the Company referring to the Company's repurchase option.
6.7 "LOCKUP" AGREEMENT. The Committee may in its discretion specify upon
granting an option that the optionee shall agree for a period of time (not to
exceed 180 days) from the effective date of any registration of securities of
the Company (upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities), not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of any
shares issued pursuant to the exercise of such option, without the prior written
consent of the Company or such underwriters, as the case may be.
SECTION 7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
7.1 METHOD OF EXERCISE. Any option granted under the Plan may be exercised
by the optionee by delivering to the Company on any business day a written
notice specifying the number of shares of Common Stock the optionee then desires
to purchase and specifying the address to which the certificates for such shares
are to be mailed (the "Notice"), accompanied by payment for such shares.
7.2 PAYMENT OF PURCHASE PRICE. Payment for the shares of Common Stock
purchased pursuant to the exercise of an option shall be made by:
(a) cash in an amount, or a check, bank draft or postal or express money
order payable in an amount, equal to the aggregate exercise price for the number
of shares specified in the Notice;
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(b) with the consent of the Committee, shares of Common Stock of the
Company having a fair market value (as defined for purposes of Section 6.3
hereof) equal to such aggregate exercise price;
(c) with the consent of the Committee, such other consideration that is
acceptable to the Committee and that has a fair market value, as determined by
the Committee, equal to such aggregate exercise price, including any
broker-directed cashless exercise/resale procedure adopted by the Committee; or
(d) with the consent of the Committee, any combination of the foregoing.
As promptly as practicable after receipt of the Notice and accompanying
payment, the Company shall deliver to the optionee certificates for the number
of shares with respect to which such option has been so exercised, issued in the
optionee's name; provided, however, that such delivery shall be deemed effected
for all purposes when the Company or a stock transfer agent of the Company shall
have deposited such certificates in the United States mail, addressed to the
optionee, at the address specified in the Notice.
7.3 SPECIAL LIMITS AFFECTING SECTION 16(B) OPTION HOLDERS. Shares issuable
upon exercise of options granted to a person who in the opinion of the Committee
may be deemed to be a director or officer of the Company within the meaning of
Section 16(b) of the Exchange Act and the rules and regulations thereunder shall
not be sold or disposed of until after the expiration of six months following
the date of grant.
SECTION 8. CHANGES IN COMPANY'S CAPITAL STRUCTURE
8.1 RIGHTS OF COMPANY. The existence of outstanding options shall not
affect in any way the right or power of the Company or its stockholders to make
or authorize, without limitation, any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of Common
Stock, or any issue of bonds, debentures, preferred or prior preference stock or
other
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capital stock ahead of or affecting the Common Stock or the rights thereof, or
the dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
8.2 RECAPITALIZATION, STOCK SPLITS AND DIVIDENDS. If the Company shall
effect a subdivision or consolidation of shares or other capital readjustment,
the payment of a stock dividend, or other increase or reduction of the number of
shares of the Common Stock outstanding, in any such case without receiving
compensation therefor in money, services or property, then (i) the number,
class, and price per share of shares of stock subject to outstanding options
hereunder shall be appropriately adjusted in such a manner as to entitle an
optionee to receive upon exercise of an option, for the same aggregate cash
consideration, the same total number and class of shares as he or she would have
received as a result of the event requiring the adjustment had he or she
exercised his or her option in full immediately prior to such event; (ii) the
number and class of shares with respect to which options may be granted under
the Plan; and (iii) the number and class of shares set forth in Sections 3.3 and
4.4 shall be adjusted by substituting for the total number of shares of Common
Stock then reserved for issuance under the Plan that number and class of shares
of stock that the owner of an equal number of outstanding shares of Common Stock
would own as the result of the event requiring the adjustment.
8.3 MERGER WITHOUT CHANGE OF CONTROL. After a merger of one or more
corporations into the Company, or after a consolidation of the Company and one
or more corporations in which (i) the Company shall be the surviving
corporation, and (ii) the stockholders of the Company immediately prior to such
merger or consolidation own after such merger or consolidation shares
representing at least fifty percent of the voting power of the Company, each
holder of an outstanding option shall, at no additional cost, be entitled upon
exercise of such option to receive in lieu of the number of shares as to which
such option shall then be so exercisable, the number and class of shares of
stock or other securities to which such holder would have been entitled pursuant
to the terms of the agreement of merger or consolidation if,
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immediately prior to such merger or consolidation, such holder had been the
holder of record of a number of shares of Common Stock equal to the number of
shares for which such option was exercisable.
8.4 SALE OR MERGER WITH CHANGE OF CONTROL. If the Company is merged into
or consolidated with another corporation under circumstances where the Company
is not the surviving corporation, or if there is a merger or consolidation where
the Company is the surviving corporation but the stockholders of the Company
immediately prior to such merger or consolidation do not own after such merger
or consolidation shares representing at least fifty percent of the voting power
of the Company, or if the Company is liquidated, or sells or otherwise disposes
of substantially all of its assets to another corporation while unexercised
options remain outstanding under the Plan, (i) subject to the provisions of
clause (iii) below, after the effective date of such merger, consolidation,
liquidation, sale or disposition, as the case may be, each holder of an
outstanding option shall be entitled, upon exercise of such option, to receive,
in lieu of shares of Common Stock, shares of such stock or other securities,
cash or property as the holders of shares of Common Stock received pursuant to
the terms of the merger, consolidation, liquidation, sale or disposition; (ii)
the Committee may accelerate the time for exercise of all unexercised and
unexpired options to and after a date prior to the effective date of such
merger, consolidation, liquidation, sale or disposition, as the case may be,
specified by the Committee; or (iii) all outstanding options may be cancelled by
the Committee as of the effective date of any such merger, consolidation,
liquidation, sale or disposition provided that (x) notice of such cancellation
shall be given to each holder of an option and (y) each holder of an option
shall have the right to exercise such option to the extent that the same is then
exercisable or, if the Committee shall have accelerated the time for exercise of
all unexercised and unexpired options, in full during the 30-day period
preceding the effective date of such merger, consolidation, liquidation, sale or
disposition.
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8.5 ADJUSTMENTS TO COMMON STOCK SUBJECT TO OPTIONS. Except as hereinbefore
expressly provided, the issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock then subject to outstanding options.
8.6 MISCELLANEOUS. Adjustments under this Section 8 shall be determined by
the Committee, and such determinations shall be conclusive. No fractional shares
of Common Stock shall be issued under the Plan on account of any adjustment
specified above.
SECTION 9. GENERAL RESTRICTIONS
9.1 INVESTMENT REPRESENTATIONS. The Company may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his or her
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
9.2 COMPLIANCE WITH SECURITIES LAWS. The Company shall not be required to
sell or issue any shares under any option if the issuance of such shares shall
constitute a violation by the optionee or by the Company of any provisions of
any law or regulation of any governmental authority. In addition, in connection
with the Securities Act of 1933, as now in effect or hereafter amended (the
"Act"), upon exercise of any option, the Company shall not be required to issue
such shares unless the Committee has received evidence satisfactory to it to the
effect that the holder of such option will not transfer such shares except
pursuant to a registration statement in effect under such Act or unless an
opinion of counsel satisfactory to the Company has been received by the Company
to the effect that such registration is not required. Any determination
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in this connection by the Committee shall be final, binding and conclusive. In
the event the shares issuable on exercise of an option are not registered under
the Act, the Company may imprint upon any certificate representing shares so
issued the following legend or any other legend which counsel for the Company
considers necessary or advisable to comply with the Act and with applicable
state securities laws:
The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities
laws of any State and may not be sold or transferred except upon
such registration or upon receipt by the Corporation of an opinion
of counsel satisfactory to the Corporation, in form and substance
satisfactory to the Corporation, that registration is not required
for such sale or transfer.
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act; and in the event any shares are
so registered the Company may remove any legend on certificates representing
such shares. The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of an option or the issuance of shares
pursuant thereto to comply with any law or regulation of any governmental
authority.
9.3 EMPLOYMENT OBLIGATION. The granting of any option shall not impose
upon the Company any obligation to employ or continue to employ any optionee;
and the right of the Company to terminate the employment of any officer or other
employee shall not be diminished or affected by reason of the fact that an
option has been granted to him or her.
SECTION 10. WITHHOLDING TAXES
10.1 RIGHTS OF COMPANY. The Company may require an employee exercising a
Nonqualified Option, or disposing of shares of Common Stock acquired pursuant to
the exercise of an Incentive Option in a disqualifying disposition (as defined
in Section 421(b) of the Code), to reimburse the Company for any taxes required
by any government to be withheld or otherwise deducted and paid by the Company
in respect of the issuance or disposition of such shares. In lieu thereof, the
Company shall have the right to withhold the amount of such taxes from any other
sums due or to become due from the Company to the employee upon such terms and
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conditions as the Company may prescribe. The Company may, in its discretion,
hold the stock certificate to which such employee is otherwise entitled upon the
exercise of an Option as security for the payment of any such withholding tax
liability, until cash sufficient to pay that liability has been received or
accumulated.
10.2 PAYMENT IN SHARES. An employee may elect to have such tax withholding
obligation satisfied, in whole or in part, by (i) authorizing the Company to
withhold from shares of Common Stock to be issued pursuant to the exercise of a
Nonqualified Option a number of shares with an aggregate fair market value (as
defined in Section 6.3 hereof determined as of the date the withholding is
effected) that would satisfy the withholding amount due with respect to such
exercise, or (ii) transferring to the Company shares of Common Stock owned by
the employee with an aggregate fair market value (as defined in Section 6.3
hereof determined as of the date the withholding is effected) that would satisfy
the withholding amount due. With respect to any employee who is subject to
Section 16 of the Exchange Act, the following additional restrictions shall
apply:
(a) the election to satisfy tax withholding obligations relating to an
option exercise in the manner permitted by this Section 10.2 shall be made
either (1) during the period beginning on the third business day following the
date of release of quarterly or annual summary statements of sales and earnings
of the Company and ending on the twelfth business day following such date, or
(2) at least six (6) months prior to the date of exercise of the option;
(b) such election shall be irrevocable;
(c) such election shall be subject to the consent or approval of the
Committee; and
(d) the Common Stock withheld to satisfy tax withholding, if granted at
the discretion of the Committee, must pertain to an option which has been held
by the employee for at least six (6) months from the date of grant of the
option.
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10.3 NOTICE OF DISQUALIFYING DISPOSITION. Each holder of an Incentive
Option shall agree to notify the Company in writing immediately after making a
disqualifying disposition (as defined in Section 421(b) of the Code) of any
Common Stock purchased upon exercise of the Incentive Option.
SECTION 11. AMENDMENT OR TERMINATION OF PLAN
11.1 AMENDMENT. The Board may terminate the Plan and may amend the Plan at
any time, and from time to time, subject to the limitation that, except as
otherwise provided herein, no amendment shall be effective unless approved by
the stockholders of the Company in accordance with applicable law and
regulations, at an annual or special meeting held within 12 months before or
after the date of adoption of such amendment, in any instance in which such
amendment would: (i) increase the number of shares of Common Stock that may be
issued under, or as to which Options may be granted pursuant to, the Plan; or
(ii) change in substance the provisions of Section 4 hereof relating to
eligibility to participate in the Plan. In addition, the provisions of Section
4.4 shall not be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act, or the
rules thereunder. In addition, the provisions of Subsection 6.3(ii) may not be
amended or repealed without the affirmative vote of the holders of a majority of
the shares of Common Stock present and entitled to vote at a duly convened
meeting of the Company's stockholders. Without limiting the generality of the
foregoing, the Board is expressly authorized to amend the Plan, at any time and
from time to time, to confirm it to the provisions of Rule 16b-3 under the
Exchange Act, as that Rule may be amended from time to time.
Except as otherwise provided herein, the rights and obligations under any
option granted before amendment of this Plan or any unexercised portion of such
option shall not be adversely affected by amendment of this Plan or such option
without the consent of the holder of such option.
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11.2 TERMINATION. This Plan shall terminate as of the tenth anniversary of
its effective date. The Board may terminate this Plan at any earlier time for
any or no reason. No Option may be granted after the Plan has been terminated.
No Option granted while this Plan is in effect shall be altered or impaired by
termination of this Plan, except upon the consent of the holder of such Option.
The power of the Committee to construe and interpret this Plan and the Options
granted prior to the termination of this Plan shall continue after such
termination.
SECTION 12. NONEXCLUSIVITY OF PLAN
Neither the adoption of this Plan by the Board of Directors nor the
submission of this Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including the granting of
stock options otherwise than under this Plan, and such arrangements may be
either applicable generally or only in specific cases.
SECTION 13. EFFECTIVE DATE AND DURATION OF PLAN
This Plan shall become effective upon its adoption by the Board, provided,
that the stockholders of the Company shall have approved this Plan within twelve
months prior to or following the adoption of this Plan by the Board. Subject to
the foregoing, options may be granted under the Plan at any time subsequent to
its effective date; provided, however, that (a) no such option shall be
exercised or exercisable unless the stockholders of the Company shall have
approved the Plan within twelve months prior to or following the adoption of
this Plan by the Board, and (b) all options issued prior to the date of such
stockholders' approval shall contain a reference to such condition. No option
may be granted under the Plan after the tenth anniversary of the effective date.
The Plan shall terminate (i) when the total amount of the Common Stock with
respect to which options may be granted shall have been issued upon the exercise
of options or (ii) by action of the Board of Directors pursuant to Section 11
hereof, whichever shall first occur.
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SECTION 14. PROVISIONS OF GENERAL APPLICATION
14.1 SEVERABILITY. The invalidity or unenforceability of any provision of
this Plan shall not affect the validity or enforceability of any other provision
of this Plan, each of which shall remain in full force and effect.
14.2 CONSTRUCTION. The headings in this Plan are included for convenience
only and shall not in any way effect the meaning or interpretation of this Plan.
Any term defined in the singular shall include the plural, and vice versa. The
words "herein," "hereof" and "hereunder" refer to this Plan as a whole and not
to any particular part of this Plan. The word "including" as used herein shall
not be construed so as to exclude any other thing not referred to or described.
14.3 FURTHER ASSURANCES. The Company and any holder of an option shall
from time to time execute and deliver any and all further instruments, documents
and agreements and do such other and further acts and things as may be required
or useful to carry out the intent and purpose of this Plan and such option and
to assure to the Company and such option holder the benefits contemplated by
this Plan; PROVIDED, HOWEVER, that neither the Company nor any option holder
shall in any event be required to take any action inconsistent with the
provisions of this Plan.
14.4 GOVERNING LAW. This Plan and each Option shall be governed by the
laws of the State of Delaware.
* * * * *
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