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EXHIBIT 10.2
ON ASSIGNMENT, INC.
RESTATED 1987 STOCK OPTION PLAN
ARTICLE ONE
GENERAL
I. PURPOSES OF THE PLAN
A. This Restated 1987 Stock Option Plan (the "Plan") is
intended to promote the interests of On Assignment, Inc., a Delaware
corporation (the "Company"), by providing a method whereby eligible individuals
may be offered incentives and rewards which will encourage them to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Company and continue to render services to the Company (or its parent or
subsidiary corporations). This restatement of the Plan shall become effective
on the date on which the restatement is adopted by the Board, subject to the
approval of the stockholders ("Effective Date").
B. For purposes of the Plan, the following provisions
shall be applicable in determining the parent and subsidiary corporations of
the Company:
(i) Any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company
shall be considered to be a PARENT corporation of the Company,
provided each such corporation in the unbroken chain (other than the
Company) owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(ii) Each corporation (other than the
Company) in an unbroken chain of corporations beginning with the
Company shall be considered to be a SUBSIDIARY of the Company,
provided each such corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
II. STRUCTURE OF THE PLAN
A. Option Programs. The Plan shall be divided into two
separate components: the Discretionary Option Grant Program described in
Article Two and the Automatic Option Grant Program described in Article Three.
Under the Discretionary Option Grant Program, eligible individuals may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
Common Stock in accordance with the provisions of Article Two. Under the
Automatic Option Grant Program, each eligible member of the Company's Board of
Directors (the "Board") will automatically receive an option grant to purchase
shares of Common Stock in accordance with the provisions of Article Three.
B. General Provisions. Unless the context clearly
indicates otherwise, the provisions of Articles One and Four of the Plan shall
apply to the Discretionary Option Grant Program and the Automatic Option Grant
Program and shall accordingly govern the interests of all individuals under the
Plan.
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III. ADMINISTRATION OF THE PLAN
A. The Discretionary Option Grant Program shall be
administered by one or more committees comprised of Board members. The primary
committee (the "Primary Committee") shall be comprised of two or more
non-employee Board members and shall have sole and exclusive authority to grant
stock options and stock appreciation rights under the Discretionary Option
Grant Program to officers and employee-directors of the Company subject to the
short-swing profit restrictions of the Federal securities laws. Stock options
may be granted under the Discretionary Option Grant Program to all other
eligible employees and consultants by either the Primary Committee or a second
committee comprised of one or more Board members (the "Secondary Committee").
The members of the Primary Committee and the Secondary Committee shall each
serve for such period of time as the Board may determine and shall be subject
to removal by the Board at any time.
B. No Board member shall be eligible to serve on the
Primary Committee if such individual has, within the twelve (12)- month period
immediately preceding the date he or she is to be appointed to the Committee,
received an option grant or stock award under this Plan or any other stock plan
of the Company, its parent or subsidiary corporation, other than pursuant to
the Automatic Option Grant Program in effect under Article Three.
C. Subject to the limited authority provided the
Secondary Committee to effect option grants in accordance with the provisions
of Section III.A of this Article One, the Primary Committee shall serve as the
Plan Administrator and shall have full power and authority (subject to the
express provisions of the Discretionary Option Grant Program) to establish such
rules and regulations as it may deem appropriate for the proper administration
of such program and to make such determinations under the program and any
outstanding option as it may deem necessary or advisable. Decisions of the
Plan Administrator shall be final and binding on all parties with an interest
in the Plan or any outstanding option under this Discretionary Option Grant
Program. Service on the Primary or Secondary Committee shall constitute
service as a Board member, and members of either Committee shall accordingly be
entitled to full indemnification and reimbursement as Board members for their
service on either Committee. No member of the Primary or Secondary Committee
shall be liable for any act or omission made in good faith with respect to the
Plan or any option granted under the Plan.
D. Administration of the Automatic Option Grant Program
shall be self-executing in accordance with the express terms and conditions of
Article Three.
IV. ELIGIBILITY FOR OPTION GRANTS
A. The persons eligible to receive option grants under
Article Two shall be limited to the following:
(i) key employees (including officers
and directors) of the Company (or its parent or subsidiary
corporations) who render services which contribute to the success and
growth of the Company (or its parent or subsidiary corporations) or
which may reasonably be anticipated to contribute to the future
success and growth of the Company (or its parent or subsidiary
corporations); and
(ii) those consultants or independent
contractors who provide valuable services to the Company (or its
parent or subsidiary corporations).
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(iii) From and after the first date on
which the shares of the Company's common stock are registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"IPO Effective Date"), non-employee members of the Board or the
non-employee members of the board of directors of any parent
corporation shall not be eligible to participate in the Discretionary
Option Grant Program or in any other stock option, stock purchase,
stock bonus or other stock plan of the Company (or its parent or
subsidiary corporations). However, non-employee members of the Board
shall be eligible to receive automatic option grants pursuant to the
provisions of Article Three.
B. The Plan Administrator shall have full authority to
determine which eligible individuals are to receive option grants under the
Discretionary Option Grant Program, the number of shares to be covered by each
such grant, whether the granted option is to be an incentive stock option
("Incentive Option") which satisfies the requirements of Section 422 of the
Internal Revenue Code or a non-statutory option not intended to meet such
requirements, the time or times at which each such option is to become
exercisable, and the maximum term for which the option is to be outstanding.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
the Company's authorized but unissued or reacquired Common Stock. The
aggregate number of shares which may be issued under the Plan shall not exceed
2,000,000 shares, which includes an increase of 500,000 shares authorized by
the Board under the Plan on February 13, 1997 and which increase is subject to
stockholder approval at the 1997 Annual Stockholders Meeting. The total number
of shares issuable under the Plan shall be subject to adjustment from time to
time in accordance with the provisions of this Section V. In no event may any
one individual participating in the Plan be granted stock options for more than
250,000 shares of Common Stock over the remaining term of the Plan. For
purposes of this limitation, any option grants made prior to December 31, 1993
will not be taken into account.
B. Should an option expire or terminate for any reason
prior to exercise or surrender in full (including options canceled in
accordance with the cancellation-regrant provisions of Section IV of Article
Two), the shares subject to the portion of the option not so exercised or
surrendered shall be available for subsequent option grants under the Plan.
Shares subject to any option or portion thereof canceled in accordance with
Section V of Article Two or Section III of Article Three and shares repurchased
by the Company pursuant to its repurchase rights under the Plan shall not be
available for subsequent option grants under the Plan. In addition, should the
exercise price of an outstanding option under the Plan be paid with shares of
Common Stock, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised, and not by the net number of shares of Common Stock
actually issued to the option holder.
C. In the event any change is made to the Common Stock
issuable under the Plan by reason of (a) any Corporate Transaction (as defined
in Section III of Article Two) or (b) any stock split, stock dividend,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without receipt of consideration, then
unless such change results in the termination of all outstanding options under
the Plan as a result of the Corporate Transaction, appropriate adjustments
shall be made to (i) the aggregate class and/or number of shares issuable under
the Plan, (ii) the class and/or number of shares and price per share of the
Common Stock subject to each outstanding option under the Discretionary Option
Grant Program, (iii) the number and/or class of shares per non-employee Board
member for
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which automatic option grants are subsequently to be made under the Automatic
Option Grant Program, and (iv) the number and/or class of shares and price per
share of the Common Stock in effect under each automatic grant outstanding
under the Automatic Option Grant Program. Such adjustments to the outstanding
options are to be effected in a manner which shall preclude the enlargement or
dilution of rights and benefits under such options. The adjustments determined
by the Plan Administrator shall be final, binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Article Two shall be
authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not Employees may only be granted non- statutory
options. Each granted option shall be evidenced by one or more instruments in
the form approved by the Plan Administrator; provided, however, that each such
instrument shall comply with and incorporate the terms and conditions specified
below. Each instrument evidencing an Incentive Option shall, in addition, be
subject to the applicable provisions of Section II of this Article Two.
A. Option Price.
1. The option price per share shall be fixed by
the Plan Administrator, provided, however, that in no event shall the option
price per share be less than eighty-five percent (85%) of the fair market value
of a share of Common Stock on the date of the option grant.
2. The option price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section VI
of this Article Two and the instrument evidencing the grant, be payable in one
of the alternative forms specified below:
(i) cash or check made payable to the
Company's order;
(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Company's earnings
for financial reporting purposes and valued at Fair Market Value on
the Exercise Date (as such terms are defined below); or
(iii) through a broker-dealer sale and
remittance procedure pursuant to which the optionee shall provide
irrevocable written instructions (I) to the designated broker-dealer
to effect the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds an amount equal to the aggregate
option price payable for the purchased shares plus all applicable
Federal and state income and employment taxes required to be withheld
by the Company by reason of such purchase and (II) to the Company to
deliver the certificates for the purchased shares directly to such
broker- dealer.
For purposes of this subparagraph 2, the Exercise Date shall
be the first date on which the Company shall have received written notice of
the exercise of the option. Except to the extent the sale and remittance
procedure is utilized in connection with the exercise of the option, payment of
the option price for the purchased shares must accompany such notice.
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3. The Fair Market Value of a share of Common
Stock on any relevant date under subparagraph 1 or 2 above (and for all other
valuation purposes under the Plan) shall be determined in accordance with the
following provisions:
- If the Common Stock is not at the time listed
or admitted to trading on any stock exchange but is traded on the
NASDAQ National Market System, the fair market value shall be the
closing price of one share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers through its NASDAQ system or any successor system. If there
is no closing price for the Common Stock on the date in question, then
the closing price on the last preceding date for which such quotation
exists shall be determinative of fair market value.
- If the Common Stock is at the time listed or
admitted to trading on any national stock exchange, then the Fair
Market Value shall be the closing selling price per share of Common
Stock on the date in question on the stock exchange determined by the
Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions
on such exchange. If there is no reported sale of Common Stock on
such exchange on the date in question, then the Fair Market Value
shall be the closing selling price on the exchange on the last
preceding date for which such quotation exists.
- If the Common Stock is at the time neither
listed nor admitted to trading on any stock exchange nor traded on the
NASDAQ National Market System, or if the Plan Administrator determines
that the value determined pursuant to the preceding paragraphs does
not reflect Fair Market Value, then the Fair Market Value shall be
determined by the Plan Administrator after taking into account such
factors as the Plan Administrator shall deem appropriate.
B. Term and Exercise of Options. Each option granted
under this Article Two shall be exercisable at such time or times, during such
period, and for such number of shares as shall be determined by the Plan
Administrator and set forth in the stock option agreement evidencing such
option; provided, however, that no such option shall have a term in excess of
ten (10) years from the grant date. During the lifetime of the optionee, the
option shall be exercisable only by the optionee and shall not be assignable or
transferable by the optionee otherwise than by will or by the laws of descent
and distribution.
C. Termination of Service.
1. Except to the extent otherwise provided
pursuant to Section VII of this Article Two, the following provisions shall
govern the exercise period applicable to any options held by the optionee at
the time of cessation of Service or death.
- Should the optionee cease to remain in
Service for any reason other than death or permanent disability, then
the period for which each outstanding option held by such optionee is
to remain exercisable shall be limited to the three (3)-month period
following the date of such cessation of Service.
- In the event such Service terminates by
reason of permanent disability (as defined in Section 22(e)(3) of the
Internal Revenue Code), then the period for which each outstanding
option held by the optionee is to remain
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exercisable shall be limited to the twelve (12)-month period following
the date of such cessation of Service.
- Should the optionee die while in Service or
during the three (3)-month period following his or her cessation of
Service, then the period for which each of his or her outstanding
options is to remain exercisable shall be limited to the three
(3)-year period following the date of the optionee's cessation of
Service. During such limited period, the option may be exercised by
the personal representative of the optionee's estate or by the person
or persons to whom the option is transferred pursuant to the
optionee's will or in accordance with the laws of descent and
distribution.
- Under no circumstances, however, shall any
such option be exercisable after the specified expiration date of the
option term.
- Each such option shall, during such limited
exercise period, be exercisable for any or all of the shares for which
the option is exercisable on the date of the optionee's cessation of
Service. Upon the expiration of such limited exercise period or (if
earlier) upon the expiration of the option term, the option shall
terminate and cease to be exercisable.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to permit one or more options held by the
optionee under this Article Two to be exercised, during the limited period of
exercisability provided under subparagraph 1 above, not only with respect to
the number of shares for which each such option is exercisable at the time of
the optionee's cessation of Service but also with respect to one or more
subsequent installments of purchasable shares for which the option would
otherwise have become exercisable had such cessation of Service not occurred.
3. For purposes of the foregoing provisions of
this paragraph I.C (and all other provisions of the Plan), unless it is
evidenced otherwise in the specific option agreement evidencing the option
grant and/or the purchase agreement evidencing the purchased optioned shares,
the optionee shall be deemed to remain in SERVICE for so long as such
individual renders services on a periodic basis to the Company or any parent or
subsidiary corporation in the capacity of an Employee, a non-employee member of
the Board or an independent consultant or advisor. The optionee shall be
considered to be an EMPLOYEE for so long as such individual remains in the
employ of the Company or one or more of its parent or subsidiary corporations
subject to the control and direction of the employer entity not only as to the
work to be performed but also as to the manner and method of performance.
D. Stockholder Rights. An optionee shall have none of
the rights of a stockholder with respect to any shares covered by the option
until such individual shall have exercised the option, paid the exercise price
for the purchased shares and been issued a stock certificate for such shares.
E. Repurchase Rights. The shares of Common Stock
acquired upon the exercise of options granted under this Article Two may be
subject to one or more repurchase rights of the Company in accordance with the
following provisions:
1. The Plan Administrator may in its discretion
determine that it shall be a term and condition of one or more options
exercised under this Article Two that the
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Company (or its assignees) shall have the right, exercisable upon the
optionee's cessation of Service, to repurchase at the option price all or (at
the discretion of the Company and with the consent of the optionee) any portion
of the shares of Common Stock previously acquired by the optionee upon the
exercise of such option. Any such repurchase right shall be exercisable by the
Company (or its assignees) upon such terms and conditions (including the
establishment of the appropriate vesting schedule and other provision for the
expiration of such right in one or more installments over the optionee's period
of Service) as the Plan Administrator may specify in the instrument evidencing
such right.
2. All of the Company's outstanding repurchase
rights shall automatically terminate, and all shares subject to such terminated
rights shall immediately vest in full, upon the occurrence of any Corporate
Transaction under Section III of this Article Two; provided, however, that no
such termination of the repurchase rights or immediate vesting of the shares
shall occur if (and to the extent): (i) the Company's outstanding repurchase
rights are to be assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction or (ii) such termination of
repurchase rights and acceleration of vesting are precluded by other
limitations imposed by the Plan Administrator at the time of the option grant.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees. Options which are
specifically designated as "non-statutory" options when issued under the Plan
shall not be subject to such terms and conditions.
A. Option Price. The option price per share of the
Common Stock subject to an Incentive Option shall in no event be less than one
hundred percent (100%) of the Fair Market Value of a share of Common Stock on
the date of grant.
B. Dollar Limitation. The aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the Common Stock
for which one or more options granted to any Employee under this Plan (or any
other option plan of the Company or its parent or subsidiary corporations) may
for the first time become exercisable as Incentive Options under the Federal
tax laws during any one calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the Employee holds two or more such
options which become exercisable for the first time in the same calendar year,
the foregoing limitation on the exercisability thereof as Incentive Options
under the Federal tax laws shall be applied on the basis of the order in which
such options are granted.
C. 10% Stockholder. If any individual to whom an
Incentive Option is to be granted pursuant to the provisions of the Plan is on
the date of grant the owner of stock (as determined under Section 424(d) of the
Internal Revenue Code) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any one of its
parent or subsidiary corporations (such person to be herein referred to as a
10% Stockholder), then the option price per share shall not be less than one
hundred and ten percent (110%) of the Fair Market Value per share of Common
Stock on the date of grant and the option term shall not exceed five (5) years
measured from the grant date.
Except as modified by the preceding provisions of this Section
II, all the provisions of the Plan shall be applicable to the Incentive Options
granted hereunder.
III. CORPORATE TRANSACTIONS
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A. In the event of any of the following
stockholder-approved transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which
the Company is not the surviving entity, except for a transaction the
principal purpose of which is to change the state of the Company's
incorporation;
(ii) the sale, transfer or other
disposition of all or substantially all of the assets of the Company;
or
(iii) any reverse merger in which the
Company is the surviving entity but in which fifty percent (50%) or
more of the Company's outstanding voting stock is transferred to
holders different from those who held the stock immediately prior to
such merger,
then each option outstanding under this Article Two shall be automatically
accelerated so that each such option shall, immediately prior to the specified
effective date for such Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock purchasable under such
option and may be exercised for all or any portion of such shares. However, no
option shall be so accelerated if and to the extent (i) such option is to be
assumed by the successor corporation or parent thereof or to be replaced with a
comparable option to purchase shares of the capital stock of such successor
corporation or parent thereof or (ii) such acceleration is subject to other
applicable limitations imposed by the Plan Administrator in the relevant option
agreement.
B. In connection with any such Corporate Transaction,
the exercisability as an incentive stock option under the Federal tax laws of
any accelerated options under this Article Two shall remain subject to the
applicable dollar limitation of paragraph II.B of this Article Two.
C. The grant of options under this Article Two shall in
no way affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
D. Upon the consummation of the Corporate Transaction,
all outstanding options under this Article Two shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation or its
parent company.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under this Article Two and to
grant in substitution therefor new options under the Plan covering the same or
different numbers of shares of Common Stock but having an option price per
share not less than eighty-five percent (85%) of Fair Market Value (one hundred
percent (100%) of such Fair Market Value in the case of an Incentive Option or
one hundred and ten percent (110%) of such Fair Market Value in the case of an
Incentive Option granted to a 10% Stockholder) on the date of grant.
V. SURRENDER OF OPTIONS FOR CASH OR STOCK
A. Provided and only if the Plan Administrator
determines in its discretion to implement the stock appreciation right
provisions of this Section V, one or more optionees may
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be granted the right, exercisable upon such terms and conditions as the Plan
Administrator may establish at the time of the option grant or at any time
thereafter, to surrender all or part of an unexercised option under this
Article Two in exchange for a distribution from the Company, payable in cash or
in shares of Common Stock, equal in amount to the excess of (i) the Fair Market
Value (at date of surrender) of the number of shares in which the optionee is
at the time vested under the surrendered option or portion thereof over (ii)
the aggregate option price payable for such vested shares.
B. No surrender of an option shall be effective
hereunder unless it is approved by the Plan Administrator. If the surrender is
so approved, then the distribution to which the optionee shall accordingly
become entitled under this Section V may be made in shares of Common Stock
valued at Fair Market Value at date of surrender, in cash, or partly in shares
and partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the optionee shall retain whatever rights the optionee had
under the surrendered option (or surrendered portion thereof) on the date of
surrender and may exercise such rights at any time prior to the later of (i)
five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised at any time after ten (10) years (or five (5) years in the case of
a 10% Stockholder) after the date of the option grant.
D. One or more officers of the Company subject to the
short-swing profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights
in tandem with their outstanding options under this Article Two. Each
outstanding option with such a limited stock appreciation right in effect for
at least six (6) months shall automatically be canceled, to the extent
exercisable for vested shares of Common Stock, upon the occurrence of a Hostile
Take-Over, and the optionee shall in return be entitled to a cash distribution
from the Company in an amount equal to the excess of (i) the Take-Over Price of
the number of shares in which the optionee is at the time vested under the
canceled option or canceled portion over (ii) the aggregate option price
payable for such vested shares. Such cash distribution shall be made within
five (5) days following the consummation of the Hostile Take-Over. Neither the
approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such option cancellation and cash distribution.
The balance (if any) of each such option shall continue in full force and
effect in accordance with the terms and conditions of the instrument evidencing
such grant.
E. For purposes of paragraph V.D, the following
definitions shall be in effect:
A Hostile Take-Over shall be deemed to occur in the
event (i) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly
or indirectly acquires beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Act of 1934, as amended (the
"1934 Act")) of securities possessing more than fifty percent (50%) of
the total combined voting power of the Company's outstanding
securities pursuant to a tender or exchange offer made directly to the
Company's stockholders which the Board does not recommend such
stockholders to accept and (ii) more than fifty percent (50%) of the
securities so acquired in such tender or exchange offer are accepted
from holders other than Company officers and directors participating
in the Plan.
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The Take-Over Price per share shall be deemed to be
equal to the greater of (a) the Fair Market Value per share on the
date of cancellation, as determined pursuant to the valuation
provisions of paragraph I.A.3 of this Article Two, or (b) the highest
reported price per share paid in effecting such Hostile Take-Over.
However, if the canceled option is an Incentive Option, the Take-Over
Price shall not exceed the clause (a) price per share.
F. The shares of Common Stock subject to any option
surrendered or canceled for an appreciation distribution pursuant to this
Section V shall NOT be available for subsequent option grants under the Plan.
VI. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may assist any optionee
(including any officer or director) in the exercise of one or more options
under this Article Two by (a) authorizing the extension of a loan to such
optionee from the Company or (b) permitting the optionee to pay the option
price for the purchased Common Stock in installments over a period of years.
The terms of any loan or installment method of payment (including the interest
rate and terms of repayment) will be established by the Plan Administrator in
its sole discretion. Loans and installment payments may be granted without
security or collateral (other than loans to optionees who are consultants or
independent contractors, which must be adequately secured by collateral other
than the purchased shares), but the maximum credit available to the optionee
shall not exceed the sum of (i) the aggregate option price payable for the
purchased shares (less the par value) plus (ii) any Federal and state income
and employment tax liability incurred by the optionee in connection with the
exercise of the option.
B. The Plan Administrator may, in its absolute
discretion, determine that one or more loans extended under Section VI.A above
shall be subject to forgiveness by the Company in whole or in part upon such
terms and conditions as the Plan Administrator in its discretion deems
appropriate.
VII. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority,
exercisable in its sole discretion to extend, either at the time when the
option is granted or at any time while the option remains outstanding, the
period of time for which any option granted under this Article Two is to remain
exercisable following the optionee's cessation of Service from the period set
forth in the option agreement to such greater period of time as the Plan
Administrator shall deem appropriate; provided, however, that in no event shall
such option be exercisable after the specified expiration date of the option
term.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
The individuals eligible to receive automatic option grants
pursuant to the provisions of this Article Three shall be limited to the
following:
(1) each individual who is serving as a
non-employee member of the Board on the IPO Effective Date; and
(2) each individual who is first appointed or
elected as a non-employee Board member at any time after the IPO
Effective Date.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants will be made under this
Article Three on the dates specified below:
(i) Each individual who has not
previously been an Employee, and who first becomes a non- employee
Board member at any time after the IPO Effective Date, whether through
election at an Annual Stockholders Meeting or through appointment by
the Board, shall automatically be granted, at the time of such initial
election or appointment, a non- statutory stock option to purchase
9,000 shares of Common Stock.
(ii) Commencing with the 1993 Annual
Stockholders Meeting and each subsequent Annual Stockholders Meeting
until 1996, each individual who is at the time serving as a
non-employee member of the Board shall receive a grant of a
non-statutory option to purchase 1,500 shares of Common Stock,
provided such individual has been a member of the Board for at least
six (6) months.
(iii) Commencing with the 1996 Annual
Stockholders Meeting and each subsequent Annual Stockholders Meeting,
each individual who is at the time serving as a non-employee member of
the Board shall receive a grant of a non- statutory option to purchase
3,000 shares of Common Stock, instead of the 1,500 shares under
Section II.A(ii) above.
The 9,000-share limitation, 1,500-share limitation and
3,000-share limitation on the automatic option grant to be made to each
non-employee Board member shall be subject to periodic adjustment pursuant to
the applicable provisions of Section V.C of Article One.
B. Exercise Price. The exercise price per share shall
be equal to one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the automatic grant date.
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C. Payment.
The exercise price shall be payable in one of the
alternative forms specified below:
(i) cash or check made payable to the
Company's order;
(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Company's earnings
for financial reporting purposes and valued at Fair Market Value on
the Exercise Date (as such terms are defined in paragraph I.A of
Article Two); or
(iii) through a broker-dealer sale and
remittance procedure pursuant to which the optionee shall provide
irrevocable written instructions (I) to the designated broker-dealer
to effect the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds an amount equal to the aggregate
option price payable for the purchased shares plus all applicable
Federal and state income and employment taxes required to be withheld
by the Company by reason of such purchase and (II) to the Company to
deliver the certificates for the purchased shares directly to such
broker- dealer.
Except to the extent the sale and remittance procedure
specified above is utilized for the exercise of the option, payment of the
exercise price for the purchased shares must accompany the written notice of
option exercise.
D. Option Term. Each automatic grant under this Article
Three shall have a maximum term of ten (10) years measured from the automatic
grant date.
E. Exercisability. Each annual automatic grant for
1,500 shares shall be immediately exercisable in full for the option shares.
Each annual automatic grant for 3,000 shares shall be immediately exercisable
in full for the option shares, provided that the optionee has been a member of
the Board for six (6) months on the annual automatic grant date; if the
optionee has not been a member of the Board for six (6) months on the annual
automatic grant date, such automatic option grant shall become exercisable in
full for the option shares on the date six (6) months following the annual
automatic grant date. Each initial automatic grant for 9,000 shares shall
become exercisable for the option shares in three (3) installments as follows:
(i) The option shall become exercisable
for one-third (1/3) of the option shares upon completion of twelve
(12) months of Board service measured from the automatic grant date.
(ii) The option shall become exercisable
for an additional one-third (1/3) of the option shares upon the
completion of twenty-four (24) months of Board service measured from
the automatic grant date.
(iii) The option shall become exercisable
for the final one-third (1/3) of the option shares upon the completion
of thirty-six (36) months of Board service measured from the automatic
grant date.
As the option becomes exercisable for one or more installments
of the option shares, the installments shall accumulate, and the option shall
remain exercisable for the accumulated
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installments until the expiration or sooner termination of the option term.
The option, however, shall not become exercisable for any additional option
shares following the optionee's cessation of Board service, except to the
extent the option is otherwise to become exercisable in accordance with the
provisions of Section III of this Article Three.
F. Non-Transferability. During the lifetime of the
optionee, the option shall be exercisable only by the optionee and shall not be
assignable or transferable by the optionee otherwise than by will or by the
laws of descent and distribution following the optionee's death.
G. Effect of Termination of Board Membership.
1. Should the optionee cease to be a Board
member for any reason (other than death) while holding an automatic option
grant under this Article Three, then such optionee shall have a six (6)-month
period following the date of such cessation of Board membership in which to
exercise such option for any or all of the shares of Common Stock for which the
option is exercisable at the time the optionee ceases service as a Board
member.
2. Should the optionee die while serving as a
Board member or during the six (6)-month period following his or her cessation
of Board service, then the option may subsequently be exercised, for any or all
of the shares of Common Stock for which the option is exercisable at the time
of the optionee's cessation of Board membership, by the personal representative
of the optionee's estate or by the person or persons to whom the option is
transferred pursuant to the optionee's will or in accordance with the laws of
descent and distribution. Any such exercise must, however, occur within three
(3) years after the date of the optionee's cessation of Board service.
3. In no event shall any automatic grant under
this Article Three remain exercisable after the specified expiration date of
the ten (10)-year option term. Upon the expiration of the applicable exercise
period in accordance with subparagraphs 1 and 2 above or (if earlier) upon the
expiration of the ten (10)-year option term, the automatic grant shall
terminate and cease to be exercisable.
H. Stockholder Rights. The holder of an automatic
option grant under this Article Three shall have no stockholder rights with
respect to any shares covered by such option until such individual shall have
exercised the option, paid the exercise price for the purchased shares and been
issued a stock certificate for such shares.
I. Remaining Terms. The remaining terms and conditions
of each automatic option grant shall be as set forth in the prototype
Non-Employee Director Automatic Grant Agreement.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction (as such
term is defined in Section III of Article Two), then the exercisability of each
automatic option grant outstanding under this Article Three shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares. Upon
the consummation of the Corporate Transaction, all automatic option grants
under this Article Three shall terminate and cease to be outstanding.
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B. In connection with any Change in Control of the
Company, the exercisability of each automatic option grant at the time
outstanding under this Article Three shall automatically accelerate so that
each such option shall, immediately prior to the specified effective date for
the Change in Control, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such shares. For purposes of this Article
Three, a Change in Control shall be deemed to occur in the event:
(i) any person or related group of
persons (other than the Company or a person that directly or
indirectly controls, is controlled by, or is under common control
with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant
to a tender or exchange offer made directly to the Company's
stockholders which the Board does not recommend such stockholders to
accept; or
(ii) there is a change in the composition
of the Board over a period of twenty-four (24) consecutive months or
less such that a majority of the Board members (rounded up to the next
whole number) cease, by reason of one or more proxy contests for the
election of Board members, to be comprised of individuals who either
(A) have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board
members during such period by at least two-thirds of the Board members
described in clause (A) who were still in office at the time such
election or nomination was approved by the Board.
C. Upon the occurrence of a Hostile Take-Over, each
automatic option grant which has been outstanding under this Article Three for
a period of at least six (6) months shall automatically be canceled in return
for a cash distribution from the Company in an amount equal to the excess of
(i) the Take-Over Price of the shares of Common Stock at the time subject to
the canceled option (whether or not the option is otherwise at the time
exercisable for such shares) over (ii) the aggregate exercise price payable for
such shares. The cash distribution payable upon such cancellation shall be
made within five (5) days following the consummation of the Hostile Take-Over.
Neither the approval of the Plan Administrator nor the consent of the Board
shall be required in connection with such option cancellation and cash
distribution.
D. For purposes of this Article Three, Hostile Take-Over
shall have the meaning assigned to such term in paragraph V.E of Article Two.
The Take-Over Price per share shall be deemed to be equal to the greater of (a)
the Fair Market Value per share on the date of cancellation, as determined
pursuant to the valuation provisions of paragraph I.A.3 of Article Two, or (b)
the highest reported price per share paid in effecting such Hostile Take-Over.
E. The shares of Common Stock subject to each option
canceled in connection with the Hostile Take-Over shall NOT be available for
subsequent issuance under this Plan.
F. The automatic option grants outstanding under this
Article Three shall in no way affect the right of the Company to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
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IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
The provisions of this Automatic Option Grant Program,
including any automatic option grants outstanding under this Article Three, may
not be amended at intervals more frequently than once every six (6) months,
other than to the extent necessary to comply with applicable Federal income tax
laws and regulations.
ARTICLE FOUR
MISCELLANEOUS
I. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever;
provided, however, that (i) no such amendment or modification shall, without
the consent of the holders, adversely affect rights and obligations with
respect to options at the time outstanding under the Plan and (ii) any
amendment to the Automatic Option Grant Program (or any options outstanding
thereunder) shall be in compliance with the limitation of Section IV of Article
Three. In addition, the Board shall not, without the approval of the
stockholders of the Company (i) increase the maximum number of shares issuable
under the Plan, except for permissible adjustments under Section V.C of Article
One, (ii) materially modify the eligibility requirements for the grant of
options under the Plan or (iii) otherwise materially increase the benefits
accruing to participants under the Plan.
II. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan was restated on June 22, 1992 to be
effective on the IPO Effective Date, and the Company's stockholders approved
the restatement on September 4, 1992. Article One, Section III of the Plan was
subsequently amended to permit the establishment of a secondary committee to
administer the Plan. Such amendment became effective on the September 30, 1992
date of its approval by the Board. The Plan was restated on October 13, 1993
to (i) amend the automatic grant program under the Option Plan to increase to
9,000 from 3,000 the number of shares awarded to non-employee directors upon
initial election or appointment and to delete vesting restrictions for the
annual 1,500-share automatic option grants and (ii) limit the maximum number of
shares for which any individual participant may be granted stock options over
the remaining term of the Option Plan. The Plan was restated on December 7,
1995 to (i) amend the automatic grant program under the Option Plan to increase
to 3,000 from 1,500 the number of shares awarded to each non-employee director
upon each annual meeting of the Company's stockholders and (ii) eliminate the
six-month service requirement for receiving such automatic annual grants,
provided that the annual option grants to non- employee directors who have not
served as Board members for at least six (6) months prior to the date of such
annual grant shall become exercisable six (6) months after the date of such
grant. The Plan was restated on February 13, 1997 to increase by 500,000 the
number of shares of the Company's Common Stock reserved for issuance under the
Plan from 1,500,000 shares to 2,000,000 shares. If stockholder approval is not
obtained within twelve (12) months after the February 13, 1997 date of the
Board's approval of the share increase under the Plan, then any options granted
on the basis of such share increase shall terminate and cease to be
outstanding.
B. The provisions of this 1997 restatement shall apply
only to options granted under the Plan from and after the Effective Date. Each
option issued and outstanding under the Plan immediately prior to the Effective
Date shall continue to be governed by the terms and conditions of the Plan (and
the instrument evidencing such grant) as in effect on the date each such option
was previously granted, and nothing in this restatement shall be deemed to
affect or
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otherwise modify the rights or obligations of the holders of such prior options
with respect to the acquisition of shares of Common Stock thereunder.
C. The option acceleration provisions of Section III of
Article Two relating to Corporate Transactions may, in the Plan Administrator's
discretion, be extended to one or more outstanding stock options under the Plan
which were granted prior to the IPO Effective Date and which do not otherwise
provide for such acceleration.
D. The sale and remittance procedure authorized for the
exercise of outstanding options under this Plan shall be available for all
options granted under this Plan on or after the IPO Effective Date and all
non-statutory options outstanding under the Plan.
E. The Plan shall terminate upon the earlier of (i) June
21, 2002 or (ii) the date on which all shares available for issuance under the
Plan shall have been issued or canceled pursuant to the exercise or surrender
of options granted hereunder. If the date of termination is determined under
clause (i) above, then options outstanding on such date shall thereafter
continue to have force and effect in accordance with the provisions of the
instruments evidencing such options.
F. Options may be granted under this Plan to purchase
shares of Common Stock in excess of the number of shares then available for
issuance under the Plan, provided (i) an amendment to increase the maximum
number of shares issuable under the Plan is adopted by the Board prior to the
initial grant of any such option and within one year thereafter such amendment
is approved by the stockholders of the Company and (ii) each option granted is
not to become exercisable, in whole or in part, at any time prior to the
obtaining of such stockholder approval.
III. USE OF PROCEEDS
Any cash proceeds received by the Company from the sale of
shares pursuant to options granted under the Plan shall be used for general
corporate purposes.
IV. WITHHOLDING
The Company's obligation to deliver shares upon the exercise
or surrender of any options granted under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements.
V. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
option or surrender right hereunder, and the issuance of stock upon the
exercise or surrender of any such option shall be subject to the procurement by
the Company of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options granted under it and the stock
issued pursuant to it.
B. No shares of Common Stock or other assets shall be
issued or delivered under the Plan, unless and until, in the opinion of counsel
for the Company (or its successor in the event of any Corporate Transaction),
there shall have been compliance with all applicable requirements of the
Federal and state securities exchange on which stock of the same class is then
listed, and all other requirements of law or of any regulatory bodies having
jurisdiction over such issuance and delivery.
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VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Company in establishing this Plan,
nor any action taken by the Board or the Plan Administrator hereunder, nor any
provision of this Plan shall be construed so as to grant any individual the
right to remain in the employ or Service of the Company (or any parent or
subsidiary corporation) for any period of specific duration, and the Company
(or any parent or subsidiary corporation retaining the services of such
individual) may terminate such individual's employment or Service at any time
and for any reason, with or without cause.