1994 STOCK OPTION PLAN OF
MENDOCINO PARTNERS, INC.
Mendocino Partners, Inc., a corporation organized under the laws of
the State of Delaware (the "Company"), hereby adopts this 1994 Stock Option Plan
(the "Plan"). The purposes of this Plan are as follows:
(1) To further the growth, development, and financial success of the
Company by providing additional Incentives to its Directors, Officers, Employees
and advisors, and employees of companies who do business with the Company by
assisting them to become owners of capital stock of the Company and thus
permitting them to benefit directly from its growth, development, and financial
success.
(2) To enable the Company to obtain and retain the services of the
type of directors, officers, employees and advisors considered essential to the
long-range success of the Company by providing and offering them an opportunity
to become owners of capital stock of the Company under options, Including
options that are intended to qualify as "Incentive stock options" under Section
422 of the Internal Revenue Code of 1986, as amended.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall Include the feminine and neuter, and the
singular shall Include the plural, where the context so indicates.
"AO Option" shall mean an Accelerated Ownership Non-Qualified Stock
Option granted in accordance with Section 4.5 hereof.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Stock Option Committee of the Board,
appointed as provided in Section 6.1.
"Companion Grant" shall have the definition set forth in Section
4.9 hereof.
"Company" shall mean Mendocino Partners, Inc.. In addition,
"Company" shall mean any corporation assuming, or issuing new employee stock
options in substitution for, Options outstanding under the Plan, in a
transaction to which Section 425(a) of the Code applies.
"Director" shall mean a member of the Board.
"Employee" shall mean any employee (as defined in accordance with
the Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company, whether such employee is so employed at the time this Plan
is adopted or becomes so employed subsequent to the adoption of this Plan, and
(except for Incentive Stock Options), consultants or employees of companies who
do business with the Company.
"Incentive Stock Option" shall mean an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive Stock Option by
the Committee.
"Non-Qualified Option" shall mean an Option which is not an
Incentive Stock Option and which is designated as a Non-Qualified Option by the
Committee.
"Officer" shall mean an officer of the Company.
"Option" shall mean an option to purchase capital stock of the
Company granted under the Plan.
"Options" Includes both Incentive Stock Options and Non-Qualified Options.
"Optionee" shall mean a Director, Officer, or Employee to whom an
Option is granted under the Plan.
"Plan" shall mean this 1994 Stock Option Plan of the Company.
"Restricted Stock" shall mean common stock of the Company granted
under the conditions set forth in Section 4.10.
"Secretary" shall mean the Secretary of the Company.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Termination of Employment" shall mean the time when the
employee-employer relationship or directorship between the Optionee and the
Company is terminated for any reason, with or without cause, Including, but not
by way of limitation, a termination by resignation, discharge, death or
retirement, but excluding terminations where there is a simultaneous
reemployment by the Company. The Committee, in its absolute discretion, shall
determine the effect of all other matters and questions relating to Termination
of Employment, Including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Employment; provided, however, that, with respect to Incentive Stock Options, a
leave of absence shall constitute a Termination of Employment if, and to the
extent that, such leave of absence interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable Regulations and Revenue
Rulings under said Section.
ARTICLE II
SHARES SUBJECT TO PLAN
Section 2.1 - Shares Subject to Plan
The shares of stock subject to Options shall be shares of the
Company's par value $.001 Common Stock. The aggregate number of such shares
which may be issued upon exercise of Options or as Restricted Stock shall not
exceed 2,000,000.
Section 2.2 - Limitation on Incentive Stock Option Grants
Subject to the overall limitations of Section 2.1, the aggregate
fair market value (determined as of the time the option is granted) of stock
with respect to which "Incentive stock options" (within the meaning of Section
422 of the Code) are exercisable for the first time by any Director, Officer or
Employee in any calendar year (under the Plan and all other Incentive stock
option plans of the Company) shall not exceed $100,000.
Section 2.3 - Unexercised Options
If any Option expires or is canceled without having been fully
exercised, or is forfeited under the terms of a Restricted Stock grant, the
number of shares subject to such Option or grant but as to which such Option was
not exercised prior to its expiration or cancellation or shares which were
forfeited may again be optioned or granted hereunder, subject to the limitations
of Sections 2.1 and 2.2.
-2-
Section 2.4 - Changes in Company's Shares
In the event that the outstanding shares of Common Stock of the
Company are hereafter changed into or exchanged for a different number or kind
of shares or other securities of the Company, or of another corporation, by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares,
appropriate adjustments shall be made by the Committee in the number and kind of
shares for the purchase of which Options may be granted, Including adjustments
of the limitations in Sections 2.1 and 2.2 on the maximum number and kind of
shares which may be issued on exercise of Options or Restricted Stock which may
be issued.
ARTICLE III
GRANTING OF OPTIONS
Section 3.1 - Eligibility
Any Director, Officer, advisor or Employee of the Company or
employee of a company that does business with the Company shall be eligible to
be granted Options, except as provided in Sections 3.2 and 6.4(a). However, no
Incentive Stock Option shall be granted to any Director or other person who is
not an Employee of the Company.
Section 3.2 - Qualification of Incentive Stock Options
No Incentive Stock Option shall be granted unless such Option,
when granted, qualifies as an "Incentive stock option" under Section 422 of the
Code.
Section 3.3 - Granting of Options
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Determine which individuals are Directors, Officers,
or Employees or advisors or employees of persons with whom the
Company does business and select from among those persons
(Including those to whom Options have been previously granted
under the Plan) such of them as in its opinion should be granted
Options; and
(ii) Determine the number of shares to be subject to such
Options granted to such selected persons, and determine whether
such Options are to be Incentive Stock Options or Non-Qualified
Options, whether stock appreciation rights should be granted for
all or part of the Options granted, and, if Non-Qualified
Options, whether such options are AO Options; and
(iii) Determine the terms and conditions of such
Options, consistent with the Plan.
(b) Upon the selection of a Director, Officer, Employee or other
person to be granted an Option, the Committee shall instruct the Secretary to
issue such Option and may impose such conditions on the grant of such Option as
it deems appropriate. Without limiting the generality of the preceding sentence,
the Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition to the grant of a Non-Qualified Option that the Optionee
surrender for cancellation some or all of the unexercised Non-Qualified Options
which have been previously granted to him. A Non-Qualified Option the grant of
which is conditioned upon such surrender may have an option price lower (or
higher) than the option price of the surrendered Non-Qualified Option, may cover
the same (or a lesser or greater) number of shares as the surrendered
Non-Qualified Option, may contain such other terms as the Committee deems
appropriate and shall be exercisable in accordance with its terms, without
regard to the number of shares, price, option period, or any other term or
condition of the surrendered Non-Qualified Option.
-3-
ARTICLE IV
TERMS OF OPTIONS
Section 4.1 - Option Agreement
Each Option shall be evidenced by a written Stock Option
Agreement, which shall be executed by the Optionee and an authorized Officer of
the Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with the Plan. Stock Option Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to qualify such Options as "Incentive stock options" under Section 422
of the Code.
Section 4.2 - Option Price
(a) The price of the shares subject to each Option shall be set
by the Committee; provided, however, that the price per share of shares subject
to an Incentive Stock Option shall be not less than 100% of the fair market
value of such shares on the date such Option is granted, or 110% of the fair
market value of the Optionee holds 10% or more of the Company's Common Stock,
and that the price per share of shares subject to a Non-Qualified Option shall
not be less than 85% of the fair market value of such shares on the date such
Option is granted.
(b) For purposes of the Plan, the fair market value of a share
of the Company's stock as of a given date shall be: (i) the closing price of a
share of the Company's stock on the principal exchange on which shares of the
Company's stock are then trading, if any, on such date, or, if shares were not
traded on such date, then on the next preceding trading day during which a sale
occurred; or (ii) if such stock is not traded on an exchange but is quoted on
NASDAQ or a successor quotation system, (1) the last sales price (if the stock
is then listed as a National Market Issue under the NASD National Market System)
or (2) the mean between the closing representative bid and asked prices (in all
other cases) for the stock on such date as reported by NASDAQ or such successor
quotation system; or (iii) if such stock is not publicly traded on an exchange
and not quoted on NASDAQ or a successor quotation system, the mean between the
closing bid and asked prices for the stock on such date as determined in good
faith by the Committee; or (iv) if the Company's stock is not publicly traded,
the fair market value established by the Committee acting in good faith.
Section 4.3 - Commencement of Exercisability
(a) Except as the Committee may otherwise provide, or in the
case of death or disability of the Optionee, with respect to Options or common
stock issued to persons which are at the time of such grant subject to Section
16 of the Securities Exchange Act of 1934 with respect to the Company, (i) no
Option may be exercised in whole or in part during the six months after such
Option is granted, and (ii) the Company common stock acquired under this Plan
shall not be sold for at least six months after acquisition.
(b) Subject to the provisions of Sections 4.3(a), 4.3(c) and
7.3, Options shall become exercisable at such times and in such installments
(which may be cumulative) as the Committee shall provide in the terms of each
individual Option; provided, however, that by a resolution adopted after an
Option is granted the Committee may, on such terms and conditions as it may
determine to be appropriate and subject to Sections 4.3(a), 4.3(c) and 7.3,
accelerate the time at which such Option or any portion thereof may be
exercised, and provided further, that no less than 20% of each Option shall vest
and be exercisable on each anniversary of the granting thereof.
(c) No portion of an Option which is unexercisable at
Termination of Employment shall thereafter become exercisable.
-4-
Section 4.4 - Expiration of Options
(a) No Incentive Stock Option may be exercised to any extent by
anyone after the first to occur of the following events:
(i) The later of the expiration of ten years from the
date the Option was granted (five years if the Optionee holds at
the time of grant 10% or more of the Company's Common Stock) or
the expiration of three years from the date of the Optionee's
death; or
(ii) Except in the case of any Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the
expiration of three months from the date of the Optionee's
Termination of Employment for any reason other than such
Optionee's death unless the Optionee dies within said
three-month period; or
(iii) In the case of an Optionee who is disabled (within
the meaning of Section 22(e)(3) of the Code), the expiration of
three years from the date of the Optionee's Termination of
Employment for any reason other than such Optionee's death
unless the Optionee dies within said three-year period.
(b) Subject to the provisions of Section 4.5(a), the Committee
shall provide, in the terms of each individual Option, when such Option expires
and becomes unexercisable; and (without limiting the generality of the
foregoing) the Committee may provide in the terms of individual Options that
said Options expire immediately upon a Termination of Employment for any reason.
Section 4.5 - Accelerated Ownership Non-Qualified Options
The committee may determine at the time of granting any
Non-Qualified Option that such option should be an Accelerated Ownership
Non-Qualified Stock Option ("AO Option"). AO Options shall have the same terms
as Non-Qualified Options, except that should an Optionee exercise his or her AO
Option, in whole or part, by delivering shares of the Company's Common Stock
pursuant to Section 5.3 (b)(ii) (provided such shares have been held by Optionee
for more than six months) the Optionee is thereby automatically granted an
additional AO Option or Options, at the fair market value as of the date of the
original AO Option grant, for a number of shares of Company Common Stock equal
to the sum of the whole shares used by Optionee in payment of the Option price
and the number of whole shares, if any, withheld by the Company pursuant to
Section 5.7. The additional AO Option shall be exercisable at any time from the
date of grant to the expiration date of the Option to which the AO Option is
related.
Section 4.6 - Reservation of Rights
Nothing in this Plan or in any Stock Option Agreement hereunder
shall confer upon any Employee-Optionee any right to continue in the employ of
the Company or shall interfere with or restrict in any way the rights of the
Company, which are hereby expressly reserved, to discharge any Optionee at any
time for any reason whatsoever, with or without cause.
Section 4.7 - Adjustments in Outstanding Options
In the event that the outstanding shares of the stock subject to
Options are changed into or exchanged for a different number or kind of shares
of the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split-up, stock
dividend, or combination of shares, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares as to which all
outstanding Options, or portions thereof then unexercised, shall be exercisable,
to the end that after such event the Optionee's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in an
outstanding Option shall be made without change in the total price applicable to
the Option or the unexercised portion of the Option (except for any change in
the aggregate price resulting from rounding-off of share quantities or prices)
and with any necessary corresponding adjustment in Option price per share;
provided, however, that, in
-5-
the case of Incentive Stock Options, each such adjustment shall be made in such
manner as not to constitute a "modification" within the meaning of Section
424(h)(3) of the Code. Any such adjustment made by the Committee shall be final
and binding upon all Optionees, the Company and all other interested persons.
Section 4.8 - Merger, Consolidation, Acquisition, Liquidation or Dissolution
The Committee shall provide by the terms of each Option that,
upon or in connection with the merger or consolidation of the Company with or
into another corporation, the acquisition by another corporation or person of
all or substantially all of the Company's assets or 80% or more of the Company's
then outstanding voting stock or the liquidation or dissolution of the Company,
such Option shall be assumed or an equivalent option substituted by any
successor corporation of the Company. The Committee may also, in its absolute
discretion and on such terms and conditions as it deems appropriate, provide,
either by the terms of such Option or by a resolution adopted prior to the
occurrence of such merger, consolidation, acquisition, liquidation, or
dissolution, that, for some period of time prior to such event, such Option
shall be exercisable as to all shares covered thereby, notwithstanding anything
to the contrary in Section 4.3(a), Section 4.3(b), and/or any installment
provisions of such Option.
Section 4.9 - Stock Appreciation Rights
Stock appreciation rights may be granted, at the discretion of
the Committee, separately or concurrently with the grant of any option granted
under the Plan ("Companion Grant"). A stock appreciation right shall extend to
all or a portion of the shares covered by the Companion Grant. If a stock
appreciation right extends to less than all the shares covered by the Companion
Grant and if a portion of the option contained in the Companion Grant is
thereafter exercised, the number of shares subject to the unexercised stock
appreciation right shall be reduced only if and to the extent that the remaining
portion of the Option contained in the Companion Grant covers fewer shares than
the unexercised stock appreciation right would otherwise cover. A stock
appreciation right shall entitle the Optionee (subject to the conditions and
limitations set forth below), under surrender of a then exercisable portion of
the Option contained in the Companion Grant (subject to the maximum number of
shares to which the stock appreciation right extends), to receive payment of an
amount determined pursuant to subparagraph (b) of the following paragraph.
Stock appreciation rights shall be subject to the following
terms and to such other terms and conditions not Inconsistent with the Plan as
the Committee may determine:
(a) A stock appreciation right shall be exercisable by the
Optionee only at such time or times, and to the extent, that the Option
contained in the Companion Grant could have been exercised and only when the
fair market value of the stock subject to the Option contained in the Companion
Grant exceeds the exercise price of such option.
(b) Upon exercise of the stock appreciation right and surrender
of an exercisable portion of the Option contained in the Companion Grant, the
Optionee shall be entitled to receive payment of an amount (subject to (d)
below) determined by multiplying the difference obtained by subtracting the
option exercise price per share of Common Stock subject to the Companion Grant
from the fair market value of a share of Common Stock on the date of exercise of
the stock appreciation right, by the number of shares with respect to which the
stock appreciation right is exercised.
(c) The Committee, at its sole discretion, may settle the amount
determined in subparagraph (b) above solely in cash, solely in shares of Common
Stock (valued as determined in subparagraph (b) above), or partly in such shares
and partly in cash; provided, however, that in any event cash shall be paid in
lieu of fractional shares.
(d) The maximum amount per share which will be payable upon
exercise of a stock appreciation right shall be the option exercise price of the
Option contained in the Companion Grant.
(e) An Optionee may exercise a stock appreciation right only
during the third through twelfth business day following the Company's regular
public release of quarterly or annual financial summary statements
-6-
of sales and earnings.
Section 4.10 - Restricted Stock
Restricted Stock may be granted, at the discretion of the
Committee, separately or concurrently with the grant of any option under the
Plan. In any grant of Restricted Stock, the Committee may determine the time
and/or events which shall cause the Restricted Stock to vest and cease to be
forfeitable. If Restricted Stock is granted on conjunction with any option, the
Restricted Stock shall be canceled, on a share by share basis, upon exercise of
the related option, and the option will likewise terminate upon vesting of the
Restricted Stock. Restricted Stock may not be issued in connection with
Incentive Stock Options.
ARTICLE V
EXERCISE OF OPTIONS
Section 5.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he or she or a legal
representative thereof may exercise an Option granted to him or her, or any
portion thereof. After the death of the Optionee, any exercisable portion of an
Option may, prior to the time when such portion becomes unexercisable under
Section 4.4 or Section 4.7, be exercised by his or her personal representative
or by any person empowered to do so under the deceased Optionee's will or under
the then applicable laws of descent and distribution.
Section 5.2 - Partial Exercise
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
Section 4.4 or Section 4.7, such Option or portion thereof may be exercised in
whole or in part; provided, however that the Company shall not be required to
issue fractional shares and the Committee may, by the terms of the Option,
require any partial exercise to be with respect to a specified minimum number of
shares.
Section 5.3 - Manner of Exercise
An exercisable Option, or any exercisable portion thereof, may
be exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under Section 4.4 or Section 4.7:
(a) Notice in writing signed by the Optionee or other person
then entitled to exercise such Option or portion, stating that such Option or
portion is exercised, such notice complying with all applicable rules
established by the Committee; and
(b) (i) Full payment (in cash or by check) for the shares
with respect to which such Option
or portion is thereby exercised; or
(ii) Shares of any class of the Company's stock owned by
the Optionee duly endorsed for transfer to the Company with a
fair market value (as determinable under Section 4.2(b)) on the
date of delivery equal to the aggregate Option price of the
shares with respect to which such Option or portion is thereby
exercised; or
(iii) With the consent of the Committee, a full
recourse promissory note bearing interest
(at least such rate as shall then preclude the imputation of
interest under the Code or any successor
provision) and payable upon such terms as may be prescribed by
the Committee. The Committee
-7-
may also prescribe the form of such note and the security to be
given for such note. No Option may, however, be exercised by
delivery of a promissory note or by a loan from the Company when
or where such loan or other extension of credit is prohibited by
law; or
(iv) Any combination of the consideration provided in
the foregoing subsections (i), (ii),
and (iii); and
(c) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance Including, without limitation, placing legends on share certificates
and issuing stop-transfer orders to transfer agents and registrars; and
(d) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.
Section 5.4 - Conditions to Issuance of Stock Certificates
The shares of stock issuable and deliverable upon the exercise
of an Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the Company.
The Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The completion of any registration or other qualification of
such shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body, which the Committee shall, in its absolute discretion, deem necessary or
advisable; and
(b) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(c) The payment to the Company of all amounts which it is
required to withhold under federal, state, or local law in connection with the
exercise of the Option; and
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience.
Section 5.5 - Rights as Shareholders
The holders of Options shall not be, nor have any of the rights
or privileges of, shareholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
holders.
Section 5.6 - Transfer Restrictions
The Committee, in its absolute discretion, may impose such
restrictions on the transferability of the shares purchasable upon the exercise
of an Option as it deems appropriate. Any such restriction shall be set forth in
the respective Stock Option Agreement and may be referred to on the certificates
evidencing such shares. The Committee may require the Director, Officer, or
Employee to give the Company prompt notice of any disposition of shares of
stock, acquired by exercise of an Incentive Stock Option, within two years from
the date of granting such Option or one year after the transfer of such shares
to such Director, Officer, or Employee. The Committee may direct that the
certificates evidencing shares acquired by exercise of an Option refer to such
requirement to give prompt notice of disposition.
-8-
Section 5.7 - Withholding Tax
Should any amount be required to be withheld for payment of
taxes under the code from an Optionee with respect to the exercise of any
Option, Optionee in his or her discretion may pay such withholding tax in shares
of the Company's common stock, at the fair market value of such common stock on
the date of payment.
Section 5.8 - Reports
The Company shall provide to each Optionee a copy of the
Company's annual report when released to the Company's stockholders.
ARTICLE VI
ADMINISTRATION
Section 6.1 - Stock Option Committee
The Stock Option Committee shall consist of at least two
Directors, appointed by and holding office at the pleasure of the Board.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee shall be filled by the Board.
After the Company's common stock becomes registered under the
Securities Exchange Act of 1934, as amended, unless otherwise provided by the
Board of Directors, no Options, stock appreciation rights or Restricted Stock
may be granted to any member of the Stock Option Committee. No person shall be
eligible to serve on the Stock Option Committee unless he is then a
"disinterested person" within the meaning of Rule 16b-3 which has been adopted
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, if and as such Rule is then in effect. This paragraph may be waived for
successive six (6) month periods by the Board of Directors.
Section 6.2 - Duties and Powers of Committee
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the Options and to adopt or amend
such rules for the administration, interpretation and application of the Plan as
are consistent therewith and to interpret, amend or revoke any such rules. The
Committee may accelerate the exercise date of any option and determine the right
of any person to exercise the rights on behalf of any Optionee. Any such
interpretations and rules in regard to Incentive Stock Options shall be
consistent with the basic purpose of the Plan to grant "Incentive stock options"
within the meaning of Section 422 of the Code. In its absolute discretion, the
Board may at any time and from time to time exercise any and all rights and
duties of the Committee under the Plan.
Section 6.3 - Majority Rule
The Committee shall act by a majority of its members in office.
The Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
Section 6.4 - Compensation; Professional Assistance; Good Faith Actions
Members of the Committee shall receive such compensation for
their services as members as may be determined by the Board. All expenses and
liabilities Incurred by members of the Committee in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the Company and its
Officers and Directors shall be entitled to rely upon the advice, opinions, or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Optionees, the Company, and all other interested persons. No member of
the Committee shall be
-9-
personally liable for any action, determination, or interpretation made in good
faith with respect to the Plan or the Options, and all members of the Committee
shall be fully protected by the Company in respect to any such action,
determination, or interpretation.
ARTICLE VII
OTHER PROVISIONS
Section 7.1 - Options Not Transferable
No Option or interest or right therein or part thereof shall be
liable for the debts, contracts, or engagements of the Optionee or his
successors in interest or shall be subject to disposition by transfer,
alienation, or any other means whether such disposition be voluntary or
involuntary or by operation of law, by judgment, levy, attachment, garnishment,
or any other legal or equitable proceedings (Including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided,
however, that nothing in this Section 7.1 shall prevent transfers by will or by
the applicable laws of descent and distribution.
Section 7.2 - Amendment, Suspension or Termination of the Plan
The Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time or from time to time by the Board
or the Committee. Neither the amendment, suspension, nor termination of the Plan
shall, without the consent of the holder of the Option, alter or impair any
rights or obligations under any Option theretofore granted. No Option may be
granted during any period of suspension nor after termination of the Plan, and
in no event may any Option be granted under this Plan after the first to occur
of the following events:
(a) The expiration of ten years from the date the Plan is
adopted; or
(b) The expiration of ten years from the date the Plan is
approved by the Company's shareholders under Section 7.3.
Section 7.3 - Approval of Plan by Shareholders
This Plan will be submitted for the approval of the Company's
shareholders within 12 months after the date of the Board's initial adoption of
the Plan. Incentive Stock Options may be granted prior to such shareholder
approval; provided, however, that such Incentive Stock Options shall not be
exercisable prior to the time when the Plan is approved by the shareholders;
provided, further, that if such approval has not been obtained at the end of
said 12-month period, all Incentive Stock Options previously granted under the
Plan shall thereupon be canceled and become null and void.
Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans
The adoption of this Plan shall not affect any other
compensation or Incentive plans in effect for the Company. Nothing in this Plan
shall be construed to limit the right of the Company (a) to establish any other
forms of Incentives or compensation for employees of the Company or (b) to grant
or assume options otherwise than under this Plan in connection with any proper
corporate purpose, Including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation, or otherwise of the business, stock, or assets of any
corporation, firm, or association.
Section 7.5 - Titles
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of the Plan.
* * * *
-10-
I hereby certify that the foregoing Plan was duly adopted by the
Board of Directors and Stockholders of Mendocino Partners, Inc. on April 20,
1994.
Jehu Hand
Secretary
Corporate Seal
* * * *
-11-
1994 STOCK OPTION PLAN OF MENDOCINO PARTNERS, INC.
[FORM OF] STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is made by and
between Mendocino Partners, Inc., a Delaware corporation (the "Company"), and
_______ (the "Optionee") as of the date set forth on the signature page hereto.
R E C I T A L S
A. The Board of Directors of the Company (the "Board") has
established the 1994 Stock Option Plan of the Company (the "Plan"), for the
purpose of providing to Employees and Directors of the Company and others an
opportunity to acquire shares of the Company's $.001 par value common stock (the
"Shares"); and
B. The Board of Directors or the Stock Option Committee of the
Company's Board of Directors (the "Committee") appointed to administer the Plan
has determined that it would be to the advantage and best interest of the
Company and its shareholders to grant the non-qualified stock option, Incentive
stock option or restricted stock grant provided for herein (the "Option") to the
Optionee as an inducement to remain in the service of the Company and as an
Incentive for Increased efforts during such service, and has advised the Company
thereof and instructed it to issue the Option.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they
shall have the meaning specified below unless the context clearly indicates to
the contrary. Capitalized terms used herein and not otherwise defined shall have
the meaning set forth in the Plan. The masculine pronoun shall Include the
feminine and neuter, and the singular the plural, where the context so
indicates.
Section 1.1 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.2 - Company
"Company" shall mean Mendocino Partners, Inc.. In addition,
"Company" shall mean any corporation assuming, or issuing new employee stock
options in substitution for the Option and Incentive Stock Options (as defined
in Section 1.7 of the Plan), outstanding under the Plan, in a transaction to
which Section 425(a) of the Code applies.
Section 1.3 - Option
"Option" shall mean the option to purchase $.001 par value
common stock of the Company granted under this Agreement.
Section 1.4 - Plan
"Plan" shall mean the 1994 Stock Option Plan of the Company.
Section 1.5 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.6 - Securities Act
"Securities Act" shall mean the Securities Act of 1933, as amended.
ARTICLE II
GRANT OF OPTION
Section 2.1 - Grant of Option
In consideration of the Optionee's agreement to render faithful
and efficient services to the Company and for other good and valuable
consideration, on the date set forth on the Signature Page hereof (the "Date of
Grant"), the Company irrevocably grants to the Optionee the option to purchase
any part or all of an aggregate of the number of Shares set forth on the
Signature Page hereof and upon the terms and conditions set forth in this
Agreement.
Section 2.2 - Purchase Price
The purchase price of the Shares covered by the Option shall be
the amount set forth on the Signature Page hereof and shall be without
commission or other charge (the "Purchase Price").
Section 2.3 - Reservation of Rights
Nothing in the Plan or in this or any Stock Option Agreement
shall confer upon the Optionee any right to continue in the employ of the
Company or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company and its Subsidiaries, which are hereby expressly reserved,
to discharge the Optionee at any time for any reason whatsoever, with or without
cause.
Section 2.4 - Adjustments in Option
In the event that the outstanding Shares subject to the Option
are changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split up, stock dividend, or
combination of shares, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares as to which the Option, or portions
thereof then unexercised, shall be exercisable, to the end that after such event
the Optionee's proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in the Option shall be made without
change in the total price applicable to the unexercised portion of the Option
(except for any change in the aggregate price resulting from rounding-off of
share quantities or prices) and with any necessary corresponding adjustment in
the Purchase Price. Any such adjustment made by the Committee shall be final and
binding upon the Optionee, the Company, the Subsidiaries and all other
interested persons.
-2-
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 - Commencement of Exercisability
(a) The Option shall become exercisable in cumulative
installments as set forth on the signature page hereto.
(b) Excluding Saturdays, Sundays, and nationally recognized
holidays, if the Optionee is absent from employment for any reason other than
vacation for an aggregate period exceeding sixty (60) days during the annual
period between the Date of Grant and the First Anniversary Date or any
successive Anniversary Date and the following Anniversary Date, then the latter
Anniversary Date shall be postponed by the number of all such days of absence.
This paragraph (b) shall not apply to Optionees who are Directors but not
Employees of the Company.
Section 3.2 - Duration of Exercisability
The installments provided for in Section 3.1 are cumulative.
Each such installment which becomes exercisable pursuant to Section 3.1 shall
remain exercisable until the expiration date set forth on the signature page of
this Agreement or until it becomes unexercisable under the Plan, whichever is
sooner.
Section 3.3 - Assumption of Option; Acceleration of Exercisability
In the event of the merger or consolidation of the Company with
or into another corporation, or the acquisition by another corporation or person
of all or substantially all of the Company's assets or eighty percent (80%) or
more of the Company's then outstanding voting stock, or the liquidation or
dissolution of the Company, such Option shall be assumed or an equivalent option
substituted by any successor corporation of the Company. The Company undertakes
to make reasonable and adequate provision for such assumption or substitution of
the Option upon or in connection with such merger, consolidation, acquisition,
liquidation, or dissolution. The Committee may also, in its absolute discretion
and upon such terms and conditions as it deems appropriate, by resolution
adopted prior to such event, provide that at some time prior to the effective
date of such event this Option shall be exercisable as to all of the Shares
covered hereby, notwithstanding that this Option may not yet have become fully
exercisable under Section 3.1.
Section 3.4 - Option Not Transferable
Neither the Option nor any interest or right therein or part
thereof shall be liable for the debts, contracts, or engagements of the Optionee
or his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment, or any other means
whether such disposition be voluntary or involuntary or by operation of law, by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (Including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 3.5
shall not prevent transfers by will or by the applicable laws of descent and
distribution.
ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he or she may exercise
the Option or any portion thereof. After the death of the Optionee, any
exercisable portion of the Option may, prior to the time when the Option becomes
unexercisable, be exercised by his or her personal representative or by any
person empowered to do so
-3-
under the Optionee's will or under the then applicable laws of descent and
distribution.
Section 4.2 - Partial Exercise
Any exercisable portion of the Option or the entire Option, if
then wholly exercisable, may be exercised in whole or in part at any time prior
to the time when the Option or portion thereof becomes unexercisable under the
Plan; provided, however, that each partial exercise shall be for not less than
one hundred (100) Shares (or minimum installment set forth in Section 3.1, if a
smaller number of Shares) and shall be for whole Shares only.
Section 4.3 - Manner of Exercise
The Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary or the Secretary's office of all of the
following prior to the time when the Option or such portion becomes
unexercisable under the Plan:
(a) Notice in writing signed by the Optionee or the other person
then entitled to exercise the Option or portion thereof, stating that the Option
or portion thereof is thereby exercised, such notice complying with all
applicable rules established by the Committee; and
(b) (i) Full payment (in cash or by check) for the Shares with
respect to which such Option or
portion is exercised; or
(ii) Shares of any class of the Company's stock owned by the
Optionee duly endorsed for transfer to the Company with a fair
market value on the date of delivery equal to the aggregate
Option price of the Shares with respect to which such Option or
portion is thereby exercised; or
(iii) With the consent of the Committee, a full recourse
promissory note bearing interest (at least such rate as shall
then preclude the imputation of interest under the Code or any
successor provision) and payable upon such terms as may be
prescribed by the Committee. The Committee may also prescribe
the form of such note and the security to be given for such
note. No Option may, however, be exercised by delivery of a
promissory note or by a loan from the Company when or where such
loan or other extension of credit is prohibited by law; or
(iv) Any combination of the consideration provided in the
foregoing subsections (i), (ii), and (ii);
and
(c) Full payment to the Company of all amounts which, under
federal, state or local law, it is required to withhold upon exercise of the
Option; and
(d) In the event the Option or portion thereof shall be
exercised pursuant to Section 4.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option.
Section 4.4 - Conditions to Issuance of Stock Certificates
The Shares deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued Shares or
issued Shares which have then been reacquired by the Company. Such Shares shall
be fully paid and non-assessable. The Company shall not be required to issue or
deliver any certificate or certificates for Shares purchased upon the exercise
of the Option or portion thereof prior to fulfillment of all of the following
conditions:
(a) The completion of any registration or other qualification of
such Shares under any state or federal law or under rulings or regulations of
the Securities and Exchange Commission or of any other governmental regulatory
body, which the Committee shall, in its absolute discretion, deem necessary or
advisable;
-4-
(b) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(c) The payment to the Company of all amounts which, under
federal, state, or local law, it is required to withhold upon exercise of the
Option; and
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish for
reasons of administrative convenience.
It is understood that the Shares deliverable upon exercise of the Option have
been registered under the Securities Act, and the Company shall use its best
efforts to keep such registration current.
Section 4.5 - Rights as Stockholder
The holder of the Option shall not be, nor have any of the
rights or privileges of, a stockholder of the Company in respect of any Shares
purchasable upon the exercise of any part of the Option unless and until
certificates representing such Shares shall have been issued by the Company to
such holder.
ARTICLE V
OTHER PROVISIONS
Section 5.1 - Administration
The Committee shall have the power to interpret the Plan and
this Agreement and to adopt such rules for the administration, interpretation
and application of the Plan as are consistent therewith and to interpret or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee or the Special Committee in good faith
shall be final and binding upon the Optionee, the Company, the Subsidiaries and
all other interested persons. No member of the Committee or the Special
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Option. In its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan and this
Agreement.
Section 5.2 - Shares to Be Reserved
The Company shall at all times during the term of the Option
reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of this Agreement.
Section 5.3 - Notices
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Optionee shall be addressed to him or her at the
address set forth on the Signature Page hereof. By a notice given pursuant to
this Section 5.3, either party may hereafter designate a different address for
delivery of notices. Any notice which is required to be given to the Optionee
shall, if the Optionee is then deceased, be given to the Optionee's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 5.3. Any notice shall be
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid and deposited (with postage prepaid) in a post office or
branch post office regularly maintained by the United States Postal Service.
-5-
Section 5.4 - Titles
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
Section 5.5 - Construction
This Agreement shall be administered, interpreted, and enforced
under the laws of the State of Delaware.
-6-
SIGNATURE PAGE
1994 STOCK OPTION PLAN OF MENDOCINO PARTNERS, INC.
Incentive Stock Option
In tandem with stock appreciation right
No stock appreciation right
Non-Qualified Option
AO Option
In tandem with stock appreciation right No stock
appreciation right In tandem with Restricted Stock No
Restricted Stock
Restricted stock grant without accompanying option
Purchase Price:
Number of Shares:
Vesting: Immediate as to the entire option.
Expiration:
I have read the Stock Option Agreement indicated above which was
adopted for use in connection with the 1994 Stock Option Plan. As Optionee, I
hereby agree to all of the terms of the Agreement.
Date of Grant: ___________
Optionee Name
Address
Optionee Social Security Number or Taxpayer Identification
Number:
Optionee Signature
The Company hereby agrees to all of the terms of the Agreement.
MENDOCINO PARTNERS, INC.
By:
Its: