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EXHIBIT 10.14
TERADYNE, INC.
1997 EMPLOYEE STOCK OPTION PLAN
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1. Purpose. The purpose of the Teradyne, Inc. 1997 Employee Stock
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Option Plan (the "Plan") is to encourage key employees of Teradyne, Inc. (the
"Company") and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations") and other individuals who render services
to the Company or a Related Corporation, by providing opportunities to
participate in the ownership of the Company and its future growth through (a)
the grant of options which qualify as "incentive stock options" ("ISOs") under
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code");
(b) the grant of options which do not qualify as ISOs ("Non-Qualified Options");
(c) awards of stock in the Company ("Awards"); and (d) opportunities to make
direct purchases of stock in the Company ("Purchases"). Both ISOs and
Non-Qualified Options are referred to hereafter individually as an "Option" and
collectively as "Options." Options, Awards and authorizations to make Purchases
are referred to hereafter collectively as "Stock Rights." As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Code.
2. Administration of the Plan.
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A. Board or Committee Administration. The Plan shall (be
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administered by the Board of Directors of the Company (the "Board")
or, subject to paragraph 2(D) (relating to compliance with Section
162(m) of the Code), by a committee appointed by the Board (the
"Committee"). Hereinafter, all references in this Plan to the
"Committee" shall mean the Board if no Committee has been appointed.
Subject to ratification of the grant or authorization of each Stock
Right by the Board (if so required by applicable state law), and
subject to the terms of the Plan, the Committee shall have the
authority to (i) determine to whom (from among the class of employees
eligible under paragraph 3 to receive ISOs) ISOs shall be granted, and
to whom (from among the class of individuals and entities eligible
under paragraph 3 to receive Non-Qualified Options and Awards and to
make Purchases) Non-Qualified Options, Awards and authorizations to
make Purchases may be granted; (ii) determine the time or times at
which Options or Awards shall be granted or Purchases made; (iii)
determine the purchase price of shares subject to each Option or
Purchase, which prices shall not be less than the minimum price
specified in paragraph 6; (iv) determine whether each Option granted
shall be an ISO or a Non-Qualified Option; (v) determine (subject to
paragraph 7) the time or times when each Option shall become
exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii)
determine whether restrictions such as repurchase options are to be
imposed on shares subject to Options, Awards and Purchases and the
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nature of such restrictions, if any, and (viii) interpret the Plan and
prescribe and rescind rules and regulations relating to it. If the
Committee determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under Section 422 of the Code and
the regulations promulgated thereunder, to ensure that such Option is
not treated as an ISO. The interpretation and construction by the
Committee of any provisions of the Plan or of any Stock Right granted
under it shall be final unless otherwise determined by the Board. The
Committee may from time to time adopt such rules and regulations for
carrying out the Plan as it may deem advisable. No member of the Board
or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Stock Right granted
under it.
B. Committee Actions. The Committee may select one of its
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members as its chairman, and shall hold meetings at such time and
places as it may determine. A majority of the Committee shall
constitute a quorum and acts of a majority of the members of the
Committee at a meeting at which a quorum is present, or acts reduced
to or approved in writing by all the members of the Committee (if
consistent with applicable state law), shall be the valid acts of the
Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution therefor,
fill vacancies however caused, or remove all members of the Committee
and thereafter directly administer the Plan.
C. Grant of Stock Rights to Board Members. Stock Rights may
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be granted to members of the Board. All grants of Stock Rights to
members of the Board shall in all respects be made in accordance
with the provisions of this Plan applicable to other eligible persons.
Members of the Board who either (i) are eligible to receive grants
of Stock Rights pursuant to the Plan or (ii) have been granted Stock
Rights may vote on any matters affecting the administration of the
Plan or the grant of any Stock Rights pursuant to the Plan, except
that no such member shall act upon the granting to himself or
herself of Stock Rights, but any such member may be counted in
determining the existence of a quorum at any meeting of the Board
during which action is taken with respect to the granting to such
member of Stock Rights.
D. Performance-Based Compensation. The Board, in its dis-
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cretion, may take such action as may be necessary to ensure that Stock
Rights granted under the Plan qualify as "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code and
applicable regulations promulgated thereunder ("Performance-Based
Compensation"). Such action may include, in the Board's discretion,
some or all of the following (i) if the Board determines that Stock
Rights granted under the Plan generally shall constitute
Performance-Based Compensation, the Plan shall be administered, to the
extent required for such Stock Rights to constitute Performance-Based
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Compensation, by a Committee consisting solely of two or more "outside
directors" (as defined in applicable regulations promulgated under
Section 162(m) of the Code), (ii) if any Non-Qualified Options with an
exercise price less than the fair market value per share of Common
Stock are granted under the Plan and the Board determines that such
Options should constitute Performance-Based Compensation, such options
shall be made exercisable only upon the attainment of a
pre-established, objective performance goal established by the
Committee, and such grant shall be submitted for, and shall be
contingent upon shareholder approval and (iii) Stock Rights granted
under the Plan may be subject to such other terms and conditions as
are necessary for compensation recognized in connection with the
exercise or disposition of such Stock Right or the disposition of
Common Stock acquired pursuant to such Stock Right, to constitute
Performance-Based Compensation.
3. Eligible Employees and Others. ISOs may be granted only to employees
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of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, consultant or
director of the Company or any Related Corporation; provided, however, that no
Option may be granted hereunder to any non-employee director. The Committee may
take into consideration a recipient's individual circumstances in determining
whether to grant a Stock Right. The granting of any Stock Right to any
individual or entity shall neither entitle that individual or entity to, nor
disqualify such individual or entity from, participation in any other grant of
Stock Rights.
4. Stock. The stock subject to Stock Rights shall be authorized but
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unissued shares of Common Stock of the Company, par value $.125 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 3,000,000, subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the unpurchased shares of
Common Stock subject to such Option shall again be available for grants of Stock
Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 2,000,000 shares of Common Stock
under the Plan during any fiscal year of the Company. If any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part or shall be repurchased by the Company, the shares subject to such Option
shall be included in the determination of the aggregate number of shares of
Common Stock deemed to have been granted to such employee under the Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the Plan
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at any time on or after January 28, 1997 and prior to January 25, 2007. The date
of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
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grant. The Committee shall have the right, with the consent of the optionee, to
convert an ISO granted under the Plan to a Non-Qualified Option pursuant to
paragraph 16.
6. Minimum Option Price; ISO Limitations.
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A. Price for Non-Qualified Options, Awards and Purchases.
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Subject to paragraph 2(D) (relating to compliance with Section
162(m) of the Code), the exercise price per share specified in the
agreement relating to each Non-Qualified Option granted, and the
purchase price per share of stock granted in any Award or authorized
as a Purchase, under the Plan may be less than the fair market value
of the Common Stock of the Company on the date of grant; provided
that, in no event shall such exercise price or such purchase price be
less than the minimum legal consideration required therefor under the
laws of any jurisdiction in which the Company or its successors in
interest may be organized. No more than 400,000 Non-Qualified
Options may be granted under the Plan for less than "fair market
value" (as hereinafter defined).
B. Price for ISOs. The exercise price per share specified
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in the agreement relating to each ISO granted under the Plan
shall not be less than the fair market value per share of Common Stock
on the date of such grant. In the case of an ISO to be granted to an
employee owning stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or
any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than one hundred ten
percent (110%) of the fair market value per share of Common Stock on
the date of grant. For purposes of determining stock ownership under
this paragraph, the rules of Section 424(d) of the Code shall apply.
C. $100,000 Annual Limitation on ISO Vesting. Each eligible
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employee may be granted Options treated as ISOs only to the extent
that, in the aggregate under this Plan and all incentive stock option
plans of the Company and any Related Corporation, ISOs do not become
exercisable for the first time by such employee during any calendar
year with respect to stock having a fair market value (determined at
the time the ISOs were granted) in excess of $100,000. Any Options
granted to an employee in excess of such limitation will be granted as
Non-Qualified Options, and the Company shall issue separate
certificates to the optionee with respect to Options that are
Non-Qualified Options and Options that are ISOs.
D. Determination of Fair Market Value. If, at the time
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an Option is granted under the Plan, the Company's Common Stock is
publicly traded, "fair market value" shall be determined as of the
date of grant or, if the prices or quotes discussed in this sentence
are unavailable for such date, the last business day for which such
prices or quotes are available prior to the date of grant and shall
mean (i) the average (on that date) of the high, low and closing
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prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is
then traded on a national securities exchange; or (ii) the last
reported sale price (on that date) of the Common Stock on the Nasdaq
National Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service
for over-the-counter securities, if the Common Stock is not reported
on the Nasdaq National Market. If the Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair market
value" shall mean the fair value of the Common Stock as determined by
the Committee after taking into consideration all factors which it
deems appropriate, including, without limitation, recent sale and
offer prices of the Common Stock in private transactions negotiated at
arm's length.
7. Option Duration. Subject to earlier termination as provided in
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paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years and one day from the date of grant in the case of Non-Qualified Options,
(ii) ten years from the date of grant in the case of ISOs and (iii) five years
from the date of grant in the case of ISOs granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Related Corporation, as determined under
paragraph 6(B). Subject to earlier termination as provided in paragraphs 9 and
10, the term of each ISO shall be the term set forth in the original instrument
granting such ISO, except with respect to any part of such ISO that is converted
into a Non-Qualified Option pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9
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through 12, each Option granted under the Plan shall be exercisable as follows:
A. Vesting. The Option shall either be fully exercisable on
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the date of grant or shall become exercisable thereafter in
such installments as the Committee may specify.
B. Full Vesting of Installments. Once an installment becomes
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exercisable, it shall remain exercisable until expiration or
termination of the Option, unless otherwise specified by the
Committee.
C. Partial Exercise. Each Option or installment may be
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exercised at any time or from time to time, in whole or in part,
for up to the total number of shares with respect to which it is
then exercisable.
D. Acceleration of Vesting. The Committee shall have the
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right to accelerate the date that any installment of any Option
becomes exercisable; provided, that the Committee shall not,
without the consent of an optionee, accelerate the permitted
exercise date of any installment of any Option granted to any
employee as an ISO (and not previously converted into a
Non-Qualified Option pursuant to paragraph 16) if such
acceleration would violate the annual vesting limitation contained
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in Section 422(d) of th Code, as described in paragraph 6(C).
9. Termination of Employment. Unless otherwise specified in the
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agreement relating to such ISO, if an optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
as defined in paragraph 10, no further installments of his or her Options shall
become exercisable, and his or her Options shall terminate after the passage of
90 days from the date of termination of his or her employment; provided, that
the Committee may specify that Non-Qualified Options may remain exercisable for
more than 90 days from the date of termination of employment; provided, further,
that in no event shall any Option or part or installment thereof become or
remain exercisable after its specified expiration date. Employment shall be
considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A bona fide leave of absence with the written approval of
the Committee shall not be considered an interruption of employment under the
Plan, provided that such written approval contractually obligates the Company or
any Related Corporation to continue the employment of the optionee after the
approved period of absence. Options granted under the Plan shall not be affected
by any change of employment within or among the Company and Related
Corporations, so long as the optionee continues to be an employee of the Company
or any Related Corporation. Nothing in the Plan shall be deemed to give any
grantee of any Stock Right the right to be retained in employment or other
service by the Company or any Related Corporation for any period of time.
Notwithstanding anything to the contrary contained above, in the case
of normal retirement, Non-Qualified Options granted to an optionee shall remain
exercisable until the date which is the earlier of (i) the Non-Qualified Options
specified expiration date or (ii) 90 days from the date upon which such optionee
becomes employed by a competitor of the Company, to the extent of the number of
shares which have vested prior to and during such period. The Committee shall
have the absolute discretion to determine whether and as of what date any
optionee is employed by a competitor of the Company.
10. Death; Disability.
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A. Death. If an optionee ceases to be employed by the
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Company and all Related Corporations by reason of his or her death,
by such optionee may be exercised, to the extent of the number
of shares with respect to which such optionee has theretofore
been granted Options (whether or not such Options have vested in
accordance with their terms),by the estate, personal representative
or beneficiary who has acquired the Option by will or by the
laws of descent and distribution,(i) in the case of ISOs, at any
time prior to the earlier of the ISOs' specified expiration date or
180 days from the date of such optionee's death or (ii) in the case
of Non-Qualified Options, at any time prior to the earlier of the
Non-Qualified Options specified expiration date or one year from
the date of such optionee's death.
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B. Disability. If an optionee ceases to be employed
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by the Company and all Related Corporations by reason of his
or her disability, any Option theretofore granted to such
optionee shall remain exercisable until the date which is (i)
in the case of ISOs, the earlier of such ISOs' specified
expiration date or 180 days from the date of the termination
of such optionee's employment or (ii) in the case of
Non-Qualified Options, the earlier of the Non-Qualified
Options specified expiration date or 33 months from the date
of the termination of the optionee's employment, to the extent
of the number of shares (a) which, in the case of ISOs, have
vested prior to and during the period specified in clause (i)
and (b) which, in the case of Non-Qualified Options, have
vested prior to and during the period which is 30 months from
the date the optionee ceases to be employed by the Company.
For the purposes of the Plan, the term "disability" shall mean
"permanent and total disability" as defined in Section
22(e)(3) of the Code or any successor statute.
11. Assignability. No Option shall be assignable or transferable by the
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optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee.
12. Terms and Conditions of Options. Options shall be evidenced by
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instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events, an
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optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
A. Stock Dividends and Stock Splits. If the shares of Common
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Stock shall be subdivided 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 Options
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.
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B. Consolidations or Mergers. If the Company is to be
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consolidated with or acquired by another entity in a merger, sale
of all or substantially all of the Company's assets or otherwise
(each, an "Acquisition"), the Committee 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 the consideration payable with respect to the
outstanding shares of Common Stock in connection with the
Acquisition; or (ii) to the extent not inconsistent with tax and
accounting principles applicable to the subject Options, (A) upon
written notice to the optionees, provide that all Options must be
exercised, to the extent then exercisable within a specified number
of days of the date of such notice, at the end of which period the
Options shall terminate; or (B) 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 (to the extent then exercisable
or to be exercisable as a result of the Acquisition) over the
exercise price thereof.
C. Recapitalization or Reorganization. In the event of a
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recapitalization or reorganization of the Company pursuant to which
securities of the Company or of another corporation are issued with
respect to the outstanding shares of Common Stock, an optionee 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
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adjustments made pursuant to subparagraphs A, B or C with respect
to ISOs shall be made only after the Committee, 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 of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs or would cause adverse tax
consequences to the holders, it may refrain from making such
adjustments.
E. Dissolution or Liquidation. In the event of the proposed
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dissolution or liquidation of the Company, each Option will
terminate immediately prior to the consummation of such proposed
action or at such other time and subject to such other conditions
as shall be determined by the Committee.
F. Issuances of Securities. Except as expressly provided
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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. No
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adjustments shall be made for dividends paid in cash or in property
other than securities of the Company.
G. Fractional Shares. No fractional shares shall be issued
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under the Plan and the optionee shall receive from the Company cash
in lieu of such fractional shares.
H. Adjustments. Upon the happening of any of the events
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described in subparagraphs A, B or C above, the class and aggregate
number of shares set forth in paragraph 4 hereof that are subject
to Stock Rights which previously have been or subsequently may be
granted under the Plan shall also be appropriately adjusted to
reflect the events described in such subparagraphs. The Committee
or the Successor Board shall determine the specific adjustments to
be made under this paragraph 13 and, subject to paragraph 2, its
determination shall be conclusive.
If any person or entity owning restricted Common Stock obtained by
exercise of an Option receives shares or securities or cash in connection with a
corporate transaction described in subparagraphs A, B or C above as a result of
owning such restricted Common Stock, such shares or securities or cash shall be
subject to all of the conditions and restrictions applicable to the restricted
Common Stock with respect to which such shares or securities or cash were
issued, unless otherwise determined by the Committee or the Successor Board.
14. Means of Exercising Options. An Option (or any part or installment
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thereof) shall be exercised by giving written notice to the Company at its
principal office address. Such notice shall identify the Option being exercised
and specify the number of shares as to which such Option is being exercised,
accompanied by full payment of the purchase price therefor either (a) in United
States dollars in cash or by check, (b) at the discretion of the Committee,
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, (c) at the
discretion of the Committee in exceptional cases, by delivery of the grantee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the lowest applicable Federal rate, as defined in Section
1274(d) of the Code, or (d) at the discretion of the Committee, by any
combination of (a), (b) and (c) above. If the Committee exercises its discretion
to permit payment of the exercise price of an ISO by means of the methods set
forth in clauses (b), (c) or (d) of the preceding sentence, such discretion
shall be exercised in writing at the time of the grant of the ISO in question.
Alternatively, payment may be made in whole or in part in shares of the Common
Stock of the Company already owned by the person or persons exercising the
Option or shares subject to the Option being exercised (subject to such
restrictions and guidelines as the Board may adopt from time to time), or
consistent with applicable law, through the delivery of an assignment to the
Company of a sufficient amount of the proceeds from the sale of the Common Stock
acquired upon exercise of the Option and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall be at the
participant's direction at the time of exercise, provided that the Committee
shall allow for such payment at the time of grant of the ISO. The holder of an
Option shall not have the rights of a shareholder with respect to the shares
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covered by such Option until the date of issuance of a stock certificate to such
holder for such shares. Except as expressly provided above in paragraph 13 with
respect to changes in capitalization and stock dividends, no adjustment shall be
made for dividends or similar rights for which the record date is before the
date such stock certificate is issued.
15. Term and Amendment of Plan. This Plan was adopted by the Board on
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January 28, 1997, and shall expire at the end of the day on January 25, 2007
(except as to Options outstanding on that date). The Board may at any time
terminate this Plan or make such modification or amendment thereof as it deems
advisable; provided, however, that the Board may not modify or amend this Plan,
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without approval by the affirmative vote of the holders of a majority of the
securities of the Company present, or represented, and entitled to vote at a
meeting duly held in accordance with the applicable laws of the state in which
the Company is incorporated, if (i) such approval would be necessary for Option
grants under the Plan to qualify for favorable treatment under Sections 162(m)
or 422 of the Code, or any successor provisions; or (ii) such approval is
otherwise required by law or the rules of any national securities exchange or
inter-dealer quotation system on which the Common Stock is then listed (in each
case, at the time of any such modification or amendment). Termination or any
modification or amendment of this Plan shall not, without consent of a
participant, affect his or her rights under an option previously granted to him
or her.
16. Conversion of ISOs into Non-Qualified Options. The Committee, at
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the written request or with the written consent of any optionee, may in its
discretion take such actions as may be necessary to convert such optionee's ISOs
(or any installments or portions of installments 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 optionee is an
employee of the Company or a Related Corporation at the time of such conversion.
Such actions may include, but shall not be limited to, extending the exercise
period or reducing the exercise price of the appropriate installments of such
ISOs. At the time of such conversion, the Committee (with the consent of the
optionee) may impose such conditions on the exercise of the resulting
Non-Qualified Options as the Committee 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 optionee the right to have such optionee's ISOs
converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Committee takes appropriate action. Upon the taking of such
action, the Company shall issue separate certificates to the optionee with
respect to Options that are Non-Qualified Options and Options that are ISOs. The
Committee, with the consent of the optionee, may also terminate any portion of
any ISO that has not been exercised at the time of such termination.
17. Application Of Funds. The proceeds received by the Company from
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the sale of shares pursuant to Options granted and Purchases authorized under
the Plan shall be used for general corporate purposes.
18. Notice to Company of Disqualifying Disposition. Each employee who
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receives an ISO shall agree to notify the Company in writing immediately after
such optionee makes a Disqualifying Disposition (as described in Sections 421,
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422 and 424 of the Code and regulations thereunder) of any stock acquired
pursuant to the exercise of ISOs granted under the Plan. A Disqualifying
Disposition is generally any disposition occurring on or before the later of (a)
the date two years following the date the ISO was granted or (b) the date one
year following the date the ISO was exercised.
19. Withholding of Additional Income Taxes. Upon the exercise of a
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Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in such Optionee's gross income. The Committee in its
discretion may condition (i) the exercise of an Option, (ii) the transfer of a
Non-Qualified Stock Option, (iii) the grant of an Award, (iv) the making of a
Purchase of Common Stock for less than its fair market value, or (v) the vesting
or transferability of restricted stock or securities acquired by exercising an
Option, on the grantee's making satisfactory arrangement for such withholding.
Such arrangement may include payment by the grantee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
grantee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.
20. Governmental Regulation. The Company's obligation to sell and
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deliver shares of Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
21. Governing Law. The validity and construction of the Plan and the
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instruments evidencing Stock Rights shall be governed by the laws of The
Commonwealth of Massachusetts, or the laws of any jurisdiction in which the
Company or its successors in interest may be organized.