1
Exhibit 10.3
AWARE, INC.
1996 STOCK OPTION PLAN
SECTION 1. PURPOSE
This 1996 Stock Option Plan (the "Plan") of Aware, Inc., a
Massachusetts 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. Unless otherwise determined by the Board, the Plan
shall be administered by a Committee (the "Committee") consisting of at least
two (2) "Outside Directors" who may also be members of the Compensation
Committee. As used herein, the term "Outside Director" means any director who
(i) is not an employee of the Company or of any "affiliated
2
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 (the "Board") 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;
- 2 -
3
(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 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) To make, in its sole discretion, changes to any
outstanding option granted under the Plan, including: (i) to reduce the
exercise price, (ii) to accelerate the vesting schedule or (iii) 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 3,000,000 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
- 3 -
4
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 350,000 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 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
- 4 -
5
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).
4.4 OPTION GRANTS TO NON-EMPLOYEE DIRECTORS. 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") shall,
at the first meeting of the Board of Directors following each annual meeting of
stockholders, commencing with the first meeting of the Board of Directors
following the Company's annual meeting of stockholders in 1997, be automatically
granted a Nonqualified Option (the "Director Option") to purchase that number of
shares of Common Stock of the Company determined by dividing $100,000 by the
exercise price
- 5 -
6
per share of Common Stock determined in accordance with this Section 4.4.
Each Director Option shall have a term of six years and shall vest in
twelve equal consecutive quarterly installments, the first to vest on the last
day of the month following the month in which the grant occurs. In the event
that a director's position as such terminates or is terminated by reason of his
death, permanent and total disability, resignation (other than at the request of
the Board), removal by the Board or the Company's stockholders, or refusal to
accept the Company's nomination for reelection, any Director Option held by such
director shall cease to vest and shall expire sixty days thereafter. In all
other cases, a Director Option shall continue to vest after termination of the
holder's position as a director and shall expire on the sixth anniversary of the
date of grant.
The exercise price per share of Common Stock of each Director Option
shall be equal to the fair market value of the Common Stock on the date the
Director Option is granted, determined in accordance with the provisions of
Section 6.3.
Notwithstanding any other provision of this Section 4.4, no Director
Option shall be granted prior to the first meeting of the Board of Directors
following the annual meeting of stockholders in 1999 to any individual who was
or became a director of the Company, and was granted an option to purchase
Common Stock of the Company, after December 31, 1995 and before the first
meeting of the Board of Directors following the annual meeting of stockholders
in 1997.
No Director 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
- 6 -
7
exercisable during the optionee's lifetime only by the optionee. Any Director
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 option.
Director 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.
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 terms of, and
the rights and obligations of the Company and Non-Employee Directors respecting,
Director Options granted or to be granted to Non-Employee Directors.
This Section 4.4 may be modified or abrogated at any time if the Board
determines that it or any provision in it is unnecessary for compliance or is in
conflict with Rule 16b-3 under the Exchange Act.
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:
- 7 -
8
(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
- 8 -
9
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 the option to the extent the optionee was entitled to
exercise such option immediately prior to his/her death. 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:
- 9 -
10
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.
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, 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). 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.
- 10 -
11
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.
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
- 11 -
12
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;
(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, a personal recourse
note issued by the optionee to the Company in a principal amount equal
to such aggregate exercise price and with such other terms, including
interest rate and maturity, as the Committee may determine in its
discretion; PROVIDED THAT the interest rate borne by such note shall
not be less than the lowest applicable federal rate, as defined in
Section 1274(d) of the Code;
(d) with the consent of the Committee, such other
consideration that is
- 12 -
13
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
(e) 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
- 13 -
14
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
- 14 -
15
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, 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
- 15 -
16
(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.
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
- 16 -
17
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 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.
- 17 -
18
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 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.
- 18 -
19
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.
- 19 -
20
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
provided in Section hereof, 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 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. 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 provided in Section hereof, 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
- 20 -
21
such option.
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.
- 21 -
22
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.
- 22 -
23
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 Commonwealth of Massachusetts.
* * *
- 23 -