ALANCO ENVIRONMENTAL RESOURCES CORPORATION
1998 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, terms have the meaning hereinafter set forth unless the
context should clearly indicate the contrary:
(a) "Board" shall mean the Board of Directors of the Company, or the
Executive Committee of such Board;
(b) "Committee" shall mean the Administrative Committee appointed by the
Board to oversee the administration of this Plan;
(c) "Company" shall mean Alanco Environmental Resources Corporation, an
Arizona corporation;
(d) "Director" shall mean a member of the Board;
(e) "Employee" shall mean any person, including officers and directors,
employed by the Company who in the judgment of the Committee has the ability to
positively affect the profitability and economic well-being of the Company.
Part-time employees, independent contractors, consultants and advisors
performing bonafide services to the Company shall also be deemed employees
solely for the purpose of participation under the Plan. The payment of a
director's fee by the Company shall not be sufficient to constitute
"employment" by the Company;
(f) "Fair market value" shall mean the average of the closing price for
ten consecutive trading days at which the Stock is listed in the NASDAQ
quotation system ending on the day prior to the date an Option is granted
hereunder;
(g) "Grant" means the issuance of an Option hereunder to an Optionee
entitling such Optionee to acquire Stock on the terms and conditions set forth
in a Stock Option Agreement to be entered into with the Optionee. "Grant" may
also include a direct grant of stock;
(h) "Incentive Stock Option" shall mean a compensatory Option provided to
an employee of the Company giving him or her the right to purchase Stock at a
predetermined price under a plan that meets certain Internal Revenue Code
requirements and involves registered stock;
(i ) "Non-Statutory Option" shall mean all Options which are not Incentive
Stock Options;
(j) "Option" shall mean the right granted to an Optionee to acquire Stock
of the Company pursuant to the Plan;
(k) "Optionee" shall mean an Employee of the Company to whom a Grant
hereunder has been made;
(l) "Plan" shall mean the Alanco Environmental Resources Corporation 1998
Stock Option Plan, the terms of which are herein set forth;
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Page 2
(m) "Stock" shall mean the common stock of the Company or, in the event
the outstanding shares of stock are hereafter changed into or exchanged for
shares of different stock or securities of the Company or some other
corporation, such other stock or securities;
(n) "Stock Option Agreement" shall mean the agreement between the Company
and an Optionee under which an Optionee may acquire Stock pursuant to the Plan.
ARTICLE II
THE PLAN
2.1 NAME. The plan shall be known as the "Alanco Environmental
Resources Corporation 1998 Stock Option Plan."
2.2 PURPOSE. The purpose of the Plan is to advance the business and
development of the Company and its shareholders by affording to the Employees
of the Company the opportunity to acquire an equity interest in the Company by
the grant of Options to such persons under the terms herein set forth. By
doing so, the Company seeks to motivate, retain and attract highly competent,
highly motivated personnel whose judgment, initiative, leadership and continued
efforts will contribute to the success of the Company. The Options to be
granted hereunder are either "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, or "Non-Statutory
Stock Options". However, at no time will the Plan be considered or operate as a
"tandem" option plan or will any Employee be subjected to a tandem option
provision.
2.3 EFFECTIVE DATE. The Plan shall become effective upon its adoption
by the Board of the Company. Thereafter, the Plan shall be submitted to the
shareholders of the Company for approval within 12 months after the date said
Plan is adopted by the Board.
2.4 TERMINATION DATE. The Plan shall terminate ten (10) years from the
date the Plan is adopted by the Board of the Company and at such time any
Options granted hereunder shall be void and of no further force or effect.
ARTICLE III
PARTICIPANTS
Any Employee of the Company, or of any of its wholly owned subsidiaries,
shall be eligible to be granted an Option under the Plan. The Committee shall
adopt criteria pursuant to which Options shall be granted. The Committee may
grant Options to any eligible Employee in accordance with such determinations
as the Committee may, from time to time, in its sole discretion make. A
Director of the Company or of a subsidiary who is not also an employee of the
Company will not be eligible to receive an "Incentive Stock Option" pursuant to
the Plan.
ARTICLE IV
ADMINISTRATION
4.1 DUTIES AND POWERS OF THE COMMITTEE. The Plan shall be administered
by the Committee. Subject to the express provisions of the Plan, the Committee
shall have the sole discretion and authority to determine from among eligible
1998 STOCK OPTION PLAN
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persons those to whom and the time or times at which Options may be granted and
the number of shares of Stock to be subject to each Option. Subject to the
express provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations related to it and to determine the details and provisions of each
Stock Option Agreement and to make all other determinations necessary or
advisable in the administration of the Plan.
4.2 RECORDS OF PROCEEDINGS. The Committee shall maintain written
minutes of its actions which shall be maintained among the records of the
Company.
4.3 MAJORITY. A majority of the members of the Committee shall
constitute a quorum and any action taken by a majority present at such meeting
at which a quorum is present or any action taken without a meeting evidenced by
a writing executed by all members of the Committee shall constitute the action
of the Committee.
4.4 COMPANY ASSISTANCE. The Company shall supply full and timely
information to the Committee in all matters relating to eligible Optionees,
their status, death, retirement, disability and such other pertinent facts as
the Committee may require. The Company shall furnish the Committee with such
clerical and other assistance as is necessary in the performance of its duties.
All expenses of the Committee shall be paid by the Company.
4.5 COMPOSITION OF THE COMMITTEE. The Committee shall consist of up to
three (3) individuals appointed by the Board from among its members.
Appointment to the Committee shall be for a term of one (1) year or until new
individuals are appointed to the Committee by the Board. Any individual
designated and serving as a member of the Committee shall be entitled to
indemnification in relation to such service by the Company to the fullest
extent called for or permitted by Article X of the Bylaws of the Company.
4.6 COMMITTEE AUTHORITY. If the Committee deems it necessary or in the
best interest of the Company or its shareholders, the Committee may impose
restrictions of the subsequent transferability of Stock issued pursuant to
Options to be granted hereunder. In the event of the imposition of any such
conditions, the Stock of the Company to be issued pursuant to the exercise of
an Option shall have any such restrictions prominently displayed as a legend on
such certificate.
ARTICLE V
SHARES OF STOCK SUBJECT TO THE PLAN
5.1 LIMITATION. Subject to adjustment pursuant to the provisions of
Section 5.3 hereof, the number of shares of Stock which may be issued and sold
hereunder shall not exceed 750,000 shares. The Company shall take such action
as necessary to reserve the aforesaid number of shares for issuance pursuant to
the Plan.
5.2 OPTIONS GRANTED UNDER THE PLAN. Shares of stock with respect to
which an Option is granted hereunder, but which lapses prior to exercise, shall
be considered available for grant hereunder. Therefore, if Options granted
hereunder shall terminate for any reason without being wholly exercised, new
Options may be granted hereunder covering the number of shares to which such
terminated Options related.
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5.3 ANTI-DILUTION. In the event the Stock subject to Options hereunder is
changed into or exchanged for a different number or kind of stock or other
securities of the Company or of another organization by reason of merger,
consolidation or reorganization, recapitalization, reclassification,
combination of shares, stock split or stock dividend;
(a) The aggregate number of shares of Stock subject to Options which may
be granted hereunder shall be adjusted appropriately;
(b) Rights under outstanding Options granted hereunder, both as to the
number of subject shares and the Option price, shall be adjusted appropriately;
(c) Where dissolution or liquidation of the Company or any merger or
consolidation in which the Company is not a surviving corporation is involved,
each outstanding Option shall terminate and the Optionee holding such Option
shall have the right immediately prior to such dissolution, liquidation, merger
or combination to exercise his Option, in whole or in part, to the extent that
it shall not have been exercised without regard to any installment exercise
provision.
The manner of application of the foregoing provision shall be determined
solely by the Committee and any such adjustment may provide for the elimination
of fractional share interests.
ARTICLE VI
6.1 OPTIONS. Each Option granted hereunder shall be evidenced by
minutes of a meeting of or the written consent of the Committee and by a
written Stock Option Agreement dated as of the date of grant and executed by
the Company and the Optionee, which agreement shall set forth such terms and
conditions as may be determined by the Committee consistent with the Plan.
6.2 PARTICIPATION, LIMITATIONS.
(a) Options qualifying as "Incentive Stock Options" under Section 422 of
the Internal Revenue Code, as amended, may be granted from time to time to
Employees of the Company to purchase shares of the Company's Stock.
(1) The maximum number of shares for which an Incentive Stock Option
or Options may be granted under the Plan to any one Employee shall be 100,000.
(b) Options defined as "Non-Statutory Stock Options" which do not satisfy
the requisites of Section 422 of the Internal Revenue Code, as amended, may
also be granted under this Plan.
6.3 OPTION PRICE. The per share Option price for the stock subject to
each Option shall be determined by the Committee, but the per share exercise
price shall not be less than the Fair Market Value of the Stock on the date the
Option is granted.
6.4 OPTION PERIOD. Each Option granted hereunder must be granted within
ten (10) years from the effective date of the Plan. The period for the
exercise of each Option shall be determined by the Committee, but in no
instance shall such period exceed ten (10) years from the date of grant of the
Option. The Committee may prescribe such period after the grant of an Option
which must expire before such Option may be exercised as the Committee deems
appropriate.
1998 STOCK OPTION PLAN
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6.5 OPTION EXERCISE.
(a) Options granted hereunder may not be exercised until and unless the
Optionee shall meet the conditions precedent established by the Committee for
the Employees.
(b) Options may be exercised by Employees for whole shares only.
Optionees may exercise their Option in whole at any time, or in part from time
to time in each year on a cumulative basis with any portion not exercised to be
carried over for exercise in subsequent years. Options shall be exercised by
written notice of intent to exercise the Option with respect to a specified
number of shares delivered to the Company at its principal office and payment
in full to the Company at said office of the amount of the Option price for the
number of shares with respect to which the Option(s) are then being exercised.
(c) No person to whom Incentive Stock Options are granted hereunder shall
receive Options, first exercisable during any single calendar year, for Stock,
the fair market value of which (determined at the time of the grant of the
Options) exceeds $100,000.
(d) No Option may be exercised by any Optionee unless a registration
statement, such as form S-8, covering the Stock subject thereto has been filed
with and declared effective by the Securities and Exchange Commission and an
appropriate registration or exemption therefrom, is in effect or available in
the state of residence of the exercising Optionee.
6.6 NON-TRANSFERABILITY OF OPTION. No Option or any right relative
thereto shall be transferred by an Optionee otherwise than by will or by the
laws of descent and distribution. During the lifetime of an Optionee, the
Option shall be exercisable only by him or her.
6.7 EFFECT OF DEATH OR OTHER TERMINATION OF EMPLOYMENT.
(a) If the Employee's relationship with the Company shall be terminated,
with or without cause, or by the act of the Employee, the Optionee's right to
exercise such Incentive Stock Options shall terminate and all rights thereunder
shall cease three (3) months after the date on which such person's association
is terminated. Provided however, that if the Optionee shall die or become
permanently and totally disabled while employed by the Company, as solely
determined by the Committee in accordance with its policies, then either his or
her personal representatives or a transferee under the Optionee's will or
pursuant to the laws of descent and distribution, or the disabled Optionee may
exercise the Incentive Stock Options in full one (1) year from the date of such
death or disability. In the case of an Optionee's retirement in accordance
with the Company's established retirement policy, such Incentive Stock Options
shall remain exercisable by the Optionee for three (3) months from the date of
such retirement.
(b) The exercise schedule for Non-Statutory Stock Options following
termination, death or total and permanent disablement of the Optionee will be
determined by the Committee at the time of grant.
(c) No transfer of an Option by the Optionee by will or the laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with a written notice thereof and an
authenticated copy of the will and/or such other evidence as the Committee may
1998 STOCK OPTION PLAN
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deem necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions of such Option.
6.8 RIGHTS AS A SHAREHOLDER/VESTING OF OPTIONS.
(a) An Optionee or a transferee of an Option shall have no rights as a
shareholder of the Company with respect to any shares subject to any
unexercised Options.
(b) Incentive Stock Options are exercisable once vested. Twenty-five
percent (25%) of the shares issuable under the Incentive Stock Options shall
vest six months from date of Grant provided that the Optionee has remained an
Employee of the Company for not less than six months from date of Grant,
twenty-five percent (25%) of the shares issuable under the Incentive Stock
Options shall vest one year from date of Grant provided that Optionee has
remained an Employee of the Company for not less than one year from the date of
Grant, and the remaining fifty percent (50%) of the shares issuable under the
Incentive Stock Options shall vest two years from date of Grant provided that
Optionee has remained an Employee of the Company for not less than two years
from the date of Grant. Otherwise the options shall lapse.
(c) Non-Statutory Stock Options are exercisable once vested. The vesting
schedule for Non-Statutory Stock Options will be determined by the Committee
when granted.
6.9 REQUIRED FILINGS. An Optionee to whom an Option is granted under
the terms of the Plan is required to file appropriate reports with the Internal
Revenue Service. As a condition of the receipt of an Option hereunder,
Optionee shall agree to make necessary filings with the Internal Revenue
Service. The Committee shall assist and cooperate with Optionee by providing
the necessary information required for compliance of this condition.
ARTICLE VII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder, or
any portion thereof, prior to the obtaining of any approval or clearance from
any federal or state governmental agency which the Committee shall, in its sole
discretion, determine to be necessary or advisable.
ARTICLE VIII
TERMINATION, AMENDMENT, OR MODIFICATION OF THE PLAN
The Board may at any time, upon recommendation of the Committee,
terminate, and may at any time and from time to time and in any respect amend
or modify the Plan. Provided, however, if the Plan has been submitted to and
approved by the shareholders of the Company no such action by the Board may be
taken without approval of the majority of the shareholders of the Company
which: (a) increases the total number of shares of Stock subject to the Plan,
except as contemplated in Section 5.3 hereof; (b) changes the manner of
determining the Option price; or (c) withdraws the administration of the Plan
from the Committee.
ARTICLE IX
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EMPLOYMENT
9.1 EMPLOYMENT. Nothing in the Plan or any Option granted hereunder or
in any Stock Option Agreement shall confer upon an Employee receiving such
Option or Stock Option Agreement the status as an employee of the Company.
Further, nothing in the Plan or any Option granted hereunder shall in any
manner create in any Optionee the right to continue their relationship with the
Company or create any vested interest in such relationship, including
employment.
9.2 OTHER COMPENSATION PLANS. The adoption of the Plan shall not effect
any other stock option, incentive, or other compensation plan in effect for the
Company or any of its subsidiaries, nor shall the Plan preclude the Company or
any subsidiary thereof from establishing any other forms of incentive or other
compensation for employees or non-employee Directors of the Company, or any
subsidiary thereof.
9.3 PLAN EFFECT. The Plan shall be binding upon the successors and
assigns of the Company.
9.4 TENSE. When used herein nouns in the singular shall include the
plural.
9.5 HEADINGS OF SECTIONS ARE NOT PART OF THE PLAN. Headings of articles
and sections hereof are inserted for convenience and reference and constitute
no part of the Plan.
As approved by the Shareholders on November 6, 1998.