THE SOURCE COMPANY
1995 INCENTIVE STOCK OPTION PLAN
1. Purpose of the Plan
The Source Company 1995 Incentive Stock Option Plan ("Plan") is
intended to provide additional incentive to certain valued and trusted employees
of The Source Company, a Missouri corporation (the "Company"), by encouraging
them to acquire shares of the $.01 par value common stock of the Company (the
"Stock") through options to purchase Stock granted under the Plan ("Options").
The purpose for granting such Options and making the purchase of the Stock
possible is to increase the proprietary interest of such employees in the
business of the Company and provide them with an increased personal interest in
the continued success and progress of the Company. The intended result is to
promote the interests of both the Company and its shareholders.
Options granted under the Plan are intended to qualify as "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). Each employee granted an Option
will receive and be required to accept a Stock Option Agreement with the Company
(the "Option Agreement"), which sets forth the terms and conditions of the
Option, in accordance with this Plan.
2. Administration of Plan
The Plan will be administered by a Stock Option Committee ("Option
Committee") appointed by the Board of Directors of the Company ("Board"), to be
composed of not less than three (3) members. Each member of the Option Committee
shall be: (i) a member of the Board; (ii) not eligible to receive any Options
under this Plan; and (iii) a "disinterested person" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934 or any successor rule or
regulation. Each member of the Option Committee shall serve at the pleasure of
the Board. Any vacancy occurring in the membership of the Option Committee shall
be filled by appointment by the Board. If the Board has a Compensation Committee
and its members meet the above requirements, at the discretion of the Board, the
Compensation Committee may concomitantly be the Option Committee.
The Option Committee shall have the sole power:
(a) subject to the provisions of the Plan, to determine the terms and
conditions of all Options; to construe and interpret the Plan and Options
granted under it; to determine the time or times an Option may be exercised, the
number of shares as to which an Option may be exercised at any one time, and
when an Option may terminate; to establish, amend and revoke rules and
regulations relating to the Plan and its administration; and to correct any
defect, supply any omission, or reconcile any inconsistency in the Plan, or in
any Option Agreement, in a manner and to the extent it shall deem necessary, all
of which determinations and interpretations made by the Committee shall be
conclusive and binding on all Optionees and on their legal representatives and
beneficiaries; and
(b) to determine all questions of policy and expediency that may arise
in the administration of the Plan and generally exercise such powers and perform
such acts as are deemed necessary or expedient to promote the best interests of
the Company.
3. Shares Subject to the Plan
Subject to the provisions of paragraph 13, the Stock that may be issued
pursuant to Options granted under the Plan shall not exceed in the aggregate Six
Hundred Thirty Thousand (630,000) shares of $.01 par value common stock of the
Company. If any Options granted under the Plan terminate, expire or are
surrendered without having been exercised in full, the number of shares of Stock
not purchased under such Options shall be available again for the purpose of the
Plan. The Stock to be offered for purchase upon the grant of an Option may be
authorized but unissued Stock or Stock previously issued and outstanding and
reacquired by the Company.
4. Persons Eligible for Options
All employees of the Company who are not members of the Option
Committee shall be eligible to receive the grant of Options under the Plan. The
Option Committee shall determine the employees to whom Options shall be granted,
the time or times such Options shall be granted, the number of shares to be
subject to each Option and the times when each Option may be exercised. The
Option Committee shall seek information, advice and recommendations from
management to assist the Option Committee in its independent determination as to
the employees to whom Options shall be granted. An employee who has been granted
an Option (an "Optionee"), if he or she is otherwise eligible, may be granted
additional Options.
5. Purchase Price
The purchase price of each share of Stock covered by each Option
("Purchase Price") shall not be less than one hundred percent (100%) of the Fair
Market Value Per Share (as defined below) of the Stock on the date the Option is
granted. However, if and when an Option is granted the Optionee receiving the
Option owns or will be considered to own, by reason of Section 424(d) of the
Code, more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company, the purchase price of the Stock covered by the
Option shall not be less than one hundred and ten percent (110%) of the Fair
Market Value Per Share of the Stock on the date the Option is granted.
"Fair Market Value Per Share" of the Stock shall mean: (i) if the Stock
is traded only otherwise than on a securities exchange and is quoted on the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"), the closing quoted selling price of the Stock on the date of grant
of the Option, as reported by the Wall Street Journal; (ii) if the Stock is
admitted to trading on a securities exchange, the closing quoted selling price
of the Stock on the date of grant of the Option, as reported in the Wall Street
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Journal; or (iii) if the Stock is traded only otherwise than on a securities
exchange and is not quoted on NASDAQ, the closing quoted selling price of the
Stock on the date of grant of the Option as quoted in the "pink sheets"
published by the National Daily Quotation Bureau. In any case, if there were no
sales of the Stock on the date of the grant of an Option, the Fair Market Value
Per Share shall be determined by the Option Committee in accordance with Section
20.2031-2 of the Federal Estate Tax Regulations.
6. Duration of Options
Any outstanding Option and all unexercised rights thereunder shall
expire and terminate automatically upon the earliest of: (i) the cessation of
the employment or engagement of the Optionee by the Company for any reason other
than retirement (under normal Company policies), death or disability; (ii) the
date which is three months following the effective date of the Optionee's
retirement from the Company's service; (iii) the date which is one year
following the date on which the Optionee's service with the Company ceases due
to death or disability; (iv) the date of expiration of the Option determined by
the Option Committee at the time the Option is granted and specified in such
Option; or (v) the tenth (10th) annual anniversary date of the granting of the
Option, or, if when an Option is granted the Optionee owns (or would be
considered to own by reason of Section 424(d) of the Code) more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
then on the fifth (5th) such anniversary. However, the Committee shall have the
right, but not the obligation, to extend the expiration of the Options held by
an Optionee whose service with the Company has ceased for any reason to the end
of their original terms, notwithstanding that such Options may no longer qualify
as ISOs under the Code.
7. Exercise of Options
(a) An Option may be exercisable in installments or otherwise upon such
terms as the Committee shall determine when the Option is granted.
(b) No Option will be exercisable (and any attempted exercise will be
deemed null and void) if such exercise would create a right of recovery for
"short-swing profits" under Section 16(b) of the Securities Exchange Act of
1934.
(c) No Option will become exercisable if the exercisability of such
Option would cause the aggregate fair market value (as determined at the time of
grant in accordance with the provisions of paragraph 5 hereof) of the Stock with
respect to which Option issued by the Company are first exercisable during such
calendar year to exceed $100,000. If the grant of an Option hereunder would
cause a violation of the foregoing limitation, the exercisability of the portion
of the Option granted hereunder shall be reduced to the extent necessary such
that no violation of the foregoing limitation will occur. Any Option with
respect to which exercisability has been deferred shall become first exercisable
on the first day of the calendar year in which such exercisability would not
cause a violation of the limitations
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contained in Section 422(b)(7) of the Code; provided, however, if the
exercisability is required to be deferred beyond the expiration of such Option,
the grant of such Option shall be null and void.
8. Method of Exercise
(a) When the right to purchase shares accrues, Options may be exercised
by giving written notice to the Company stating the number of shares for which
the Option is being exercised, accompanied by payment in full by cash or its
equivalent, as is acceptable to the Company, of the purchase price for the
shares being purchased. The Company shall issue a separate certificate or
certificates of Stock for each Option exercised by an Optionee.
(b) In the Committee's discretion, determined at the time an Option is
granted, payment of the purchase price for shares may be made in whole or in
part with other shares of Stock of the Company which are free and clear of all
liens and encumbrances. The value of the shares of Stock tendered in payment for
the shares being purchased shall be the Fair Market Value Per Share on the date
of the Optionee's notice of exercise.
(c) Notwithstanding the foregoing, the Company shall have the right to
postpone the time of delivery of any shares for such period as may be required
for the Company, with reasonable diligence, to comply with any applicable
listing requirements of any national securities exchange or the National
Association of Securities Dealers, Inc. or any Federal, state or local law. If
the Optionee, or other person entitled to exercise an Option, fails to timely
accept delivery of and pay for the shares specified in such notice, the Option
Committee shall have the right to terminate the Option and the exercise thereof
with respect to such shares.
9. Nontransferability of Options
No Option granted under the Plan shall be assignable or transferable by
the Optionee, either voluntarily or by operation of law, other than by will or
the laws of descent and distribution, and, during the lifetime of the Optionee,
shall be exercisable only by the Optionee.
10. Continuance of Employment
Nothing contained in the Plan or in any Option granted under the Plan
shall confer upon any Optionee any rights with respect to the continuation of
employment by the Company or interfere in any way with the right of the Company
(subject to the terms of any separate employment agreement to the contrary) at
any time to terminate such employment or to increase or decrease the
compensation of the Optionee from the rate in existence at the time of the
granting of any Option.
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11. Restrictions on Shares
If the Company shall be advised by counsel that certain requirements
under Federal or state securities laws must be met before Stock may be issued
under the Plan, the Company shall notify all persons who have been issued
Options, and the Company shall have no liability for the failure to issue Stock
under any exercise of Options because of any delay while such requirements are
being met or the inability of the Company to comply with such requirements.
12. Privilege of Stock Ownership
No person entitled to exercise any Option granted under the Plan shall
have the rights or privileges of a stockholder of the Company for any shares of
Stock issuable upon exercise of such Option until such person has become the
holder of record of such shares. No adjustment shall be made for dividends or
other rights for which the record date is prior to the date on which such person
becomes the holder of record, except as provided in paragraph 13.
13. Adjustment
(a) If the number of outstanding shares of Stock are increased or
decreased, or such shares are exchanged for a different number or kind of shares
or securities of the Company, through reorganization, merger, recapitalization,
reclassification, stock dividend, stock split, combination of shares, or other
similar transaction, the aggregate number of shares of Stock subject to the
Plan, as provided in paragraph 3, and the shares of Stock subject to issued and
outstanding Options under the Plan shall be appropriately and proportionately
adjusted by the Committee. Any such adjustment in an outstanding Option shall be
made without change in the aggregate purchase price applicable to the
unexercised portion of the Option but with an appropriate adjustment in the
price for each share or other unit of any security covered by the Option.
(b) Notwithstanding paragraph (a), upon: (i) the dissolution or
liquidation of the Company, (ii) a reorganization, merger or consolidation of
the Company with one or more corporations in which the Company is not the
surviving corporation, (iii) a sale of substantially all of the assets of the
Company or (iv) the transfer of more than 80% of the then outstanding Stock of
the Company to another entity or person, in a single transaction or series of
transactions, the Board shall accelerate the time in which any outstanding
Options granted under the Plan may be exercised to a time prior to the
consummation of the transaction, and the Plan shall terminate upon such
consummation of the transaction. However, the acceleration of the time of
exercise of such Options and the termination of the Plan shall not occur if
provision is made in writing in connection with the transaction, in a manner
acceptable to the Board, for: (A) the continuance of the Plan and assumption of
outstanding Options, or (B) the substitution for such Options of new options to
purchase the stock of a successor corporation (or parent or subsidiary thereof),
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with appropriate adjustments as to number and kind of shares and option price.
The Board of Directors shall have the authority to amend this paragraph to
provide for a requirement that a successor corporation assume any outstanding
Options.
(c) Adjustments under this paragraph 13 shall be made by the Option
Committee, whose determination as to what adjustments shall be made, and the
extent thereof shall be final, binding and conclusive. No fractional shares of
Stock shall be issued under the Plan or in connection with any such adjustment.
14. Investment Purpose
Each Option granted hereunder may be issued on the condition that any
purchase of Stock by the exercise of an Option which is not the subject of a
registration statement permitting the sale or other distribution thereof shall
be for investment purposes and not with a view to resale or distribution (the
"Restricted Stock"). If requested by the Company, each Optionee must agree, at
the time of the purchase of any Restricted Stock, to execute an "investment
letter" setting forth such investment intent in the form acceptable to the
Company and must consent to any stock certificate issued to him thereunder
bearing a restrictive legend setting forth the restrictions applicable to the
further resale, transfer or other conveyance thereof without registration under
the Securities Act of 1933, as amended, and under the applicable securities or
blue sky laws of any other jurisdiction (together, the "Securities Laws"), or
the availability of exemptions from registration thereunder and to the placing
of transfer restrictions on the records of the transfer agent for such stock. No
Restricted Stock may thereafter be resold, transferred or otherwise conveyed
unless:
(1) an opinion of the Optionee's counsel is received, in
form and substance satisfactory to counsel for the Company, that
registration under the Securities Laws is not required; or
(2) such Stock is registered under the applicable Securities
Laws; or
(3) A "no action" letter is received from the staff of the
Securities and Exchange Commission and from the administrative
agencies administering all other applicable securities or blue
sky laws, based on an opinion of counsel for Optionee in form and
substance reasonably satisfactory to counsel for the Company,
advising that registration under the Securities Laws is not
required.
15. Amendment and Termination of Plan
(a) The Board of Directors of the Company may, from time to time, with
respect to any shares at the time not subject to Options, suspend or terminate
the Plan or amend or revise the terms of the Plan; provided that any amendment
to the Plan shall be approved by a majority of the shareholders of the Company
if the amendment would (i) materially increase the benefits accruing to
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participants under the Plan; (ii) increase the number of shares of Stock which
may be issued under the Plan, except as provided under the provisions of
paragraph 13; or (iii) materially modify the requirements as to eligibility for
participation in the Plan.
(b) Subject to the provisions of paragraph 13, the Plan shall terminate
ten (10) years from the earlier of the adoption of the Plan by the Board of
Directors or its approval by the shareholders.
(c) Subject to the provisions of paragraph 13, no amendment, suspension
or termination of this Plan shall, without the consent of each Optionee, alter
or impair any rights or obligations under any Option granted to such Optionee
under the Plan.
16. Effective Date of Plan
The Plan shall become effective upon adoption by the Board of Directors
of the Company and approval by the Company's shareholders; provided, however,
that prior to approval of the Plan by the Company's shareholders but after
adoption by the Board of Directors, Options may be granted under the Plan
subject to obtaining such approval.
17. Term of Plan
No Option shall be granted under the Plan after ten (10) years from the
earlier of the date of adoption of the Plan by the Board of Directors of the
Company or the date of approval by the Company's shareholders.
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