DYNATEM, INC.
1998 STOCK OPTION PLAN
Exhibit 4.2
DYNATEM, INC.
1998 STOCK OPTION PLAN
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1. Purposes of the Plan. The purposes of this 1998 Stock Option
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Plan (the "Plan") of DYNATEM, INC., a California corporation (the "Company"),
are: (i) to insure the retention of the services of existing executive
personnel, key employees and non-employee directors of the Company or its
affiliates; (ii) to attract and retain competent new executive personnel, key
employees and non-employee directors; (iii) to provide incentive to all such
personnel and employees to devote their utmost effort and skill to the
advancement and betterment of the Company; and (iv) compensate consultants,
business associates, vendors and others who render bona fide services to the
Company so long as such services are not rendered in connection with the offer
and sale of securities in a capital-raising transaction (collectively, the
"Consultants"), by permitting them to participate in the ownership of the
Company and thereby in the success and increased value of the Company.
2. Shares Subject to the Plan. The shares of stock subject to: (i)
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the incentive options having the terms and conditions set forth in Section 6
hereof (the "Incentive Options"); and/or (ii) the nonqualified options having
the terms and conditions set forth in Section 7 hereof (the "Nonqualified
Options") shall be shares of the Company's authorized but unissued or reacquired
common stock (the "Shares"). The total number of Shares which may be issued
under the Plan shall not exceed, in the aggregate, Two Hundred Thousand
(200,000) Shares. The limitations established by the preceding sentence shall be
subject to adjustment as provided in Section 9 hereof. In the event that any
outstanding Incentive Option or Nonqualified Option granted under the Plan can
no longer under any circumstances be exercised, for any reason, the Shares
allocable to the unexercised portion thereof shall again be subject to grant or
issuance under the Plan.
3. Eligibility.
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(a) Incentive Options. Officers and other key employees of the
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Company or of any subsidiary corporation (including any member of the Board of
Directors of the Company (the "Board"), if such director is also an employee of
the Company or a subsidiary), as may be determined by the Administrator (as
defined herein), who qualify for "incentive stock options" under the applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), will
be eligible for selection to receive Incentive Options under the Plan. An
employee who has been granted an Incentive Option may, if otherwise eligible, be
granted an additional Incentive Option or options and/or Nonqualified Options if
the Administrator shall so determine.
(b) Nonqualified Options. Officers and other key employees of the
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Company or of any subsidiary corporation, any member of the Board, whether or
not he or she is employed by the Company, and the Consultants, will be eligible
to receive Nonqualified Options under the Plan. An individual who has been
granted a Nonqualified Option may, if otherwise eligible, be granted Incentive
Options or additional Nonqualified Options if the Administrator shall so
determine.
4. Administration of the Plan.
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(a) Administration by Administrator. The Plan shall be administered
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by either the Board, or a committee of the Board consisting of two (2) or more
persons, who shall be appointed by, and serve at the pleasure of, the Board and
who shall be a "non-employee director" within the meaning of Rule 16b-3 adopted
by the Securities and Exchange Commission under the Securities Exchange Act of
1934 (the "Administrator").
(b) Authority of Administrator. The Administrator shall have full and
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final authority to determine the persons to whom, and the time or times at
which, Incentive Options and Nonqualified Options shall be granted, the number
of Shares to be represented by each Incentive Option and Nonqualified Option and
the consideration to be received by the Company upon the exercise thereof; to
interpret the Plan; to amend and rescind rules and regulations relating to the
Plan; to determine the form and content, terms and conditions of the Incentive
Options and Nonqualified Options to be issued under the Plan; to determine the
identity or capacity of any persons who may be entitled to exercise a
participant's rights under any Incentive Option or Nonqualified Option under the
Plan; to correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Incentive Option or Nonqualified Option in
the manner and to the extent the Administrator deems desirable to carry the
Plan, Incentive Option or Nonqualified Option into effect; to provide for an
option to the Company to repurchase any Shares issued upon exercise of an option
upon termination of optionees association with the Company and to release and/or
waive such right; to provide for rights of first refusal and other restrictions
on transfer on any Shares issued upon exercise of an Incentive Option and/or
Nonqualified Option and to release and/or waive any such right or restriction;
and to make all other determinations necessary or advisable for the
administration of the Plan, but only to the extent not contrary to the express
provisions of the Plan. Any action, decision, interpretation or determination
by the Administrator with respect to the application or administration of the
Plan shall be final and binding on all participants and prospective
participants.
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5. Option Exercise Price.
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(a) Nonqualified Option. The exercise price of the Shares covered by
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each Nonqualified Option granted shall not be less than eight-five percent (85%)
of the fair market value of such Shares on the date the Nonqualified Option is
granted; provided, however, that the exercise price of Shares covered by a
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Nonqualified Option granted under the Plan to any person who, at the time of the
grant of the Nonqualified Option, owns stock possessing ten percent (10%) or
more of the total combined voting power of all classes of stock of the Company
or its parent or any subsidiary corporation, shall not be less than one hundred
ten percent (110%) of the fair market value of such Shares at the date of grant
of the Nonqualified Option.
(b) Incentive Option. The exercise price of the Shares covered by
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each Incentive Option granted under the Plan shall not be less than one hundred
percent (100%) of the fair market value of such Shares on the date the Incentive
Option is granted; provided, however, that the exercise price of Shares covered
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by any Incentive Option granted under the Plan to any person who, at the time of
grant of the Incentive Option, owns stock possessing ten percent (10%) or more
of the total combined voting power of all classes of stock of the Company or of
its parent or any subsidiary corporation, shall not be less than one hundred ten
percent (110%) of the fair market value of such Shares at the date of grant of
the Incentive Option.
(c) Fair Market Value. The fair market value of the Shares shall, if
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the Shares are not listed or admitted to trading on a stock exchange, be the
average of the closing bid price and asked price of the Shares in the over-the-
counter market on the day immediately preceding the date the Incentive Option or
Nonqualified Option is granted, or, if the Shares are then listed or admitted to
trading on any stock exchange, the closing sale price on such day on the
principal stock exchange on which the Shares are then listed or admitted to
trading. If no closing bid and asked prices are quoted on such day, or if no
sale takes place on such day on such principal exchange, as the case may be,
then the closing sale price of the Shares on such exchange on the next preceding
day on which a sale occurred, or the closing bid and asked prices on the next
preceding day on which such prices were quoted, as the case may be, shall be the
fair market value of the Shares. During such times as there is not a market
price available, the fair market value of the Shares shall be determined by the
Administrator, which shall consider, among other facts which it considers to be
relevant, the book value and the earnings of the Company. The exercise price or
the purchase price, as the case may be, shall be subject to adjustment as
provided in Section 9 hereof.
6. Terms and Conditions of Incentive Options. Each Incentive Option
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granted pursuant to this Plan shall be evidenced by a written Incentive Option
Agreement which shall specify that the options subject thereto are Incentive
Options within the
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meaning of Section 422 of the Code. The Incentive Option Agreement shall be in
such form as the Administrator shall, from time to time, recommend, but shall
comply with and be subject to the following terms and conditions:
(a) Medium and Time of Payment. Subject to the discretion of the
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Administrator, the exercise price of an Incentive Option shall be payable: (i)
in United States Dollars payable in cash, certified check, or bank draft; (ii)
subject to any legal restrictions on the acquisition or purchase of its Shares
by the Company, by the delivery of Shares, which shall be deemed to have a value
to the Company equal to the aggregate fair market value of such Shares
determined at the date of such exercise in accordance with the provisions of
Section 5 hereof; (iii) by the optionee's promissory note (having such terms and
providing for such security as the Administrator shall deem appropriate); (iv)
by forgiveness of indebtedness; or (v) any combination of (i), (ii), (iii), or
(iv) above.
(b) Grant of Incentive Option. Any Incentive Option shall be granted
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within ten (10) years from the date of the adoption of this Plan or the date
this Plan is approved by the shareholders of the Company, whichever is earlier.
(c) Number of Shares. The Incentive Option Agreement shall state the
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total number of Shares to which it pertains.
(d) Term of Incentive Option. Each Incentive Option granted under the
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Plan shall expire within a period of not more than ten (10) years from the date
the Incentive Option is granted; provided, however, that the term of any
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Incentive Option granted to any person who, at the time of grant of the
Incentive Option, owns stock possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Company or of its parent or
any subsidiary corporation, shall not exceed five (5) years.
(e) Date of Exercise. The Administrator may, in its discretion,
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provide that an Incentive Option may be exercised immediately or that it may not
be exercised in whole or in part for any specified period or periods of time;
provided, however, that the exercisability of each Incentive Option granted
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under the Plan shall vest at a rate of not less than twenty percent (20%) per
year over a period of not more than five (5) years following the date of the
grant of the Incentive Option. Except as may be so provided, any Incentive
Option may be exercised in whole at any time or in part from time to time during
its term.
(f) Termination of Association Except Upon Death or Disability. In
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the event that an optionee's Termination of Association (as defined herein) with
the Company shall cease for any reason other than his death or permanent and
total disability (hereinafter "Disability"): (i) all Incentive Options granted
to any such optionee pursuant to this Plan which are not exercisable
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at the date of such Termination of Association shall terminate immediately and
become void and of no effect; and (ii) all Incentive Options granted to any such
optionee pursuant to this Plan which are exercisable at the date of such
Termination of Association may be exercised (but only to the extent they were
exercisable as of the date of such Termination of Association) at any time
within thirty (30) days after the date of such Termination of Association, but
in any event no later than the date of expiration of the Incentive Option
period, and if not so exercised within such time shall become void and of no
effect at the end of such time. For purposes of this Plan, "Termination of
Association" shall mean: (A) with respect to Nonqualified Options: (1) for any
person who is an employee of the Company or a subsidiary of the Company but not
also a director of the Company, the cessation of such person's employment with
the Company or a corporation or a parent or subsidiary corporation of a
corporation issuing and assuming an option in a transaction to which Section
424(a) of the Code applies (collectively, the "Affiliates"); (2) for any person
who is a Non-Employee Director of the Company, the cessation of such person's
status as a director of the Company; (3) for any person who is both a director
of the Company and an employee of the Company or a subsidiary or Affiliate of
the Company, the cessation of both such person's employment and status as a
director; and (4) for any Consultant, the cessation of such person being a
service provider to the Company or its Affiliates; and (B) with respect to
Incentive Options, the cessation of such person's employment with the Company or
an Affiliate.
(g) Disability of Optionee. In the event of an optionee's Termination
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of Association with the Company by reason of his or her Disability: (i) all
Incentive Options granted to such optionee pursuant to this Plan which are not
exercisable at the date of such Termination of Association shall terminate
immediately and become void and of no effect; and (ii) all Incentive Options
granted to such optionee pursuant to this Plan which are exercisable at the date
of such Termination of Association may be exercised by such optionee (but only
to the extent they were exercisable as of the date of such Termination of
Association) at any time within twelve (12) months after the optionee's
Termination of Association as a result of such Disability, but in any event no
later than the date of expiration of the Incentive Option period. At the end of
such twelve (12)-month period, all Incentive Options held by such optionee, to
the extent they remain unexercised, shall terminate and become void and of no
effect.
(h) Death of Optionee. In the event of an optionee's Termination of
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Association with the Company by reason of his or her death: (i) all Incentive
Options granted to such optionee pursuant to this Plan which are not exercisable
at the date of such Termination of Association shall terminate immediately and
become void and of no effect; and (ii) all Incentive Options granted to such
optionee pursuant to this Plan which are exercisable at the date of such
Termination of Association may be exercised (but only to the extent they were
exercisable as of the date of such Termination of Association) by the executors
or
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administrators of the optionee's estate or by any person or persons who shall
have acquired the Incentive Option directly from the optionee by bequest or
inheritance at any time prior to the date of expiration of the Incentive Option
period.
(i) Limitation. Notwithstanding any other provisions of the Plan, the
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aggregate fair market value (determined in accordance with the provisions of
Section 5 hereof as of the time the Incentive Option is granted) of the Shares
with respect to which Incentive Options are exercisable for the first time by
any individual during any calendar year (under all such plans of the Company and
its parent and subsidiary corporations) shall not exceed One Hundred Thousand
Dollars ($100,000).
7. Terms and Conditions of Nonqualified Options. Each Nonqualified
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Option granted pursuant to this Plan shall be evidenced by a written
Nonqualified Option Agreement which shall specify that the options subject
thereto are Nonqualified Options. The Nonqualified Option Agreement shall be in
such form as the Administrator shall, from time to time, recommend, but shall
comply with and be subject to the following terms and conditions:
(a) Medium and Time of Payment. Subject to the discretion of the
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Administrator, the exercise price of a Nonqualified Option shall be payable:
(i) in cash, certified check, or bank draft; (ii) subject to any legal
restrictions on the acquisition or purchase of its Shares by the Company: (A) by
the delivery of Shares, which shall be deemed to have a value to the Company
equal to the aggregate fair market value of such Shares determined at the date
of such exercise in accordance with the provisions of Section 5 hereof; or (B)
in lieu of using previously outstanding Shares therefor, by use of some of the
Shares as to which the Nonqualified Option is then being exercised as stated in
the notice of exercise which directs the Company to retain a number of the
Shares that would otherwise be delivered to the optionee upon such exercise as
equals the number of Shares that would have been surrendered to the Company if
the purchase price had been paid with the previously issued Shares; (iii) by the
optionee's promissory note (having such terms and providing for such security as
the Administrator shall deem appropriate); (iv) by forgiveness of indebtedness;
or (v) any combination of (i), (ii), (iii), or (iv) above.
(b) Number of Shares. The Nonqualified Option Agreement shall state
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the total number of Shares to which it pertains.
(c) Term of Nonqualified Option. Each Nonqualified Option granted
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under the Plan shall expire within a period of not more than ten (10) years from
the date the Nonqualified Option is granted.
(d) Date of Exercise. The Administrator may, in its discretion,
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provide that a Nonqualified Option may be exercised immediately or that it may
not be exercised in whole or in part for
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any specified period or periods of time; provided, however, that the
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exercisability of each Nonqualified Option granted under the Plan shall vest at
a rate of not less than twenty percent (20%) per year over a period of not more
than five (5) years following the date of the grant of the Nonqualified Option.
Except as may be so provided, any Nonqualified Option may be exercised in whole
at any time or in part from time to time during its term.
(e) Termination of Association Except Upon Death or Disability. In
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the event of an optionee's Termination of Association with the Company for any
reason other than his or her death or Disability: (i) all Nonqualified Options
granted to any such optionee pursuant to this Plan which are not exercisable at
the date of such Termination of Association shall terminate immediately and
become void and of no effect; and (ii) all Nonqualified Options granted to any
such optionee pursuant to this Plan which are exercisable at the date of such
Termination of Association may be exercised (but only to the extent they were
exercisable as of the date of the Termination of Association) at any time within
thirty (30) days after the date of such Termination of Association, but in any
event no later than the date of expiration of the Nonqualified Option period,
and if not so exercised within such time shall become void and of no effect at
the end of such time.
(f) Disability of Optionee. In the event of an optionee's Termination
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of Association with the Company by reason of his or her Disability: (i) all
Nonqualified Options granted to such optionee pursuant to this Plan which are
not exercisable at the date of such Termination of Association shall terminate
immediately and become void and of no effect; and (ii) all Nonqualified Options
granted to such optionee pursuant to this Plan which are exercisable at the date
of such Termination of Association may be exercised by such optionee (but only
to the extent they were exercisable as of the date of the Termination of
Association) at any time within twelve (12) months after the optionee's
Disability, but in any event no later than the date of expiration of the
Nonqualified Option period. At the end of such twelve (12)-month period, all
Nonqualified Options held by such optionee, to the extent they remain
unexercised, shall terminate and become void and of no effect.
(g) Death of Optionee. In the event of an optionee's Termination of
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Association with the Company by reason of his or her death: (i) all Nonqualified
Options granted to such optionee pursuant to this Plan which are not exercisable
at the date of such Termination of Association shall terminate immediately and
become void and of no effect; and (ii) all Nonqualified Options granted to such
optionee pursuant to this Plan which are exercisable at the date of such
Termination of Association may be exercised (but only to the extent they were
exercisable as of the date of the Termination of Association) by the executors
or administrators of the optionee's estate or by any person or persons who shall
have acquired the Nonqualified Option directly from the
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optionee by bequest or inheritance at any time prior to the date of expiration
of the Nonqualified Option period.
8. Terms and Conditions Applicable Equally to Incentive Options and
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Nonqualified Options.
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(a) Rights as a Shareholder. No optionee under an Incentive Option or
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Nonqualified Option shall have any rights as a shareholder with respect to any
Shares covered by his or her option until the date of the issuance of a Share
certificate to such optionee for such Shares. Except as expressly provided in
Section 9 hereof, no adjustment shall be made for dividends or distributions or
other rights for which the record date is prior to the date such Share
certificate is issued.
(b) Nonassignability of Rights. No Incentive Option or Nonqualified
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Option granted under the Plan shall be assignable or transferable by the person
receiving the same other than by will or the laws of descent and distribution.
During the life of such person, the option shall be exercisable only by him or
her.
(c) Other Provisions. Any Incentive Option Agreement or Nonqualified
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Option Agreement may contain such other terms, provisions and conditions as may
be determined by the Administrator. Options granted to different persons, or to
the same person at different times, may be subject to terms, conditions and
restrictions which differ from each other.
9. Changes in Capital Structure. In the event that the Shares are
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hereafter increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Company by reason of merger,
consolidation or reorganization in which the Company is the surviving
corporation or of a recapitalization, stock split, combination of Shares,
reclassification, reincorporation, stock dividend (in excess of 2%), or other
change in the corporate structure of the Company, appropriate adjustments shall
be made by the Administrator in the aggregate number and kind of shares subject
to this Plan and the number and kind of shares and the price per share subject
to outstanding Incentive Options and Nonqualified Options in order to preserve,
but not to increase, the benefits to persons then holding Incentive Options
and/or Nonqualified Options.
In the event that the Company at any time proposes to: (i) merge into,
consolidate with or to enter into any other reorganization (including the sale
of substantially all of its assets) in which the Company is not the surviving
corporation; or (ii) enter into a merger or other reorganization as a result of
which the Shares will be changed into or exchanged for shares of the capital
stock or other securities of another corporation or for cash or other property,
then the Plan and all unexercised Incentive Options and Nonqualified Options
granted hereunder shall terminate, unless provision is made in writing in
connection with such transaction for the continuance of the Plan and for the
assumption
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of Incentive Options and Nonqualified Options theretofore granted, or the
substitution for such Incentive Options and Nonqualified Options of new
Incentive Options and Nonqualified Options covering the shares of a successor
corporation, with appropriate adjustments as to number and kind of shares and
prices, in which event the Plan and the Incentive Options and Nonqualified
Options theretofore granted or the new Incentive Options and Nonqualified
Options substituted therefor, shall continue in the manner and under the terms
so provided. If such provision is not made in such transaction for the
continuance of the Plan and the assumption of Incentive Options and Nonqualified
Options theretofore granted or the substitution for such Incentive Options and
Nonqualified Options of new Incentive Options and Nonqualified Options covering
the shares of a successor corporation, then the Administrator shall cause
written notice of the proposed transaction to be given to the persons holding
Incentive Options or Nonqualified Options not less than thirty (30) days prior
to the anticipated effective date of the proposed transaction, and all Incentive
Options and Nonqualified Options shall, concurrently with the effective date of
the proposed transaction, automatically expire and shall thereafter be void and
of no effect.
10. Amendment and Termination of the Plan. The Board may from time
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to time alter, amend, suspend or terminate the Plan in such respects as the
Board may deem advisable; provided, however, that no such alteration, amendment,
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suspension or termination shall be made which shall substantially affect or
impair the rights of any person under any Incentive Option or Nonqualified
Option theretofore granted without such person's consent; and, provided further,
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however, that no amendment which would: (i) materially increase the benefits
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accruing to participants under the Plan; (ii) materially increase the number of
securities which may be issued under the Plan; or (iii) materially modify the
requirements as to eligibility for participation in the Plan, shall be made
except with the approval of the Company's shareholders.
11. Effective Date and Termination of the Plan. The Plan shall be
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effective on the date of its approval by the Board and, unless the Plan shall
have been sooner terminated as provided herein, shall terminate on the tenth
(10th) anniversary of: (i) the date the Plan is approved and adopted by the
Board; or (ii) the date the Plan is approved by the Company's shareholders,
whichever is earlier.
12. Application of Funds. The proceeds received by the Company from
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the sale of Shares pursuant to Incentive Options and Nonqualified Options will
be used for general corporate purposes.
13. Tax Withholding. Whenever Shares are to be issued under the
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Plan, the Company or any subsidiary of the Company employing the recipient shall
have the right to deduct from the recipient's compensation or require the
recipient to remit to the employer corporation, prior to the issuance of the
Shares, an
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amount sufficient to satisfy federal, state and local withholding tax
requirements.
14. Continuance of Employment or Status as Director. The Plan or the
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granting of any Incentive Option or Nonqualified Option hereunder shall not
impose any obligation on the Company, its shareholders or any subsidiary of the
Company to continue the employment of any optionee or offeree who is an
employee, or to retain as a director any optionee or offeree who is a director.
15. Information to Optionees. The Company shall provide to each
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participant in the Plan a copy of the Company's financial statements for each
fiscal year of the Company within a reasonable time after such financial
statements are prepared and approved by the Company's management. The Company
shall also provide each participant in the Plan with a copy of any annual or
other report generally distributed by the Company to its shareholders.
16. Shareholder Approval. This Plan must be approved by the
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Company's shareholders within twelve (12) months following its adoption by the
Board. Any option exercised before shareholder approval is obtained must be
rescinded if shareholder approval is not obtained within twelve (12) months
following the adoption of the Plan by the Board. Such Shares shall not be
counted in determining whether such approval is obtained.
17. General Provisions. Notwithstanding any other provision of this
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Plan or agreements made pursuant thereto, the Company shall not be required to
issue or deliver any certificate or certificates for Shares upon the exercise of
options granted under this Plan prior to fulfillment of all of the following
conditions:
(a) The listing or approval for listing upon notice of issuance,
of such Shares on any securities exchange as may at the time be the market for
the Company's common stock;
(b) Any registration or other qualification of such Shares under
any state or federal law or regulation, or the maintaining in effect of any such
registration or other qualification which the Administrator shall, in its
absolute discretion upon the advice of counsel, deem necessary or advisable; and
(c) The obtaining of any other consent, approval or permit from
any state or federal governmental agency or any stock exchange on which the
Company's common stock is then listed, which the Administrator shall, in its
absolute discretion upon the advice of counsel, determine to be necessary or
advisable.
END OF PLAN
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CERTIFICATE OF ADOPTION
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The undersigned, being the duly elected and acting Secretary of DYNATEM, INC.,
a California corporation (the "Company"), does hereby certify that the Company's
1998 Stock Option Plan in the form attached hereto was duly adopted by the Board
of Directors of the Company on March 13, 1998, and approved by the written
consent of the shareholders of the Company on October 7, 1998.
/s/Michael Horan
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Michael Horan, Secretary
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