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Exhibit 10.5
BBN HARK SYSTEMS CORPORATION
1995 STOCK OPTION PLAN
1. PURPOSE
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The purpose of this 1995 Stock Option Plan (the "Plan") is to advance
the interests of BBN HARK Systems Corporation (the "Company") by enhancing the
ability of the Company and its parent and subsidiaries to attract and retain
able employees, consultants or advisors to the Company; to reward such
individuals for their contributions; and to encourage such individuals to take
into account the long-term interests of the Company through interests in shares
of the Company's common stock, $.01 par value (the "Stock"). Any employee,
consultant, or advisor selected to receive an award under the Plan is referred
to as a "participant".
Options granted pursuant to the Plan may be incentive stock options as
defined in section 422 of the Internal Revenue Code of 1986 (as from time to
time amended, the "Code") (any option that is intended so to qualify as an
incentive stock option being referred to herein as an "incentive option"), or
options that are not incentive options, or both. Except as otherwise expressly
provided with respect to an option grant, no option granted pursuant to the
Plan shall be an incentive option.
2. ADMINISTRATION
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The Plan shall be administered by the Board of Directors (the "Board")
of the Company. The Board shall have authority, not inconsistent with the
express provisions of the Plan: (a) to grant awards consisting of options or
stock appreciation rights ("SARs"), or both, to such participants as the Board
may select; (b) to determine the time or times when awards shall be granted and
the number of shares of Stock subject to each award; (C) to determine which
options are, and which options are not, intended to be incentive options; (d)
to determine the terms and conditions of each award; (e) to prescribe the form
or forms of any instruments evidencing awards and any other instruments
required under the Plan and to change such forms from time to time; (f) to
adopt, amend, and rescind rules and regulations for the administration of the
Plan; and (g) to interpret the Plan and to decide any questions and settle all
controversies and disputes that may arise in connection with the Plan. Such
determinations of the Board shall be conclusive and shall bind all parties.
Subject to Section 8, the Board shall also have the authority, both generally
and in particular instances, to waive compliance by a participant with any
obligation to be performed by the participant under an award, to waive any
condition or provision of an award, and to amend or cancel any award (and if an
award is canceled, to grant a new award on such terms as the Board shall
specify) except that the Board may not take any action with respect to an
outstanding award that would adversely affect the rights of the participant
under such award without such participant's consent. Nothing in the preceding
sentence shall be construed as limiting the power of the Board to make
adjustments required by Section 4(c) and Section 6(j).
The Board may, in its discretion, delegate some or all of its powers
with respect to the Plan to a committee (the "Committee"), in which event all
references (as appropriate) to the Board hereunder shall be deemed to refer to
the Committee. The Committee, if one is appointed, shall consist of at least
two directors. A majority of the members of the Committee shall constitute a
quorum, and all determinations of
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the Committee shall be made by a majority of its members. Any determination of
the Committee under the Plan may be made without notice or meeting of the
Committee by a writing signed by a majority of the Committee members. On and
after registration of the Stock under the Securities Exchange Act of 1934 (the
"1934 Act"), the Board shall delegate the power to select directors and
officers to receive awards under the Plan and the timing, pricing, and amount
of such awards to a Committee, all members of which shall be disinterested
persons within the meaning of Rule 16b-3 under the 1934 Act and "outside
directors" within the meaning of section 162(m)(4)(c)(I) of the Code.
3. EFFECTIVE DATE AND TERM OF PLAN
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The Plan shall become effective on the date on which it is approved by
the shareholders of the Company. Grants of awards under the Plan may be made
prior to that date (but after Board adoption of the Plan), subject to approval
of the Plan by the shareholders.
No awards shall be granted under the Plan after the completion of ten
years from the date on which the Plan was adopted by the Board, but awards
previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
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(a) NUMBER OF SHARES. Subject to adjustment as provided in Section
4(c), the aggregate number of shares of Stock that may be delivered upon the
exercise of award granted under the Plan shall be 1,200,000. If any award
granted under the Plan terminates without having been exercised in full, or
upon exercise is satisfied other than by delivery of Stock, the number of
shares of Stock as to which such award was not exercised shall be available for
future grants within the limits set forth in this Section 4(a).
(b) SHARES TO BE DELIVERED. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in its
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) CHANGES IN STOCK. In the event of a stock dividend, stock split,
or combination of shares, recapitalization, or other change in the Company's
capital stock, the number and kind of shares of stock or securities of the
Company subject to awards then outstanding or subsequently granted under the
Plan, the exercise price of such awards, the maximum number of shares or
securities that may be delivered under the Plan, and other relevant provisions
shall be appropriately adjusted by the Board, whose determination shall be
binding on all persons.
The Board may also adjust the number of shares subject to outstanding
awards, the exercise price of outstanding awards, and the terms of outstanding
awards, to take into consideration material changes in accounting practices or
principles, extraordinary dividends, consolidations or mergers (except as
described in Section 6(j)), acquisitions or dispositions of stock or property,
or any other event if it is determined by the Board that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the case of an incentive option, without the
consent of the participant, if it would constitute a modification, extension,
or renewal of the option within the meaning of section 424(h) of the Code.
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5. ELIGIBILITY FOR AWARDS
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Persons eligible to receive awards under the Plan shall be those
employees of the Company, its parent, or subsidiaries, or consultants, or
advisors to any of them, who in the opinion of the Board are in a position to
make a contribution to the Company. Participants shall be selected by the
Board. A parent for purposes of the Plan shall be a corporation which owns,
directly or indirectly, 50% or more of the total combined voting power of all
classes of the Company's stock. A subsidiary for purposes of the Plan shall be
(i) a corporation in which the Company owns, directly or indirectly, stock
possessing 50% or more of the total combined voting power of all classes of
stock, or (ii) a corporation in which the Company's parent owns, directly or
indirectly, stock possessing 50% or more of the total combined voting power of
all classes of stock. The Board may grant awards covering up to the entire
number of shares available for issuance under the Plan (as determined under
Section 4(a)) to any one participant or to several participants, in the sole
discretion of the Board.
Incentive options shall be granted only to "employees" as defined in
the provisions of the Code or regulations thereunder applicable to incentive
stock options.
6. TERMS AND CONDITIONS OF OPTIONS AND SARS
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(a) EXERCISE PRICE OF OPTIONS. The exercise price of each option shall
be determined by the Board but in the case of an incentive option shall not be
less than 100% (110%, in the case of an incentive option granted to a
ten-percent shareholder) of the fair market value of the Stock at the time the
option is granted; nor shall the exercise price be less, in the case of an
original issue of authorized stock, than par value. For this purpose, "fair
market value" in the case of incentive options shall have the same meaning as
it does in the provisions of the Code and the regulations thereunder applicable
to incentive options; and "ten-percent shareholder" shall mean any participant
who at the time of grant owns directly, or by reason of the attribution rules
set forth in section 424(d) of the Code is deemed to own, stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or of any of its parent or subsidiary corporations.
(b) DURATION OF OPTIONS. An option shall be exercisable during such
period or periods as the Board may specify. The latest date on which an option
may be exercised (the "Final Exercise Date") shall be the date which is ten
years (five years, in the case of an incentive option granted to a "ten-percent
shareholder" as defined in (a) above) from the date the option was granted or
such earlier date as may be specified by the Board at the time the option is
granted.
(c) EXERCISE OF OPTIONS.
(1) An option shall become exercisable at such time or times and
upon such conditions as the Board shall specify. In the case
of an option not immediately exercisable in full, the Board
may at any time accelerate the time at which all or any part
of the option may be exercised.
(2) Any exercise of an option shall be in writing, signed by the
proper person and furnished to the Company, accompanied by (i)
such documents, representations, agreements, and
certifications as may be required by the Board and (ii)
payment in full as specified below in
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Section 6(d) for the number of shares for which the option is
exercised.
(3) In the case of an option that is not an incentive option, the
Board shall have the right to require that the participant
exercising the option remit to the Company an amount sufficient
to satisfy any federal, state, or local withholding tax
requirements (or make other arrangements satisfactory to the
Company with regard to such taxes) prior to the delivery of any
Stock pursuant to the exercise of the option. If permitted by
the Board either at the time of the grant of the option or the
time of exercise, the participant may elect, at such time and
in such manner as the Board may prescribe, to satisfy such
withholding obligation by (i) delivering to the Company Stock
owned by such individual having a fair market value equal to
such withholding obligation, or (ii) requesting that the
Company withhold from the shares of Stock to be delivered upon
the exercise a number of shares of Stock having a fair market
value equal to such withholding obligation.
In the case of an incentive option, the Board may require as a
condition of exercise that the participant exercising the
option agree to inform the Company promptly of any disposition
(within the meaning of section 424(C) of the Code and the
regulations thereunder) of Stock received upon exercise. In
addition, if at the time the option is exercised the Board
determines that under applicable law and regulations the
Company could be liable for the withholding of any federal or
state tax with respect to a disposition of the Stock received
upon exercise, the Board may require as a condition of
exercise that the participant exercising the option agree to
give such security as the Board deems adequate to meet the
potential liability of the Company for the withholding of tax,
and to augment such security from time to time in any amount
reasonably deemed necessary by the Board to preserve the
adequacy of such security.
(4) If an option is exercised by the executor or administrator of
a deceased participant, or by the person or persons to whom
the option has been transferred by the participant's will or
the applicable laws of descent and distribution, the Company
shall be under no obligation to deliver Stock pursuant to such
exercise until the Company is satisfied as to the authority of
the person or persons exercising the option.
(d) PAYMENT FOR STOCK. Stock purchased upon exercise of an option under
the Plan shall be paid for as follows: (i) in cash, check acceptable to the
Company (determined in accordance with such guidelines as the Board may
prescribe), or money order payable to the order of the Company, or (ii) if so
permitted by the Board (which, in the case of an incentive option, shall
specify such method of payment at the time of grant), (A) through the delivery
of shares of Stock (which, in the case of Stock acquired from the Company,
shall have been held for at least six months unless the Board specifies a
shorter period) having a fair market value on the date of exercise equal to the
purchase price, or (B) by delivery of a promissory note of the participant to
the Company, such note to be payable on such terms as are specified by the
Board, or (C) by delivery of an unconditional and irrevocable undertaking by a
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or (D) by any combination of the permissible forms of payment; provided,
that if the Stock delivered upon exercise of the option is an original issue of
authorized Stock, at
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least so much of the exercise price as represents the par value of such Stock
shall be paid other than with a personal check or promissory note of the person
exercising the option.
(e) STOCK APPRECIATION RIGHTS. The Board in its discretion may grant
SARs either in tandem with or independent of options awarded under the Plan.
Except as hereinafter provided, each SAR will entitle the participant to
receive upon exercise, with respect to each share of Stock to which the SAR
relates, the excess of (i) the share's value on the date of exercise, over
(ii) the share's fair market value on the date it was granted. For purposes of
clause (i), "value" shall mean fair market value; provided, that the Board may
adjust such value to take into account dividends on the Stock and may also
grant SARs that provide, in such limited circumstances following a change in
control of the Company (as determined by the Board) as the Board may specify,
that "value" for purposes of clause (i) is to be determined by reference to an
average value for the Stock during a period immediately preceding the change in
control, all as determined by the Board. The amount payable to a participant
upon exercise of an SAR shall be paid either in cash or in shares of Stock, as
the Board determines. Each SAR shall be exercisable during such period or
periods and on such terms as the Board may specify. No SAR shall be exercisable
after the date which is ten years from the date of grant.
(f) DELIVERY OF STOCK. A participant shall not have the rights of a
shareholder with regard to awards under the Plan except as to Stock actually
received by such participant under the Plan.
The Company shall not be obligated to deliver any shares of Stock (i)
until, in the opinion of the Company's counsel, all applicable federal and
state laws and regulations have been complied with, (ii) if the outstanding
Stock is at the time listed on any stock exchange, until the shares to be
delivered have been listed or authorized to be listed on such exchange upon
official notice of issuance, and (iii) until all other legal matters in
connection with the issuance and delivery of such shares have been approved by
the Company's counsel. If the sale of Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such Act and may require
that the certificates evidencing such Stock bear an appropriate legend
restricting transfer.
(g) NONTRANSFERABILITY OF AWARDS. No award may be transferred other
than by will or by the laws of descent and distribution, and during a
participant's lifetime an award may be exercised only by him or her.
(h) DEATH. Except as otherwise provided in an award, if a participant
dies, each award held by the participant immediately prior to death may be
exercised, to the extent it was exercisable immediately prior to death, by his
executor or administrator, or by the person or persons to whom the award is
transferred by will or the applicable laws of descent and distribution, at any
time within the period ending (i) 180 days after the participant's death (in
the event the participant's employment or other service relationship with the
Company shall terminate by reason of death), or (ii) 120 days after the
participant's death (in the event the participant dies within the 60-day period
following termination of the participant's employment or other service
relationship with the Company), or such longer period as the Committee may
determine. In no event shall an award be exercised beyond the Final Exercise
Date. Except as otherwise provided in an award, all awards held by a
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participant immediately prior to death that are not then exercisable shall
terminate on the date of death.
(i) OTHER TERMINATION OF SERVICE. Except as otherwise provided in an
award, if a participant's employment or other service relationship with the
Company terminates for any reason other than death, all awards held by the
participant shall terminate to the extent not exercisable immediately prior to
such event. To the extent exercisable immediately prior to termination of
employment or other service relationship, the award shall continue to be
exercisable thereafter for a period of 60 days (or such longer period as the
Board may determine, but in no event beyond the Final Exercise Date), unless
the participant's employment or other service relationship is terminated for
"cause" as a result of the participant's misconduct which, in the judgment of
the Board, casts discredit on him or her, or is otherwise harmful to the
business, interests, or reputation of the Company, its parent, or a subsidiary,
in which case all awards shall terminate immediately. The Board may in any
award provide for post-termination exercise provisions different from those
expressly set forth in the preceding two sentences or in (h) above, including
without limitation terms allowing a later exercise by a former employee,
consultant, or advisor (or, in the case of a former employee, consultant, or
advisor who is deceased, the person or persons to whom the award is transferred
by will or the laws of descent and distribution) as to all or any portion of
the award not exercisable immediately prior to termination of employment or
other service relationship, but in no case may an award be exercised after the
Final Exercise Date. Except as otherwise provided in an award, after completion
of that 60-day or longer period, such awards shall terminate to the extent not
previously exercised, expired, or terminated. For purposes of this Plan, the
service relationship shall not be considered terminated (i) in the case of sick
leave or other bona fide leave of absence approved for purposes of the Plan by
the Board, so long as the participant's right to reemployment or continued
service is guaranteed either by statute or by contract, or (ii) in the case of
a transfer of employment or service relationship between the Company and a
subsidiary or parent, or between subsidiaries of the Company or parent
(provided the participant's direct or indirect service to the Company
continues), or to the service of a corporation (or a parent or subsidiary
corporation of such corporation) issuing or assuming an award in a transaction
to which section 424(a) of the Code applies.
(j) MERGERS, ETC. In the event of any merger, consolidation,
dissolution, or liquidation of the Company, the Board in its sole discretion
may, as to any outstanding awards, make such substitution or adjustment in the
aggregate number of shares reserved for issuance under the Plan and in the
number and purchase price (if any) of shares subject to such awards as it may
determine, or accelerate, amend, or terminate such awards upon such terms and
conditions as it shall provide (which, in the case of the termination of the
vested portion of any award, shall require payment or other consideration which
the Board deems equitable in the circumstances).
The Board may grant awards under the Plan in substitution for awards
held by employees, consultants, or advisors of another corporation who
concurrently become employees, consultants, or advisors of the Company, its
parent, or a subsidiary as the result of a merger or consolidation of that
corporation with the Company, its parent, or a subsidiary, or as the result of
the acquisition by the Company, its parent, or a subsidiary of property or
stock of that corporation. The Company may direct that substitute awards be
granted on such terms and conditions as the Board considers appropriate in the
circumstances.
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(k) CANCELLATION OF AWARDS. The Board may provide in any award that
the award shall be canceled or rescinded and any associated shares forfeited,
and the participant shall be obligated to pay to the Company any gain received
upon exercise, in the event that the participant competes with the Company,
discloses confidential information of the Company, or otherwise is not in
compliance with applicable provisions of any award, in each case on such terms
and conditions as the Board considers appropriate in the circumstances.
7. EMPLOYMENT RIGHTS
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Neither the adoption of the Plan nor the grant of awards shall confer
upon any participant any right to continue as an employee of, or consultant or
advisor to, the Company, its parent, or any subsidiary of either or affect in
any way the right of the Company, its parent, or a subsidiary of either to
terminate the participant's relationship at any time. Except as specifically
provided by the Board in any particular case, the loss of existing or potential
profit in awards granted under this Plan shall not constitute an element of
damages in the event of termination of the relationship of a participant even
if the termination is in violation of an obligation of the Company, its parent,
or a subsidiary of either to the participant by contract or otherwise.
8. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT, AND TERMINATION
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Neither adoption of the Plan nor the grant of awards to a participant
shall affect the Company's right to make awards to such participant that are
not subject to the Plan, to issue to such participant Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which Stock may be
issued, and shall in no way affect the Company's right to operate its business
at its sole discretion.
The exercise of certain awards granted under the Plan may be made
contingent upon the closing of an initial public offering of the Company's
Stock. The grant of such awards under the Plan shall in no way obligate the
Company to consummate or consider a public offering of Stock, and the failure
of the Company to close a public offering of Stock shall not entitle a
participant granted such an award to any substitute award or other benefit, or
to any damages.
The Board may at any time discontinue granting awards under the Plan.
With the consent of the participant, the Board may at any time cancel an
existing award in whole or in part and grant another award for such number of
shares as the Board specifies. The Board may at any time or times amend the
Plan or any outstanding award for the purpose of satisfying the requirements of
section 422 of the Code or of any changes in applicable laws or regulations or
for any other purpose that may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of awards; except that no such
amendment shall adversely affect the rights of any participant (without his or
her consent) under any award previously granted.
1/10/95
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