EXHIBIT 10.7
AS AMENDED THROUGH
NOVEMBER 20, 2003
TIME WARNER INC.
1999 STOCK PLAN
1. PURPOSES OF THE PLAN.
The Plan is intended to encourage ownership of Shares by Key Employees
and directors of and certain consultants to the Company or its Affiliates in
order to attract and retain such people, to motivate them to work for the
benefit of the Company or an Affiliate, and to provide an 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 and awards of Stock
Purchase Rights.
2. DEFINITIONS.
Unless otherwise specified or unless the context otherwise requires,
the following terms, as used in this Time Warner Inc. 1999 Stock 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, with respect to ISOs, means a corporation which,
for purposes of Section 424 of the Code, is a parent or
subsidiary of the Company, direct or indirect, and, with
respect to Non-Qualified Options, means any corporation,
company or other entity whose financial results are
consolidated with those of the Company in accordance with U.S.
generally accepted accounting principles, all as determined by
the Administrator.
Board of Directors means the Board of Directors of the
Company.
Change in Control means either a Corporate Change in Control
or a Transactional Change in Control.
Code means the United States Internal Revenue Code of 1986, as
amended.
Committee means the Compensation Committee of the Board of
Directors, or its successor, or such other 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 or a subcommittee of the Compensation Committee
established by the Compensation Committee.
Common Stock means shares of the Company's common stock, $.01
par value per share.
Company means (i) with respect to the periods prior to January
11, 2001, America Online, Inc., a Delaware corporation and
(ii) with respect to periods on and after January 11, 2001,
Time Warner Inc., a Delaware corporation named AOL Time Warner
Inc. prior to October 16, 2003.
Corporate Change in Control means the happening of any of the
following events:
(1) the acquisition by any individual, entity or group (an
"Entity"), including any "person" within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act, of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either
(i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding, however,
the following: (A) any acquisition directly from the Company
(excluding any acquisition by virtue of the exercise of an
exercise, conversion or exchange privilege unless the security
being so exercised, converted or exchanged was itself acquired
directly from the Company), (B) any acquisition by the
Company, or (C) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or
by any corporation controlled by the Company; or
(2) a change in the composition of the Board of Directors
since October 28, 1999, such that the individuals who, as of
such date, constituted the Board of Directors (the "Incumbent
Board") cease for any reason to constitute at least a majority
of such Board; provided that any individual who becomes a
director of the Company subsequent to October 28, 1999 whose
election, or nomination for election by the Company's
stockholders, was approved by the vote of at least a majority
of the directors then comprising the Incumbent Board shall be
deemed a member of the Incumbent Board; and provided further,
that any individual who was initially elected as a director of
the Company as a result of an actual or threatened election
contest, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf
of any person or Entity other than the Board shall not be
deemed a member of the Incumbent Board.
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:
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(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,
the average of the high and low sales prices of a share of the
Common Stock on the New York Stock Exchange or other
comparable reporting system for the applicable date, or if the
applicable date is not a trading day, the trading day
immediately preceding the applicable date;
(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 day referred to in clause (1),
and if bid and asked prices for the Common Stock are regularly
reported, the mean between the bid and the asked price for the
Common Stock at the close of trading in the over-the-counter
market on the applicable date, or if the applicable date is
not a trading day, on the trading day immediately preceding
the applicable date; 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.
Involuntary Employment Action shall mean any change in the
terms and conditions of the Participant's employment with the
Company or any successor, without cause (as defined herein),
to such extent that:
(1) the Participant shall fail to be vested with power,
authority and resources analogous to the Participant's title
and/or office prior to the Change in Control, or
(2) the Participant shall lose any significant duties or
responsibilities attending such office, or
(3) there shall occur a reduction in the Participant's
base compensation, or
(4) the Participant's employment with the Company, or its
successor, is terminated without cause (as defined herein).
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 or Stock Purchase Rights under
the Plan; provided however, that Key Employee shall not
include any person who: (i) is not on the payroll of the
Company or an Affiliate as a full-time or part-time employee
or (ii) directly or indirectly provides services to the
Company or an Affiliate pursuant to a contractual or other
arrangement, written or otherwise between the Company or
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an Affiliate and either that person or a third party, which
does not designate such person as an employee (regardless of
whether a government agency, court or other entity
subsequently determines that such person is an employee of the
Company or an Affiliate for purposes of employment taxes or
for any other purpose). Anything in the prior sentence to the
contrary notwithstanding, a person who is providing services
pursuant to a contractual or other arrangement may be eligible
for participation in the Plan as a consultant who is
designated by the Administrator in accordance with Paragraph 5
of 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, in such form as
the Administrator shall approve.
Participant means a Key Employee, director or consultant of
the Company or of an Affiliate to whom one or more Options are
granted under the Plan. As used herein, "Participant" shall
include "Participant's Survivors" where the context requires.
Plan means this Time Warner Inc. 1999 Stock Plan.
Restricted Stock means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Paragraph
14 below.
Restricted Stock Purchase Agreement means a written agreement
between the Company and a Participant evidencing the terms and
restrictions applying to stock purchased under a Stock
Purchase Right, in such form as the Administrator shall
approve.
Shares means shares of the Common Stock as to which Options or
Stock Purchase Rights 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 or Stock Purchase Rights granted under the Plan may be
authorized and unissued shares or shares held by the Company
in its treasury, or both.
Stock Purchase Right means the right to purchase Common Stock
pursuant to Paragraph 14 of the Plan, as evidenced by a
Restricted Stock Purchase Agreement.
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Survivors means a deceased Participant's legal representatives
and/or any person or persons who acquired the Participant's
rights to an Option or Stock Purchase Right by will or by the
laws of descent and distribution.
Transactional Change in Control shall mean any of the
following transactions to which the Company is a party:
(1) a reorganization, recapitalization, merger or
consolidation (a "Corporate Transaction") of the Company,
unless securities representing 60% or more of either the
outstanding shares of common stock or the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors of the Company or
the corporation resulting from such Corporate Transaction (or
the parent of such corporation) are held subsequent to such
transaction by the person or persons who were the beneficial
holders of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to
such Corporate Transaction, in substantially the same
proportions as their ownership immediately prior to such
Corporate Transaction; or
(2) the sale, transfer or other disposition of all or
substantially all of the assets of the Company.
To Vest means that you have obtained a contingent right to
exercise or purchase a defined number of your stock options,
as defined by and subject to the terms and conditions set
forth in the pertinent Option Agreement and this Plan. Unless
and until your stock options Vest pursuant to the terms of the
pertinent Option Agreement and this Plan, as well as the
vesting schedule included in your notice of grant, you have
not obtained any such right to exercise or purchase any of
your unvested stock options (except as may be provided in
Paragraphs 12 and 13 of this Plan and in the pertinent Option
Agreement in the event of Participant's Disability or death,
respectively).
3. SHARES SUBJECT TO THE PLAN.
The number of Shares which may be issued from time to time pursuant to
this Plan shall be 100,000,000 or the equivalent of such number of Shares after
the effect of any stock split, stock dividend, combination, recapitalization or
similar transaction in accordance with Paragraph 17 of the Plan. No more than 5%
of such number of Shares may be issued in connection with grants of Stock
Purchase Rights.
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.
Shares that have actually been issued under the Plan upon exercise of a Stock
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Purchase Right shall not be returned to the Plan and shall not become available
for the granting of other Options or Stock Purchase Rights under the Plan.
4. ADMINISTRATION OF THE PLAN.
Subject to the provisions of the Plan, the Administrator is authorized
to:
a. Interpret the provisions of the Plan or of any Option, Option
Agreement, Stock Purchase Right, or Restricted Stock Purchase
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
or Stock Purchase Rights;
c. Determine the number of Shares for which an Option, Options or
Stock Purchase Rights shall be granted, provided, however,
that in no event shall Options or Stock Purchase Rights to
purchase more than 4,000,000 Shares be granted to any
Participant in any fiscal year;
d. Specify the terms and conditions upon which an Option, Options
or Stock Purchase Rights may be granted; and
e. Award Options or Stock Purchase Rights to Participants who are
foreign nationals or employed or located outside the United
States, or both, on such terms and conditions, including
imposing conditions on the exercise or Vesting of Options or
Stock Purchase Rights, different from those applicable to
Options or Stock Purchase Rights granted to Participants
employed or located in the United States as may, in the
judgment of the Administrator, be necessary or desirable in
order to recognize differences in local law, tax policy or
customs;
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 or Stock Purchase
Right granted under it shall be final, unless otherwise determined by the Board
of Directors, if the Administrator is the Committee. The Administrator's
determinations under the Plan need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Options or
Stock Purchase Rights under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Administrator
shall be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Option Agreements or
Restricted Stock Purchase Agreements as to (a) the persons to receive Options or
Stock Purchase Rights under the Plan, (b) the terms and provisions of Options or
Stock Purchase Rights under the Plan, and (c) whether a termination of service
with the Company and any Affiliate has occurred.
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No member of the Board of Directors or the Administrator shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option.
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
or Stock Purchase Right is granted. Members of the Company's Board of Directors
who are not employees of the Company or of an Affiliate may receive Options or
Stock Purchase Rights pursuant to Paragraph 6, Subparagraph A (f), but only
pursuant thereto. Notwithstanding any of the foregoing provisions, the
Administrator may authorize the grant of an Option or Stock Purchase Right to a
person not then a Key Employee, director or consultant of the Company or of an
Affiliate. The actual grant of such Option or Stock Purchase Right, 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 or Restricted
Stock Purchase Agreement evidencing such Option or Stock Purchase Right, as
applicable. 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. Stock Purchase Rights shall be granted only in connection with the
hiring or retention of a Key Employee. The granting of any Option or Stock
Purchase Right to any individual shall neither entitle that individual to, nor
disqualify him or her from, participation in any other grant of Options or Stock
Purchase Rights.
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 terms and conditions as the Administrator may deem
appropriate including, without limitation, subsequent approval by the
stockholders of the Company of this Plan or any amendments thereto. 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: The option price (per share) of the
Shares covered by each Option shall be determined by
the Administrator but shall not be less than one
hundred percent (100%) of the Fair Market Value (per
share) of the Shares on the date of grant of the
Option.
b. Each Option Agreement shall state the number of
Shares to which it pertains;
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c. 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 Vest 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; and
d. Exercise of any Option may be conditioned upon the
Participant's execution of a stock purchase agreement
in form satisfactory to the Administrator providing
for certain protections for the Company and its other
stockholders, 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. Limitation on Grant of Non-Qualified Options: No
Non-Qualified Option shall be granted after the date
provided in Paragraph 23 of this Plan.
f. Directors' Options: Each director of the Company who
is not an employee of the Company or any Affiliate,
upon first being elected or appointed to the Board of
Directors, shall be granted a Non-Qualified Option to
purchase 8,000 Shares; provided, however, that the
Administrator shall be entitled to grant an Option
for such higher number of Shares as may be
appropriate (as determined by the Board of Directors)
for recruitment purposes. Each director of the
Company who is not an employee of the Company or any
Affiliate on January 18, 2001, shall be granted on
such date a Non-Qualified Option to purchase 52,000
Shares as an initial grant for joining the Board of
Directors. For the annual meeting of stockholders in
2002, on the date following the annual meeting of
stockholders of the Company, giving effect to the
election of any director or directors at such annual
meeting of stockholders, each director who is not an
employee of the Company or any Affiliate and who has
served at least six months as a director shall be
granted a Non-Qualified Option to purchase 40,000
Shares. Beginning with the annual meeting of
stockholders in 2003, on the date following the
annual meeting of stockholders of the Company each
year, giving effect to the election of any director
or directors at such annual meeting of stockholders,
each director who is not an employee of the Company
or any Affiliate and who has served at least six
months as a director shall be granted a Non-Qualified
Option to purchase 8,000 Shares. Each Option granted
pursuant to this Paragraph 6(A)(f) 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)
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years, and (iii) Vest in installments of 25% annually
over a four-year period and on the date of a meeting
of stockholders at which directors are elected if the
director does not stand for re-election or is not
re-elected at such meeting, unless a different
vesting schedule is established by the Administrator
in the applicable Option Agreement. The Board of
Directors may amend this Paragraph 6(A)(f) to
increase, reduce, eliminate, or institute option
grants for Board, Committee or other individual or
collective service under this Plan.
B. ISOs: Each Option intended to be an ISO shall so state and
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 (f) 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
stock 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
stock 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 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
stock of the Company or an Affiliate, each
Option shall terminate ten (10) years from
the date of the grant or at such earlier
time as the Option Agreement may provide.
ii. More than ten percent (10%) of the total
combined voting power of all classes of
stock of the Company or an Affiliate, each
Option shall terminate five (5) years from
the date of the grant or at such earlier
time as the Option Agreement may provide.
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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 the date provided in Paragraph 23 of this Plan.
f. To the extent that an Option which is intended to be
an ISO fails to so qualify, it shall be treated as a
Non-Qualified Option.
7. EXERCISE OF OPTIONS AND ISSUANCE OF SHARES.
An Option (or any part or installment thereof) shall be exercised in
accordance with procedures established by the Company by giving written notice
to the Company at its principal executive office address, or such other address
as the Company shall determine, together with provision for payment of the full
purchase price in accordance with this Paragraph for the Shares as to which the
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, 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 (e) at the discretion of the Administrator, through such
other method of payment approved by the Administrator, or (f) at the discretion
of the Administrator, by any combination of (a), (b), (c), (d) and (e) 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 (including,
without limitation, state securities or "blue sky" laws) which requires the
Company to
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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.
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 20) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in Paragraph
6(B)(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) if any amendment is materially adverse to the
Participant, 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, and (iii) any such amendment of any
ISO shall be made only after the Administrator, after consulting with 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 holder
of such ISO.
8. RIGHTS AS A STOCKHOLDER.
No Participant to whom an Option has been granted shall have rights as a
stockholder 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 satisfaction of such other
conditions for the transfer of Shares as may be required pursuant to the Option)
and registration of the Shares in the Company's share register in the name of
the Participant. No Participant to whom a Stock Purchase Right has been granted
shall have rights as a stockholder with respect to any Shares covered by such
Stock Purchase Right, except after tender of the full purchase price for the
Shares being purchased (and satisfaction of such other conditions for the
transfer of Shares as may be required pursuant to the Stock Purchase Right) and
registration of the Shares in the Company's share register in the name of the
purchaser. Once the Stock Purchase Right is exercised, the purchaser shall have
the rights equivalent to those of a stockholder, and shall be a stockholder when
his or her purchase is entered upon the records of the duly authorized transfer
agent of the Company. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Stock Purchase Right is
exercised, except as provided in Paragraph 17 of this Plan.
9. ASSIGNABILITY AND TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS.
By its terms, an Option or Stock Purchase Right granted to a
Participant shall not be transferable by the Participant other than (i) by will
or by the laws of descent and distribution, or (ii) as otherwise determined by
the Administrator and set forth in the applicable Option Agreement or Restricted
Stock Purchase Agreement. The designation of a beneficiary of an
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Option by a Participant shall not be deemed a transfer prohibited by this
Paragraph. Except as provided above, an Option or Stock Purchase Right 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 Stock
Purchase Right 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 or
Stock Purchase Right, shall be null and void.
10. EFFECT OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE" OR DEATH OR
DISABILITY.
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 of service, but only within such term as
the Administrator has designated in the pertinent Option
Agreement. An Option that is not exercisable on the date of
termination of service is canceled on such date and may not be
exercised. An Option that is exercisable on the date of
termination of service, but not exercised within the term as
the Administrator has designated in the pertinent Option
Agreement is canceled and may not be exercised thereafter.
b. Except as provided in Paragraph 12, 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 Disability or death within
three (3) months after the termination of employment, director
status or consultancy, the Participant or the Participant's
Survivors may exercise the Option within one (1) year after
the date of the Participant's termination of employment, 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
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Participant engaged in conduct which would constitute "cause"
(as defined in Paragraph 11 below), then such Participant
shall forthwith cease to have any right to exercise any
Option, whether or not such Option was previously exercisable.
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 2 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 to the extent
that the Administrator so determines as Company policy or to
the extent that the Option Agreement may otherwise expressly
provide.
f. Except as required by law or as set forth in the pertinent
Option Agreement, Options granted under the Plan shall not be
affected by any change of a Participant's status within or
among the Company and any Affiliates, so long as the
Participant continues to be a Key Employee, director or
consultant of the Company or any Affiliate.
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 his or her outstanding Options have been
exercised:
a. All outstanding and unexercised Options as of the time the
Participant is notified his or her service is terminated for
"cause" will immediately be forfeited.
b. For purposes of this Plan, except as otherwise provided in the
pertinent Option Agreement or Restricted Stock Purchase
Agreement, "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
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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.
12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY.
Except as otherwise provided in the pertinent Option Agreement, a
Participant who terminates his or her employment, directorship or consultancy
with the Company or 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
such cessation; and
b. In the event rights to exercise the Option Vest periodically,
to the extent of a pro rata portion of any additional rights
as would have Vested had the Participant not terminated his or
her employment, directorship or consultancy by reason of such
Disability, prior to the end of the Vesting period which next
ends following the date of such termination. The proration
shall be based upon the number of days of such Vesting period
prior to the date of such termination.
Except as otherwise provided in the pertinent Option Agreement, a
Disabled Participant may exercise such rights only within the period ending one
(1) year after the date of the Participant's termination of employment,
directorship or consultancy, as the case may be, 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 the Participant 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 Company 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 Company, the cost of which examination shall be paid for by the
Company.
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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 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 Vest periodically,
to the extent of a pro rata portion of any additional rights
which would have Vested had the Participant not died prior to
the end of the Vesting period which next ends following the
date of death. The proration shall be based upon the number of
days of such Vesting period prior to the Participant's death.
Except as otherwise provided in the pertinent Option Agreement, 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
Participant's termination of employment, directorship or consultancy, as the
case may be, 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. STOCK PURCHASE RIGHTS.
a. Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan.
After the Administrator determines that it will offer Stock Purchase Rights
under the Plan, it shall advise the offeree in writing, by means of an
Agreement, of the terms, conditions and restrictions related to the offer,
including the number of Shares that the offeree shall be entitled to purchase,
the price to be paid (which shall not be less than the par value of the Shares),
and the time within which the offeree must accept such offer, which shall in no
event exceed six (6) months from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator.
b. Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
c. Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by
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the Administrator in its sole discretion. In addition, the provisions of
Restricted Stock Purchase Agreements need not be the same with respect to each
purchaser.
15. PURCHASE FOR INVESTMENT.
Unless the offering and sale of the Shares to be issued upon the
particular exercise of an Option or Stock Purchase Right 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(s) such Option or Stock Purchase
Right 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 of
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. At the discretion of the Administrator, 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.
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.)
16. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
Upon the dissolution or liquidation of the Company, all Options or
Stock Purchase Rights 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, (i) the Participant or the Participant's
Survivors will have the right immediately prior to such dissolution or
liquidation to exercise any Option or Stock Purchase Right to the extent that
the Option or Stock Purchase Right is exercisable as of the date immediately
prior to such dissolution or liquidation; and (ii) if a Change in Control shall
have occurred within the twelve months immediately prior to the date of
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such dissolution or liquidation, such Participant or such Participant's
Survivors will have the right immediately prior to such dissolution or
liquidation to exercise any Option or Stock Purchase Right then outstanding
whether or not such Option or Stock Purchase Right is exercisable as of such
date.
17. ADJUSTMENTS.
Upon the occurrence of any of the following events, the adjustments as
hereinafter provided shall be made, unless otherwise specifically provided in a
pertinent Option Agreement or Restricted Stock Purchase Agreement:
A. Stock Dividends and Stock Splits. If (i) 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, or (ii) additional shares or new or different
shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock, the number of shares of
Common Stock deliverable upon the exercise of an Option or Stock Purchase Right
may be appropriately increased or decreased proportionately, and appropriate
adjustments may 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 (i) pursuant to Paragraph 3 or to directors pursuant to
Paragraph 6(A)(f) shall also be proportionately adjusted upon the occurrence of
such events, except as the Administrator shall otherwise determine in its sole
discretion or (ii) pursuant to Paragraph 4(c) shall also be proportionately
adjusted upon the occurrence of such events.
B. Corporate Changes in Control. In the event of a Corporate
Change in Control,
(i) Each Option or Stock Purchase Right outstanding as of the date
such Corporate Change in Control is determined to have occurred, and which is
not then exercisable by reason of Vesting requirements, shall automatically
accelerate the Vesting so that the Option or Stock Purchase Right shall become
fully exercisable and Vested on the first to occur of (x) the date the Option or
Stock Purchase Right becomes Vested and exercisable under its original terms
(with respect only to such Options or Stock Purchase Rights as otherwise would
Vest during such one-year period under their terms), (y) the first anniversary
of the date such Corporate Change in Control is determined to have occurred, and
(z) the occurrence of an Involuntary Employment Action; and
(ii) The Options or Stock Purchase Rights so accelerated shall
remain so exercisable until the earlier of the original expiration date of the
Option or Stock Purchase Right and the earlier termination of the Option or
Stock Purchase Right in accordance with the Plan and the Agreement.
C. Transactional Changes in Control. In the event of a
Transactional Change in Control,
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(i) Each Option or Stock Purchase Right outstanding as of the date
such Transactional Change in Control is determined to have occurred shall be:
(a) assumed by the successor corporation (or its parent) or replaced with a
comparable option or stock purchase right to purchase shares of the capital
stock of the successor corporation (or its parent) on an equitable basis, (b)
terminated upon written notice to the Participants stating that all Options or
Stock Purchase Rights (for purposes of this Subparagraph all Options or Stock
Purchase Rights then outstanding shall be deemed to be exercisable) must be
exercised within a specified number of days (which shall not be less than 15
days) from the date such notice is given, at the end of which period the Options
or Stock Purchase Rights shall terminate, or (c) terminated in exchange for a
cash payment equal to the excess of the Fair Market Value of the shares subject
to such Options or Stock Purchase Rights (for purposes of this Subparagraph all
Options then outstanding shall be deemed to be exercisable) over the exercise
price thereof; provided, however, that if any of the treatments of Options or
Stock Purchase Rights pursuant to this Plan set forth in clauses (a), (b) or (c)
above would make a Transactional Change in Control transaction ineligible for
pooling-of-interest accounting under APB No. 16 such that but for the nature of
such treatment such transaction would otherwise be eligible for such accounting
treatment, the Committee (or the Administrator if no Committee has been
appointed) shall have the ability to substitute for any cash or other
consideration payable under such treatment shares of Common Stock with a Fair
Market Value or other consideration with value equal to the cash or other
consideration that would otherwise be payable pursuant to such treatment. The
determination of which of the treatments set forth in clauses (a), (b) and (c)
above to provide and of comparability under clause (a) above shall be made by
the Administrator and its determinations shall be final, binding and conclusive.
(ii) Each Option or Stock Purchase Right that is assumed or
replaced in connection with a Transactional Change in Control shall
automatically accelerate so that the Option or Stock Purchase Right shall become
fully exercisable and Vested on the first to occur of (x) the date the Option
becomes Vested and exercisable under its original terms (with respect only to
such Options or Stock Purchase Rights as otherwise would Vest during such
one-year period under their terms), (y) the first anniversary of the date such
Transactional Change in Control is determined to have occurred, and (z) the
occurrence of an Involuntary Employment Action. The Options or Stock Purchase
Rights so accelerated shall remain so exercisable until the earlier of the
original expiration date of the Option and the earlier termination of the Option
in accordance with the Plan and the Agreement.
D. Corporate Transaction. In the event of a Corporate Transaction
that does not constitute a Transactional Change in Control or in the event of a
similar event, pursuant to which securities of the Company or of another
corporation or entity are issued with respect to the outstanding shares of
Common Stock, a Participant upon exercising an Option or Stock Purchase Right
shall be entitled to receive for the purchase price paid upon such exercise the
securities which would have been received if such Option or Stock Purchase Right
had been exercised prior to such Corporate Transaction.
E. Modification of ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to Subparagraph A, B, C, or D with respect to ISOs
shall be made only after the Administrator, after consulting with counsel for
the Company, determines whether such
18
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.
18. 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 or Stock Purchase
Rights. 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. The Option Agreement may contain terms, conditions and
procedures permitting Participants to elect to defer the receipt of Shares upon
the exercise of Non-Qualified Options for a specific period or until a specified
event.
19. FRACTIONAL SHARES.
No fractional shares shall be issued under the Plan and the person
exercising such right shall receive from the Company cash in lieu of such
fractional shares equal to the Fair Market Value thereof.
20. 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 ISOs 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 conversion.
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21. 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 regulation to be withheld from the
Participant's salary, wages or other remuneration in connection with the
exercise of an Option or a Disqualifying Disposition (as defined in Paragraph
22) or the Vesting of Shares issued pursuant to Stock Purchase Rights, the
Company may deduct from any amounts due to the Participant, such as compensation
or reimbursements, or may require that the Participant advance in cash to the
Company, or to any Affiliate of the Company which employs or employed the
Participant, the amount of such withholdings unless a different withholding
arrangement, including the use of shares of the Company's Common Stock or a
promissory note, 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 the shares withheld for
purposes of payroll withholding shall be determined in the manner provided in
Paragraph 2 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 Participant 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.
22. 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.
23. TERMINATION OF THE PLAN.
Unless sooner terminated by the Board of Directors, the Plan shall
terminate on October 28, 2009, and no Options or Stock Purchase Rights shall
thereafter be granted under the Plan. All Options or Stock Purchase Rights
granted under the Plan prior to that date shall remain in effect until such
Options or Stock Purchase Rights shall have been exercised or terminated in
accordance with the terms and provisions of the Plan and the applicable Option
Agreements or Restricted Stock Purchase Agreements. The Board of Directors may
terminate the Plan at any time; provided, however, that any such termination
will not materially impair any rights under any Option or Stock Purchase Right
theretofore made under the Plan without the consent of the Participant.
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24. AMENDMENT OF THE PLAN AND AGREEMENTS.
The Plan may be amended by the stockholders of the Company. The Plan
may also be amended by the Board of Directors or 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, for as long 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 which the Administrator determines is of
a scope that requires stockholder approval shall be subject to obtaining such
stockholder approval. Any modification or amendment of the Plan shall not,
without the consent of a Participant, materially adversely affect his or her
rights under an Option or Stock Purchase Right previously granted to him or her.
With the consent of the Participant affected, the Administrator may amend
outstanding Option Agreements or Restricted Stock Purchase Agreements in a
manner which may be materially adverse to the Participant but which is not
inconsistent with the Plan. In the discretion of the Administrator, outstanding
Option Agreements or Restricted Stock Purchase Agreements may be amended by the
Administrator in a manner which is not materially adverse to the Participant.
25. EMPLOYMENT OR OTHER RELATIONSHIP.
Nothing in this Plan or any Option Agreement or Restricted Stock
Purchase 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.
All Options and Stock Purchase Rights shall constitute a special
incentive payment to the Participant and shall not be taken into account in
computing the amount of salary or compensation of the Participant for the
purpose of determining any benefits under any pension, retirement,
profit-sharing, bonus, life insurance or other benefit plan of the Company or
under any agreement between the Company and the Participant, unless such plan or
agreement specifically provides otherwise.
26. GOVERNING LAW.
With respect to Options and Stock Purchase Rights granted prior to
January 18, 2001, this Plan shall be governed by and construed in accordance
with the laws of the State of Delaware, the Company's state of incorporation
and, except as otherwise provided in the pertinent Option Agreement or
Restricted Stock Purchase Agreement, the United States District
21
Court for the Eastern District of Virginia shall have exclusive jurisdiction
over any and all disputes between a Participant and the Company related to or
arising out of Options or Restricted Stock Purchase Rights granted under this
Plan. With respect to Option and Stock Purchase Rights granted on or after
January 18, 2001, this Plan shall be governed by and construed in accordance
with the laws of the State of New York and, except as otherwise provided in the
pertinent Option Agreement or Restricted Stock Purchase Agreement, any and all
disputes between a Participant and the Company related to or arising out of
Options or Stock Purchase rights granted under this Plan shall be brought only
in a state or federal court of competent jurisdiction sitting in Manhattan, New
York.
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