Exhibit 10.4
VERSATILITY INC.
1998 NON-QUALIFIED STOCK OPTION PLAN
1. PURPOSE. This 1998 Non-Qualified Stock Option Plan (the "Plan") is
intended to provide incentives to new officers, employees and consultants of
Versatility Inc. (the "Company"), and of any present or future subsidiary of the
Company ("Related Corporations") by providing them with opportunities to
purchase stock in the Company pursuant to options ("Non-Qualified Options" or
"Options") granted hereunder which do not qualify as "incentive stock options"
("ISOs") under Section 422(b) of the Internal Revenue Code (the "Code"). The
Plan is not intended to provide Option grants to any person who is an officer or
director of the Company or Related Corporations, unless such grant is an
inducement essential to such person's entering into one or more employment
agreements with the Company as a new employee.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered
by the Board of Directors of the Company (the "Board") or, subject to
paragraph 2(D) (relating to compliance with Section 162(m) of the Code),
by a committee appointed by the Board (the "Committee"). Hereinafter, all
references in this Plan to the "Committee" shall mean the Board if no
Committee has been appointed. Subject to ratification of the grant or
authorization of each Option by the Board (if so required by applicable
state law), and subject to the terms of the Plan, the Committee shall have
the authority to (i) determine to whom, from among the class of
individuals and entities eligible under paragraph 3 to receive Options,
Options may be granted; (ii) determine the time or times at which Options
shall be granted; (iii) determine the option price of shares subject to
each Option, which price shall not be less than the minimum price
specified in paragraph 6; (iv) determine (subject to paragraph 7) the time
or times when each Option shall become exercisable and the duration of the
exercise period; (v) determine whether restrictions such as repurchase
options are to be imposed on shares subject to Options and the nature of
such restrictions, if any, and (vi) interpret the Plan and prescribe and
rescind rules and regulations relating to it. The Committee shall take
whatever actions it deems necessary, under Section 422 of the Code and the
regulations promulgated thereunder, to ensure that no Option issued
hereunder is treated as an ISO. The interpretation and construction by the
Committee of any provisions of the Plan or of any Option granted under it
shall be final unless otherwise determined by the Board. The Committee may
from time to time adopt such rules and regulations for carrying out the
Plan as it may deem advisable. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with
respect to the Plan or any Option granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its members as
its chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and acts
by a majority of the members of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee (if
consistent with applicable state law), shall constitute the valid acts of
the Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and
thereafter directly administer the Plan.
C. GRANT OF OPTIONS TO BOARD MEMBERS. Options may be granted to
members of the Board. All grants of Options to members of the Board shall
in all respects be made in accordance with the provisions of this Plan
applicable to other eligible persons. Members of the Board who either (i)
are eligible to receive grants of Options pursuant to the Plan or (ii)
have been granted Options may vote on any matters affecting the
administration of the Plan or the grant of any Options pursuant to the
Plan, except that no such member shall act upon the granting to himself or
herself of Options, but any such member may be counted in determining the
existence of a quorum at any meeting of the Board during which action is
taken with respect to the granting to such member of Options.
D. PERFORMANCE-BASED COMPENSATION. Subject to the provisions of any
Agreement (as defined below) relating to an Option. The Board, in its
discretion, may take such action as may be necessary to ensure that
Options granted under the Plan qualify as "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code and
applicable regulations promulgated thereunder ("Performance-Based
Compensation"), which action may include, in the Board's discretion, some
or all of the following (i) if the Board determines that Options granted
under the
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Plan generally shall constitute Performance-Based Compensation, the Plan
shall be administered, to the extent required for such Options to
constitute Performance-Based Compensation, by a Committee consisting
solely of two or more "outside directors" (as defined in applicable
regulations promulgated under Section 162(m) of the Code), (ii) if any
Non-Qualified Options with an exercise price less than the fair market
value per share of Common Stock are granted under the Plan and the Board
determines that such Options should constitute Performance-Based
Compensation, such options shall be made exercisable only upon the
attainment of a pre-established, objective performance goal established by
the Committee, and such grant shall be submitted for, and shall be
contingent upon shareholder approval and (iii) Options granted under the
Plan may be subject to such other terms and conditions as are necessary
for compensation recognized in connection with the exercise or disposition
of such Option or the disposition of Common Stock acquired pursuant to
such Option, to constitute Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. Non-Qualified Options may be granted to:
(a) any employee or consultant of the Company or any Related Corporation who is
not an officer of the Company on the date of such grant; or (b) any new officer
of the Company, if such grant is an inducement essential to the individuals
entering into one or more employment agreements with the Company as a new
employee. The Committee may take into consideration a recipient's individual
circumstances in determining whether to grant an Option. The granting of any
Option to any individual or entity shall neither entitle such grantee to, nor
disqualify such grantee from, participation in any other grant of Options.
4. STOCK. The stock subject to Options shall be authorized but unissued
shares of Common Stock of the Company, par value $.01 per share (the "Common
Stock"), or shares of Common Stock reacquired by the Company in any manner. The
aggregate number of shares which may be issued pursuant to the Plan is
2,500,000, subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the shares of Common Stock
subject to such Option shall again be available for grants of Options under the
Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 1,125,000 of shares of Common
Stock under the Plan. If any Option granted under the Plan shall expire or
terminate for any reason without having been exercised in full or shall cease
for any reason to be exercisable in whole or in part or shall be repurchased by
the Company, the shares of Common Stock subject to such Option shall be included
in the determination of the aggregate number of shares of Common Stock deemed to
have been granted to such employee under the Plan.
5. GRANTING OF OPTIONS. Options may be granted under the Plan at any time
on or after April 14, 1998 and prior to April 14, 2008. The date of grant of an
Option under the Plan will be the date specified by the Committee at the time it
grants the Option; provided, however, that such date shall not be prior to the
date on which the Committee acts to approve the grant.
6. MINIMUM OPTION PRICE.
Subject to paragraph 2(D) (relating to compliance with Section 162(m) of
the Code), the exercise price per share specified in the agreement relating to
each Non-Qualified Option granted under the Plan (the "Agreement"), may be less
than the fair market value of the Common Stock of the Company on the date of
grant, but shall in no event be less than the minimum legal consideration
required therefor under the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or as specified in the Agreement relating to such Option,
each Option shall expire on the date specified by the Committee, but not more
than ten years from the date of grant.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on the
date of grant or shall become exercisable thereafter in such installments
as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Committee.
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C. PARTIAL EXERCISE. Each Option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date that any installment of any Option becomes
exercisable.
9. TERMINATION OF BUSINESS RELATIONSHIP. Each Option may provide that it
shall terminate before its stated expiration date, upon terms specified by the
Committee, if the optionee ceases to be an employee, officer or director or
consultant of the Company, of any Related Corporation, or of the Company and all
Related Corporations (any such relationship hereinafter referred to as a
"Business Relationship with the Company"). Nothing in the Plan or any Option
granted hereunder shall be deemed to give any optionee the right to continue his
or her Business Relationship with the Company for any period of time.
10. DEATH; DISABILITY.
A. DEATH. Unless otherwise specified by the Committee, if an
optionee's Business Relationship with the Company terminates by reason of
death, his or her Option may be exercised, to the extent of the number of
shares with respect to which such optionee could have exercised it on the
date of such optionee's death, by such optionee's estate, personal
representative or beneficiary who has acquired the Option by will or by
the laws of descent and distribution, at any time prior to the earlier of
the specified expiration date of the Option or 180 days from the date of
death.
B. DISABILITY. Unless otherwise specified by the Committee, if an
optionee's Business Relationship with the Company terminates by reason of
such optionee's disability, such optionee shall have the right to exercise
his or her Option, to the extent of the number of shares with respect to
which such optionee could otherwise have exercised it on the date his or
her Business Relationship with the Company terminated, at any time prior
to the earlier of the specified expiration date of the Option or 180 days
from the date of the termination of the optionee's Business Relationship
with the Company. Unless otherwise defined in an Agreement between the
Company and the Optionee, the term "disability" shall mean "permanent and
total disability" as defined in Section 22(e)(3) of the Code or any
successor statute.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee each Option shall be exercisable only by the
optionee.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any Option
shall be subject to the restrictions set forth herein or, consistent with
paragraph 7, to such other or additional termination and cancellation provisions
as the Committee may determine. The Committee may from time to time confer
authority and responsibility on one or more of its own members and/or one or
more officers of the Company to execute and deliver such instruments. The proper
officers of the Company are authorized and directed to take any and all action
necessary or advisable from time to time to carry out the terms of such
instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the Agreement between the optionee and the Company relating to such
Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of Options shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated
with or acquired by another entity in a merger or other reorganization in
which the holders of the outstanding voting stock of the Company
immediately preceding the consummation of such event, shall, immediately
following such event, hold, as a group, less than a majority
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of the voting securities of the surviving or successor entity, or in the
event of a sale of all or substantially all of the Company's assets or
otherwise (each, an "Acquisition"), the Committee or the board of
directors of any entity assuming the obligations of the Company hereunder
(the "Successor Board"), shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by substituting
on an equitable basis for the shares then subject to such Options either
(a) the consideration payable with respect to the outstanding shares of
Common Stock in connection with the Acquisition, (b) shares of stock of
the surviving or successor corporation or (c) such other securities as the
Successor Board deems appropriate, the fair market value of which shall
not materially exceed the fair market value of the shares of Common Stock
subject to such Options immediately preceding the Acquisition; or (ii)
upon written notice to the optionees, provide that all Options must be
exercised, to the extent then exercisable or to be exercisable as a result
of the Acquisition, within a specified number of days of the date of such
notice, at the end of which period the Options shall terminate; or (iii)
terminate all Options in exchange for a cash payment equal to the excess
of the fair market value of the shares subject to such Options (to the
extent then exercisable or to be exercisable as a result of the
Acquisition) over the exercise price thereof.
C. RECAPITALIZATION OR REORGANIZATION. Except as otherwise provided
in any Agreement and other than a transaction described in subparagraph B
above, in the event of a recapitalization or reorganization of the Company
pursuant to which securities of the Company or of another corporation are
issued with respect to the outstanding shares of Common Stock, an optionee
upon exercising an Option shall be entitled to receive for the purchase
price paid upon such exercise the securities such optionee would have
received if such optionee had exercised his or her Option prior to such
recapitalization or reorganization.
D. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Committee shall, as to
outstanding Option, either (i) upon written notice to the optionees,
provide that all Options must be exercised, to the extent then exercisable
or to be exercisable as a result of the liquidation or dissolution, within
a specified number of days of the date of such notice, at the end of which
period the Options shall terminate; or (ii) terminate all Options in
exchange for a cash payment equal to the excess of the fair market value
of the shares subject to such Options (to the extent then exercisable or
to be exercisable as a result of the liquidation or dissolution) over the
exercise price thereof.
E. ISSUANCES OF SECURITIES. Except as expressly provided herein or
in any Agreement, 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.
F. FRACTIONAL SHARES. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
G. ADJUSTMENTS. Upon the happening of any of the events described
above, the class and aggregate number of shares set forth in paragraph 4
hereof that are subject to Options which previously have been or
subsequently may be granted under the Plan shall also be appropriately and
equitably adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific
adjustments to be made under this paragraph 13 and, subject to paragraph
2, its determination shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock (or options to purchase Common Stock) having a fair
market value equal as of the date of the exercise to the cash exercise price of
the Option, (c) at the discretion of the Committee, by delivery of the
optionee's non-recourse note secured by the Option bearing interest payable not
less than annually at no less than 100% of the lowest applicable Federal rate,
as defined in Section 1274(d) of the Code, (d) at the discretion of the
Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
The holder of an Option shall not have the rights of a shareholder with respect
to the shares covered by such Option until the date of issuance of a stock
certificate to such holder for such shares. Except as expressly
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provided in any Agreement or above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
April 14, 1998. The Plan shall expire at the end of the day on April 14, 2008
(except as to Options outstanding on that date). The Board may terminate or
amend the Plan in any respect at any time. Except as otherwise provided in this
paragraph 15, in no event may action of the Board or stockholders alter or
impair the rights of an optionee, without his or her consent, under any Option
previously granted to such optionee.
16. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted under the Plan shall be used for
general corporate purposes.
17. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the grant or exercise of
an Option, the vesting or transfer of an Option pursuant to an arm's-length
transaction, the vesting or transfer of restricted stock or securities acquired
upon the exercise of an Option hereunder, or the making of a distribution or
other payment with respect to such stock or securities, the Company may withhold
taxes in respect of amounts that constitute compensation includible in gross
income. The Committee in its discretion may condition (i) the grant or exercise
of an Option, (ii) the transfer of an Option or (iii) the vesting or
transferability of restricted stock or securities acquired by exercising a
Option, on the optionee's making satisfactory arrangement for such withholding.
Such arrangement may include payment by the optionee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
optionee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.
18. DETERMINATION OF FAIR MARKET VALUE OF COMMON STOCK. Unless otherwise
provided in an Agreement, whenever it is necessary or desirable hereunder to
determine the fair market value of the Company's Common Stock, the Committee
shall make such determination in accordance with this Section. "Fair Market
Value" shall be determined as of the last business day for which the prices or
quotes discussed in this sentence are available prior to the date such Option is
granted and shall mean (i) the average of the high and low prices of the Common
Stock for the five prior business days on which the Common Stock was traded on
the principal national securities exchange on which the Common Stock is traded,
if the Common Stock is then traded on a national securities exchange; or (ii)
the average of the last reported sale prices of the Common Stock for the five
prior business days on which the Common Stock was traded on the Nasdaq National
Market or the Nasdaq SmallCap Market, as the case may be, if the Common Stock is
not then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted for the five prior business days on
which the Common Stock was traded by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market or the Nasdaq SmallCap Market, as the case may be. However, if
the Common Stock is not publicly traded at the time an Option is granted under
the Plan, "fair market value" shall be deemed to be the fair value of the Common
Stock (on that date) as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
19. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
file tax information returns reporting the income received by optionees in
connection with the Plan.
20. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Options shall be governed by the laws of State of
Delaware, or the laws of any jurisdiction in which the Company or its successors
in interest may be organized.
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