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EXHIBIT 10.6
CARDIOTECH INTERNATIONAL, INC.
1996 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN
1. DEFINITIONS.
Unless otherwise specified or unless the context otherwise requires,
the following terms, as used in this CardioTech International, Inc.
1996 Employee, Director and Consultant Stock Option Plan, have the
following meanings:
Administrator means the Board of Directors, unless it has
delegated power to act on its behalf to the Committee, in
which case the Administrator means the Committee.
Affiliate means a corporation which, for purposes of Section
424 of the Code, is a parent or subsidiary of the Company,
direct or indirect.
Board of Directors means the Board of Directors of the
Company.
Code means the United States Internal Revenue Code of 1986, as
amended.
Committee means the Committee of the Board of Directors to
which the Board of Directors has delegated power to act under
or pursuant to the provisions of the Plan.
Common Stock means shares of the Company's common stock, $.01
par value per share.
Company means CardioTech International, Inc., a Massachusetts
corporation.
Disability or Disabled means permanent and total disability as
defined in Section 22(e)(3) of the Code.
Fair Market Value of a Share of Common Stock means:
(1) If the Common Stock is listed on a national securities
exchange or traded in the over-the-counter market and sales
prices are regularly reported for the Common Stock, either (a)
the average of the closing or last prices of the Common Stock
on the Composite Tape or other comparable reporting system for
the five (5) consecutive trading days immediately following
the applicable date or (b) the closing or last price of the
Common Stock on the Composite Tape or other comparable
reporting system for the trading day immediately
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preceding the applicable date, as the Administrator shall
determine, except that Subparagraph (b) shall not apply to
Options granted pursuant to Paragraph 6(A)(e) of the Plan;
(2) If the Common Stock is not traded on a national securities
exchange but is traded on the over-the-counter market, if
sales prices are not regularly reported for the Common Stock
for the trading days or day referred to in clause (1), and if
bid and asked prices for the Common Stock are regularly
reported, either (a) the average of the mean between the bid
and the asked price for the Common Stock at the close of
trading in the over-the-counter market for the five (5)
trading days on which Common Stock was traded immediately
preceding the applicable date or (b) the mean between the bid
and the asked price for the Common Stock at the close of
trading in the over-the-counter market for the trading day on
which Common Stock was traded immediately preceding the
applicable date, as the Administrator shall determine, except
that Subparagraph (b) shall not apply to Options granted
pursuant to Paragraph 6(A)(e) of the Plan; and
(3) If the Common Stock is neither listed on a national
securities exchange nor traded in the over-the-counter market,
such value as the Administrator, in good faith, shall
determine.
ISO means an option meant to qualify as an incentive stock
option under Section 422 of the Code.
Key Employee means an employee of the Company or of an
Affiliate (including, without limitation, an employee who is
also serving as an officer or director of the Company or of an
Affiliate), designated by the Administrator to be eligible to
be granted one or more Options under the Plan.
Non-Qualified Option means an option which is not intended to
qualify as an ISO.
Option means an ISO or Non-Qualified Option granted under the
Plan.
Option Agreement means an agreement between the Company and a
Participant delivered pursuant to the Plan.
Participant means a Key Employee, director or consultant to
whom one or more Options are granted under the Plan. As used
herein, "Participant" shall
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include "Participant's Survivors" where the context requires.
Participant's Survivors means a deceased Participant's legal
representatives and/or any person or persons who acquired the
Participant's rights to an Option by will or by the laws of
descent and distribution.
Plan means this CardioTech International, Inc. 1996 Employee,
Director and Consultant Stock Option Plan.
Shares means shares of the Common Stock as to which Options
have been or may be granted under the Plan or any shares of
capital stock into which the Shares are changed or for which
they are exchanged within the provisions of Paragraph 3 of the
Plan. The Shares issued upon exercise of Options granted under
the Plan may be authorized and unissued Shares or Shares held
by the Company in its treasury, or both.
2. PURPOSES OF THE PLAN.
The Plan is intended to encourage ownership of Shares by Key Employees,
directors and certain consultants to the Company in order to attract such
people, to induce them to work for the benefit of the Company or of an Affiliate
and to provide additional incentive for them to promote the success of the
Company or of an Affiliate. The Plan provides for the granting of ISOs and
Non-Qualified Options.
3. SHARES SUBJECT TO THE PLAN.
The number of Shares subject to this Plan as to which Options may be
granted from time to time shall be 1,100,000 Shares or the equivalent of such
number of Shares after the Administrator, in its sole discretion, has
interpreted the effect of any stock split, stock dividend, combination,
recapitalization or similar transaction in accordance with Paragraph 16 of the
Plan. Of such 1,100,000 Shares, only 100,000 Shares shall be eligible for grant
under Paragraph 6(A)(e) hereof.
If an Option ceases to be "outstanding", in whole or in part, the
Shares which were subject to such Option shall be available for the granting of
other Options under the Plan. Any Option shall be treated as "outstanding" until
such Option is exercised in full, or terminates or expires under the provisions
of the Plan, or by agreement of the parties to the pertinent Option Agreement.
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4. ADMINISTRATION OF THE PLAN.
The Administrator of the Plan will be the Board of Directors, except to the
extent the Board of Directors delegates its authority to the Committee, in which
case the Committee shall be the Administrator. Following the date on which the
Common Stock is registered under the Securities and Exchange Act of 1934, as
amended (the "1934 Act"), the Plan is intended to comply in all respects with
Rule 16b-3 or its successors, promulgated pursuant to Section 16 of the 1934 Act
with respect to Participants who are subject to Section 16 of the 1934 Act, and
any provision in this Plan with respect to such persons contrary to Rule 16b-3
shall be deemed null and void to the extent permissible by law and deemed
appropriate by the Administrator. Subject to the provisions of the Plan, the
Administrator is authorized to:
a. Interpret the provisions of the Plan or of any Option or
Option Agreement and to make all rules and determinations
which it deems necessary or advisable for the administration
of the Plan;
b. Determine which employees of the Company or of an Affiliate
shall be designated as Key Employees and which of the Key
Employees, directors and consultants shall be granted Options;
c. Determine the number of Shares for which an Option or Options
shall be granted; and
d. Specify the terms and conditions upon which an Option or
Options may be granted;
provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Section 422 of the Code of those Options which are designated as
ISOs. Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Option granted under it
shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is the Committee.
5. ELIGIBILITY FOR PARTICIPATION.
The Administrator will, in its sole discretion, name the Participants
in the Plan, provided, however, that each Participant must be a Key Employee,
director or consultant of the Company or of an Affiliate at the time an Option
is granted. Members of the Board of Directors who are not employees of the
Company or of an Affiliate may receive options pursuant to Paragraph 6(A)(e) of
the Plan, but only pursuant thereto.
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Notwithstanding any of the foregoing provisions, the Administrator may authorize
the grant of an Option to a person not then an employee, director or consultant
of the Company or of an Affiliate. The actual grant of such Option, however,
shall be conditioned upon such person becoming eligible to become a Participant
at or prior to the time of the execution of the Option Agreement evidencing such
Option. ISOs may be granted only to Key Employees. Non-Qualified Options may be
granted to any Key Employee, director or consultant of the Company or an
Affiliate. The granting of any Option to any individual shall neither entitle
that individual to, nor disqualify him or her from, participation in any other
grant of Options.
6. TERMS AND CONDITIONS OF OPTIONS.
Each Option shall be set forth in writing in an Option Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant. The Administrator may provide that Options be
granted subject to such conditions as the Administrator may deem appropriate,
including, without limitation, subsequent approval by the shareholders of the
Company of this Plan or any amendments to this Plan. The Option Agreements shall
be subject to at least the following terms and conditions:
A. Non-Qualified Options: Each Option intended to be a
Non-Qualified Option shall be subject to the terms and
conditions which the Administrator determines to be
appropriate and in the best interest of the Company, subject
to the following minimum standards for any such Non-Qualified
Option:
a. Option Price. Each Option Agreement shall state the
option price (per share) of the Shares covered by
each Option, which option price shall be determined
by the Administrator but shall not be less than the
par value per share of Common Stock;
b. Number of Shares. Each Option Agreement shall state
the number of Shares to which it pertains;
c. Term of Option, Vesting. Each Option Agreement shall
state the date or dates on which it first is
exercisable and the date after which it may no longer
be exercised, and may provide that the Option rights
accrue or become exercisable in installments over a
period of months or years, or upon the occurrence of
certain conditions or the attainment of stated goals
or events;
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d. Option Conditions. Exercise of any Option may be
conditioned upon the Participant's execution of a
Share purchase agreement in form satisfactory to the
Administrator providing for certain protections for
the Company and its other shareholders including
requirements that:
i. The Participant's or the Participant's
Survivors' right to sell or transfer the
Shares may be restricted; and
ii. The Participant or the Participant's
Survivors may be required to execute letters
of investment intent and must also
acknowledge that the Shares will bear
legends noting any applicable restrictions.
e. Directors' Options. Each director of the Company who
is not an employee of the Company or any Affiliate,
who is first elected or appointed to the Board of
Directors after the date on which the Common Stock is
registered under the 1934 Act, upon such election or
appointment and upon every anniversary thereof
provided that on such dates such director has been in
the continued and uninterrupted service of the
Company as a director since his or her election or
appointment and is a director of the Company and is
not an employee of the Company at such times, shall
be granted a Non-Qualified Option to purchase 14,000
Shares. Any non-employee director serving in office
on the date on which the Common Stock is registered
under the 1934 Act, who has been a member of the
Board of Directors prior to such date shall be
granted on such date and upon every anniversary
thereof, a Non-Qualified Option to purchase 14,000
Shares, provided that on such date such director has
been in the continued and uninterrupted service of
the Company as a director since his or her election
or appointment and is a director of the Company and
is not an employee of the Company at such time. If
any non-employee director should cease to be a
director and thereafter shall be elected or appointed
to the Board of Directors, upon such election or
appointment and upon every anniversary thereof
provided that on such dates such director has been in
the continued and uninterrupted service of the
Company as a director since his or her election or
appointment and is a director of the Company and is
not an employee of the Company at such times, shall
be granted a Non-Qualified Option to purchase 14,000
Shares. Each such
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Option shall (i) have an exercise price equal to the
Fair Market Value (per share) of the Shares on the
date of grant of the Option, (ii) have a term of ten
(10) years, and (iii) shall become cumulatively
exercisable in four (4) equal installments of
twenty-five percent (25%) each, upon completion of
three (3) months of service on the Board of Directors
after the date of grant, and continuing upon
completion of each of the next three (3) three
(3)-month periods of service thereafter (for example,
if the date of grant of an Option was May 1, 1996,
then the Option would vest in four (4) equal
installments on August 1, 1996, November 1, 1996,
February 1, 1997 and May 1, 1997). Any director
entitled to receive an Option grant under this
Subparagraph may elect to decline the Option.
Notwithstanding the provisions of Paragraph 23
concerning amendment of the Plan, the provisions of
this Subparagraph 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. The provisions of
Paragraphs 10, 11, 12 and 13 below shall not apply to
Options granted pursuant to this Subparagraph.
Except as otherwise provided in the pertinent Option Agreement, if a
director who received Options pursuant to this Subparagraph (e):
i. ceases to be a member of the Board of
Directors for any reason other than death or
Disability, any then unexercised Options
granted to such director may be exercised by
the director within a period of ninety (90)
days after the date the director ceases to
be a member of the Board of Directors, but
only to the extent of the number of Shares
with respect to which the Options are
exercisable on the date the director ceases
to be a member of the Board of Directors,
and in no event later than the expiration
date of the Option; or
ii. ceases to be a member of the Board of
Directors by reason of his or her death or
Disability, any then unexercised Options
granted to such director may be exercised by
the director (or by the Participant's
personal representative, or Participant's
Survivors in the event of death) within a
period of one hundred eighty (180) days
after
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the date the director ceases to be a member
of the Board of Directors, but only to the
extent of the number of Shares with respect
to which the Options are exercisable on the
date the director ceases to be a member of
the Board of Directors, and in no event
later than the expiration date of the
Option.
B. ISOs: Each Option intended to be an ISO shall be issued only
to a Key Employee and be subject to at least the following
terms and conditions, with such additional restrictions or
changes as the Administrator determines are appropriate but
not in conflict with Section 422 of the Code and relevant
regulations and rulings of the Internal Revenue Service:
a. Minimum standards. The ISO shall meet the minimum
standards required of Non-Qualified Options, as
described in Paragraph 6(A) above, except clauses (a)
and (e) thereunder.
b. Option Price. Immediately before the Option is
granted, if the Participant owns, directly or by
reason of the applicable attribution rules in Section
424(d) of the Code:
i. Ten percent (10%) or less of the total
combined voting power of all classes of
share capital of the Company or an
Affiliate, the Option price per share of the
Shares covered by each Option shall not be
less than one hundred percent (100%) of the
Fair Market Value per share of the Shares on
the date of the grant of the Option.
ii. More than ten percent (10%) of the total
combined voting power of all classes of
share capital of the Company or an
Affiliate, the Option price per share of the
Shares covered by each Option shall not be
less than one hundred ten percent (110%) of
the said Fair Market Value on the date of
grant.
c. Term of Option. For Participants who own
i. Ten percent (10%) or less of the total
combined voting power of all classes of
share capital of the Company or an
Affiliate, each Option shall terminate not
more than ten (10) years from the date of
the grant or at such earlier time as the
Option Agreement may provide.
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ii. More than ten percent (10%) of the total
combined voting power of all classes of
share capital of the Company or an
Affiliate, each Option shall terminate not
more than five (5) years from the date of
the grant or at such earlier time as the
Option Agreement may provide.
d. Limitation on Yearly Exercise. The Option Agreements
shall restrict the amount of Options which may be
exercisable in any calendar year (under this or any
other ISO plan of the Company or an Affiliate) so
that the aggregate Fair Market Value (determined at
the time each ISO is granted) of the stock with
respect to which ISOs are exercisable for the first
time by the Participant in any calendar year does not
exceed one hundred thousand dollars ($100,000),
provided that this Subparagraph (d) shall have no
force or effect if its inclusion in the Plan is not
necessary for Options issued as ISOs to qualify as
ISOs pursuant to Section 422(d) of the Code.
e. Limitation on Grant of ISOs: No ISOs shall be granted
after March 4, 2006.
7. EXERCISE OF OPTION AND ISSUE OF SHARES.
An Option (or any part or installment thereof) shall be exercised by
giving written notice to the Company at its principal office address, together
with provision for payment of the full purchase price in accordance with this
Paragraph for the Shares as to which such Option is being exercised, and upon
compliance with any other condition(s) set forth in the Option Agreement. Such
written notice shall be signed by the person exercising the Option, shall state
the number of Shares with respect to which the Option is being exercised and
shall contain any representation required by the Plan or the Option Agreement.
Payment of the purchase price for the Shares as to which such Option is being
exercised shall be made (a) in United States dollars in cash or by check, or (b)
at the discretion of the Administrator, through delivery of shares of Common
Stock having a fair market value equal as of the date of the exercise to the
cash exercise price of the Option, determined in good faith by the
Administrator, or (c) at the discretion of the Administrator, by delivery of the
grantee's personal recourse note bearing interest payable not less than annually
at no less than 100% of the applicable Federal rate, as defined in Section
1274(d) of the Code, or (d) at the discretion of the Administrator, in
accordance with a cashless exercise program established with a securities
brokerage firm, and approved by the Administrator or
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(e) at the discretion of the Administrator, by any combination of (a), (b), (c)
and (d) above. Notwithstanding the foregoing, the Administrator shall accept
only such payment on exercise of an ISO as is permitted by Section 422 of the
Code.
The Company shall then reasonably promptly deliver the Shares as to
which such Option was exercised to the Participant (or to the Participant's
Survivors, as the case may be). In determining what constitutes "reasonably
promptly," it is expressly understood that the delivery of the Shares may be
delayed by the Company in order to comply with any law or regulation which
requires the Company to take any action with respect to the Shares prior to
their issuance. The Shares shall, upon delivery, be evidenced by an appropriate
certificate or certificates for fully paid, non-assessable Shares.
In lieu of permitting a Participant to obtain Common Stock pursuant to
the exercise of an Option, the Company may, in its sole discretion, pay to the
Participant an amount equal to the Appreciated Value multiplied by the number of
shares of Common Stock that the Participant is entitled to upon the exercise of
an Option (the "Appreciated Amount"). The Appreciated Amount shall be payable to
the Participant within fifteen (15) days of receipt by the Company of the notice
from the Participant that the Participant intends to exercise the Option.
"Appreciated Value" shall mean the amount by which (i) the per share Fair Market
Value on the date of exercise of the Option, exceeds (ii) the option price per
share set forth in the related Option Agreement.
The Administrator shall have the right to accelerate the date of
exercise of any installment of any Option; provided that the Administrator shall
not accelerate the exercise date of any installment of any Option granted to any
Key Employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Paragraph 19) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in Paragraph
6(A)(d).
The Administrator may, in its discretion, amend any term or condition
of an outstanding Option provided (i) such term or condition as amended is
permitted by the Plan, (ii) any such amendment shall be made only with the
consent of the Participant to whom the Option was granted, or in the event of
the death of the Participant, the Participant's Survivors, if the amendment is
adverse to the Participant, (iii) any such amendment of any ISO shall be made
only after the Administrator, after consulting the counsel for the Company,
determines whether such amendment would constitute a "modification" of any
Option which is an ISO (as that term is defined in Section 424(h) of the Code)
or would cause any adverse tax consequences for the holders of such ISO, and
(iv) with respect to any Option held by any Participant who is subject to the
provisions of Section 16(a) of the 1934 Act,
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any such amendment shall be made only after the Administrator, after consulting
with counsel for the Company, determines whether such amendment would constitute
the grant of a new Option.
8. RIGHTS AS A SHAREHOLDER.
No Participant to whom an Option has been granted shall have rights as
a shareholder with respect to any Shares covered by such Option, except after
due exercise of the Option and tender of the full purchase price for the Shares
being purchased pursuant to such exercise and registration of the Shares in the
Company's share register in the name of the Participant.
9. ASSIGNABILITY AND TRANSFERABILITY OF OPTIONS.
By its terms, an Option granted to a Participant shall not be
transferable by the Participant other than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act or the rules
thereunder, provided, however, that the designation of a beneficiary of an
Option by a Participant shall not be deemed a transfer prohibited by this
Paragraph. Except as provided in the preceding sentence, an Option shall be
exercisable, during the Participant's lifetime, only by such Participant (or by
his or her legal representative) and shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process. Any attempted transfer,
assignment, pledge, hypothecation or other disposition of any Option or of any
rights granted thereunder contrary to the provisions of this Plan, or the levy
of any attachment or similar process upon an Option, shall be null and void.
10. EFFECT OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE".
Except as otherwise provided in the pertinent Option Agreement, in the
event of a termination of service (whether as an employee, director or
consultant) with the Company or an Affiliate before the Participant has
exercised all Options, the following rules apply:
a. A Participant who ceases to be an employee, director or
consultant of the Company or of an Affiliate (for any reason
other than termination "for cause", Disability, or death for
which events there are special rules in Paragraphs 11, 12, and
13, respectively), may exercise any Option granted to him or
her to the extent that the Option is exercisable on the date
of such termination
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of service, but only within such term as the Administrator has
designated in the pertinent Option Agreement.
b. In no event may an Option Agreement provide, if the Option is
intended to be an ISO, that the time for exercise be later
than three (3) months after the Participant's termination of
employment.
c. The provisions of this Paragraph, and not the provisions of
Paragraph 12 or 13, shall apply to a Participant who
subsequently becomes disabled or dies after the termination of
employment, director status or consultancy, provided, however,
in the case of a Participant's death within three (3) months
after the termination of employment, director status or
consulting, the Participant's Survivors may exercise the
Option within one (1) year after the date of the Participant's
death, but in no event after the date of expiration of the
term of the Option.
d. Notwithstanding anything herein to the contrary, if subsequent
to a Participant's termination of employment, termination of
director status or termination of consultancy, but prior to
the exercise of an Option, the Board of Directors determines
that, either prior or subsequent to the Participant's
termination, the Participant engaged in conduct which would
constitute "cause", then such Participant shall forthwith
cease to have any right to exercise any Option.
e. A Participant to whom an Option has been granted under the
Plan who is absent from work with the Company or with an
Affiliate because of temporary disability (any disability
other than a permanent and total Disability as defined in
Paragraph 1 hereof), or who is on leave of absence for any
purpose, shall not, during the period of any such absence, be
deemed, by virtue of such absence alone, to have terminated
such Participant's employment, director status or consultancy
with the Company or with an Affiliate, except as the
Administrator may otherwise expressly provide.
f. Options granted under the Plan shall not be affected by any
change of employment or other service within or among the
Company and any Affiliates, so long as the Participant
continues to be an employee, director or consultant of the
Company or any Affiliate, provided, however, if a
Participant's employment by either the Company or an Affiliate
should cease (other than to
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become an employee of an Affiliate or the Company), such
termination shall affect the Participant's rights under any
Option granted to such Participant in accordance with the
terms of the Plan and the pertinent Option Agreement.
11. EFFECT OF TERMINATION OF SERVICE "FOR CAUSE".
Except as otherwise provided in the pertinent Option Agreement, the
following rules apply if the Participant's service (whether as an employee,
director or consultant) with the Company or an Affiliate is terminated "for
cause" prior to the time that all of his or her outstanding Options have been
exercised:
a. All outstanding and unexercised Options as of the date the
Participant is notified his or her service is terminated "for
cause" will immediately be forfeited, unless the Option
Agreement provides otherwise.
b. For purposes of this Paragraph, "cause" shall include (and is
not limited to) dishonesty with respect to the Company or any
Affiliate, insubordination, substantial malfeasance or
non-feasance of duty, unauthorized disclosure of confidential
information, and conduct substantially prejudicial to the
business of the Company or any Affiliate. The determination of
the Administrator as to the existence of cause will be
conclusive on the Participant and the Company.
c. "Cause" is not limited to events which have occurred prior to
a Participant's termination of service, nor is it necessary
that the Administrator's finding of "cause" occur prior to
termination. If the Administrator determines, subsequent to a
Participant's termination of service but prior to the exercise
of an Option, that either prior or subsequent to the
Participant's termination the Participant engaged in conduct
which would constitute "cause", then the right to exercise any
Option is forfeited.
d. Any definition in an agreement between the Participant and the
Company or an Affiliate, which contains a conflicting
definition of "cause" for termination and which is in effect
at the time of such termination, shall supersede the
definition in this Plan with respect to such Participant.
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12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY.
Except as otherwise provided in the pertinent Option Agreement, a
Participant who ceases to be an employee, director or consultant of the Company
or of an Affiliate by reason of Disability may exercise any Option granted to
such Participant:
a. To the extent exercisable but not exercised on the date of
Disability; and
b. In the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of any
additional rights as would have accrued had the Participant
not become Disabled prior to the end of the accrual period
which next ends following the date of Disability. The
proration shall be based upon the number of days of such
accrual period prior to the date of Disability.
A Disabled Participant may exercise such rights only within a period of
not more than one (1) year after the date that the Participant became Disabled,
notwithstanding that the Participant might have been able to exercise the Option
as to some or all of the Shares on a later date if he or she had not become
disabled and had continued to be an employee, director or consultant or, if
earlier, within the originally prescribed term of the Option.
The Administrator shall make the determination both of whether
Disability has occurred and the date of its occurrence (unless a procedure for
such determination is set forth in another agreement between the Company and
such Participant, in which case such procedure shall be used for such
determination). If requested, the Participant shall be examined by a physician
selected or approved by the Administrator, the cost of which examination shall
be paid for by the Company.
13. EFFECT OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.
Except as otherwise provided in the pertinent Option Agreement, in the
event of the death of a Participant to whom an Option has been granted while the
Participant is an employee, director or consultant of the Company or of an
Affiliate, such Option may be exercised by the Participant's Survivors:
a. To the extent exercisable but not exercised on the date of
death; and
b. In the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of any
additional rights which would have accrued had the Participant
not died prior to the end of the accrual
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period which next ends following the date of death. The
proration shall be based upon the number of days of such
accrual period prior to the Participant's death.
If the Participant's Survivors wish to exercise the Option, they must
take all necessary steps to exercise the Option within one (1) year after the
date of death of such Participant, notwithstanding that the decedent might have
been able to exercise the Option as to some or all of the Shares on a later date
if he or she had not died and had continued to be an employee, director or
consultant or, if earlier, within the originally prescribed term of the Option.
14. PURCHASE FOR INVESTMENT.
Unless the offering and sale of the Shares to be issued upon the
particular exercise of an Option shall have been effectively registered under
the Securities Act of 1933, as now in force or hereafter amended (the "1933
Act"), the Company shall be under no obligation to issue the Shares covered by
such exercise unless and until the following conditions have been fulfilled:
a. The person(s) who exercise such Option shall warrant to the
Company, prior to the receipt of such Shares, that such
person(s) are acquiring such Shares for their own respective
accounts, for investment, and not with a view to, or for sale
in connection with, the distribution of any such Shares, in
which event the person(s) acquiring such Shares shall be bound
by the provisions of the following legend which shall be
endorsed upon the certificate(s) evidencing their Shares
issued pursuant to such exercise or such grant:
"The shares represented by this certificate have been
taken for investment and they may not be sold or
otherwise transferred by any person, including a
pledgee, unless (1) either (a) a Registration
Statement with respect to such shares shall be
effective under the Securities Act of 1933, as
amended, or (b) the Company shall have received an
opinion of counsel satisfactory to it that an
exemption from registration under such Act is then
available, and (2) there shall have been compliance
with all applicable state securities laws.
b. The Company shall have received an opinion of its counsel that
the Shares may be issued upon such particular exercise in
compliance with the 1933 Act without registration thereunder.
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The Company may delay issuance of the Shares until completion of any
action or obtaining of any consent which the Company deems necessary under any
applicable law (including, without limitation, state securities or "blue sky"
laws).
15. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
Upon the dissolution or liquidation of the Company, all Options granted
under this Plan which as of such date shall not have been exercised will
terminate and become null and void; provided, however, that if the rights of a
Participant or a Participant's Survivors have not otherwise terminated and
expired, the Participant or the Participant's Survivors will have the right
immediately prior to such dissolution or liquidation to exercise any Option to
the extent that the Option is exercisable as of the date immediately prior to
such dissolution or liquidation.
16. ADJUSTMENTS.
Upon the occurrence of any of the following events, a Participant's
rights with respect to any Option granted to him or her hereunder which have not
previously been exercised in full shall be adjusted as hereinafter provided,
unless otherwise specifically provided in the written agreement between the
Participant and the Company relating to such Option:
A. Stock Dividends and Stock Splits. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of such Option shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend. The number
of Shares subject to options to be granted to directors pursuant to Paragraph
6(A)(e) shall also be proportionately adjusted upon the occurrence of such
events.
B. Consolidations or Mergers. If the Company is to be consolidated with
or acquired by another entity in a merger, sale of all or substantially all of
the Company's assets or otherwise (an "Acquisition"), the Administrator or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Options, either (i)
make appropriate provision for the continuation of such Options by substituting
on an equitable basis for the Shares then subject to such Options either the
consideration payable with respect to the outstanding shares of Common Stock in
connection
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with the Acquisition or securities of any successor or acquiring
entity; or (ii) upon written notice to the Participants, provide that all
Options must be exercised (either to the extent then exercisable or, at the
discretion of the Administrator, all Options being made fully exercisable for
purposes of this Subparagraph), within a specified number of days of the date of
such notice, at the end of which period the Options shall terminate; or (iii)
terminate all Options in exchange for a cash payment equal to the excess of the
Fair Market Value of the shares subject to such Options (either to the extent
then exercisable or, at the discretion of the Administrator, all Options being
made fully exercisable for purposes of this Subparagraph) over the exercise
price thereof.
C. Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in Subparagraph B above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, a Participant upon exercising an Option shall be entitled to
receive for the purchase price paid upon such exercise the securities he or she
would have received if he or she had exercised such Option prior to such
recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any adjustments
made pursuant to Subparagraph A, B or C with respect to ISOs shall be made only
after the Administrator, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424(h) of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Administrator
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments, unless
the holder of an ISO specifically requests in writing that such adjustment be
made and such writing indicates that the holder has full knowledge of the
consequences of such "modification" on his or her income tax treatment with
respect to the ISO.
17. ISSUANCES OF SECURITIES.
Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. Except as
expressly provided herein, no adjustments shall be made for dividends paid in
cash or in property (including without limitation, securities) of the Company.
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18. FRACTIONAL SHARES.
No fractional share shall be issued under the Plan and the person
exercising such right shall receive from the Company cash in lieu of such
fractional share equal to the Fair Market Value thereof.
19. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS:
TERMINATION OF ISOs.
The Administrator, at the written request of any Participant, may in
its discretion take such actions as may be necessary to convert such
Participant's ISOs (or any portions thereof) that have not been exercised on the
date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the Participant is an employee of
the Company or an Affiliate at the time of such conversion. Such actions may
include, but not be limited to, extending the exercise period or reducing the
exercise price of the appropriate installments of such Options. At the time of
such conversion, the Administrator (with the consent of the Participant) may
impose such conditions on the exercise of the resulting Non-Qualified Options as
the Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any Participant the right to have such Participant's ISO's converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action. The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such termination.
20. WITHHOLDING.
In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other
amounts are required by applicable law or governmental regulation to be withheld
from the Option holder's salary, wages or other remuneration in connection with
the exercise of an Option or a Disqualifying Disposition (as defined in
Paragraph 21), the Option holder shall advance in cash to the Company, or to any
Affiliate of the Company which employs or employed the Option holder, the amount
of such withholdings unless a different withholding arrangement, including the
use of shares of the Company's Common Stock, is authorized by the Administrator
(and permitted by law), provided, however, that with respect to persons subject
to Section 16 of the 1934 Act, any such withholding arrangement shall be in
compliance with any applicable provisions of Rule 16b-3 promulgated under
Section 16 of the 1934 Act. For purposes hereof, the fair market value of
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the shares withheld for purposes of payroll withholding shall be determined in
the manner provided in Paragraph 1 above, as of the most recent practicable date
prior to the date of exercise. If the fair market value of the shares withheld
is less than the amount of payroll withholdings required, the Option holder may
be required to advance the difference in cash to the Company or the Affiliate
employer. The Administrator in its discretion may condition the exercise of an
Option for less than the then Fair Market Value on the Participant's payment of
such additional withholding.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
Each Key Employee who receives an ISO must agree to notify the Company
in writing immediately after the Key Employee makes a Disqualifying Disposition
of any shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired shares by exercising the
ISO. If the Key Employee has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
22. TERMINATION OF THE PLAN.
The Plan will terminate on March 4, 2006. The Plan may be terminated at
an earlier date by vote of the shareholders of the Company; provided, however,
that any such earlier termination will not affect any Options granted or Option
Agreements executed prior to the effective date of such termination.
23. AMENDMENT OF THE PLAN AND AGREEMENTS.
The Plan may be amended by the shareholders of the Company. The Plan
may also be amended by the Administrator, including, without limitation, to the
extent necessary to qualify any or all outstanding Options granted under the
Plan or Options to be granted under the Plan for favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, to the extent necessary
to ensure the qualification of the Plan under Rule 16b-3, at such time, if any,
as the Company has a class of stock registered pursuant to Section 12 of the
1934 Act, and to the extent necessary to qualify the shares issuable upon
exercise of any outstanding Options granted, or Options to be granted, under the
Plan for listing on any national securities exchange or quotation in any
national automated quotation system of securities dealers. Any amendment
approved by the Administrator
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which is of a scope that requires shareholder approval in order to ensure
favorable federal income tax treatment for any incentive stock options or
requires shareholder approval in order to ensure the compliance of the Plan with
Rule 16b-3 at such time, if any, as the Company has a class of stock registered
pursuant to Section 12 of the 1934 Act, shall be subject to obtaining such
shareholder approval. Any modification or amendment of the Plan shall not,
without the consent of a Participant, adversely affect his or her rights under
an Option previously granted to him or her. With the consent of the Participant
affected, the Administrator may amend outstanding Option Agreements in a manner
which may be adverse to the Participant but which is not inconsistent with the
Plan. In the discretion of the Administrator, outstanding Option Agreements may
be amended by the Administrator in a manner which is not adverse to the
Participant.
24. EMPLOYMENT OR OTHER RELATIONSHIP.
Nothing in this Plan or any Option Agreement shall be deemed to prevent
the Company or an Affiliate from terminating the employment, consultancy or
director status of a Participant, nor to prevent a Participant from terminating
his or her own employment, consultancy or director status or to give any
Participant a right to be retained in employment or other service by the Company
or any Affiliate for any period of time.
25. GOVERNING LAW.
This Plan shall be construed and enforced in accordance with the law of
The Commonwealth of Massachusetts.
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