EXHIBIT 4.1
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PHAZAR CORP
2006 INCENTIVE STOCK OPTION PLAN
1. Purposes of this Plan
The purposes of this Phazar Corp Incentive Stock Option Plan are to attract and
retain the best available personnel, to provide additional incentive to the
Employees of the Company and its Subsidiaries, to promote the success of the
Company's business and to enable the Employees to share in the growth and
prosperity of the Company by providing them with an opportunity to purchase
stock in the Company.
Options granted hereunder may be either Incentive Stock Options or Non-Statutory
Stock Options, at the discretion of the Board and as reflected in the terms of
the written stock option agreement.
Definitions
As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company, without
par value.
(d) "Company" shall mean Phazar Corp, a Delaware corporation.
(e) "Committee" shall mean the Committee appointed by the Board in
accordance with Section 4 of this Plan, if one is appointed.
(f) "Continuous Employment" or "Continuous Status as an Employee" shall
mean the absence of any interruption or termination of employment or service as
an Employee by or to the Company or any Parent or Subsidiary of the Company
which now exists or is hereafter organized or acquired by or acquires the
Company. Continuous Employment shall not be considered interrupted in the case
of sick leave, military leave or any other leave of absence approved by the
Board or in the event of transfers between locations of the Company or between
the Company, its Parent, any of its Subsidiaries or its successors.
(g) "Disinterested Person" shall mean a director who is a "disinterested
person," as such term is defined pursuant to Rule 16b-3(c)(2)(i) promulgated
pursuant to the Exchange Act and any applicable releases and opinions or the
Securities and Exchange Commission.
(h) "Employee" shall mean any person, including officers and directors,
employed by the Company, its Parent, any of its Subsidiaries or its successors;
or, for purposes of eligibility for Nonstatutory Stock Options, any person
employed by the Company, including officers and directors, or any consultant to,
or director of, the Company, or any Parent or Subsidiary of the Company, whether
or not such consultant or director is an employee of such entities.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor legislation.
(j) "Incentive Stock Option" shall mean an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(k) "Nonstatutory Stock Option" shall mean an Option which is not an
Incentive Stock Option.
(l) "Option" shall mean a stock option granted pursuant to this Plan.
(m) "Option Agreement" shall mean a written agreement in such form or
forms as the Board (subject to the terms and conditions of this Plan) may from
time to time approve, evidencing an Option.
(n) "Optioned Stock" shall mean the Common Stock subject to an Option.
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(o) "Optionee" shall mean an Employee who is granted an Option.
(p) "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Sections 425(e) and (g) of the Code.
(q) "Plan" shall mean this 1986 Stock Option Plan.
(r) "Registration Date" shall mean the effective date of the first
registration statement which is filed by the Company and declared effective
pursuant to Section 12(g) of the Exchange Act, with respect to any class of the
Company's securities.
(s) "Share" or "Shares" shall mean the Common Stock, as adjusted in
accordance with Section 11 of this Plan.
(t) "Stock Purchase Agreement" shall mean an agreement in such form or
forms as the Board (subject to the terms and conditions of this Plan) may from
time to time approve, which is to be executed as a condition of purchasing
Optioned Stock upon exercise of an Option.
(u) "Subsidiary" shall mean a subsidiary corporation, whether now or
hereafter existing, as defined in Sections 425(f) and (g) of the Code. 3. Stock
Subject to this Plan Subject to the provisions of Section 11 of this Plan, the
maximum aggregate number of Shares which may be optioned and sold under this
Plan is TwoHundred and Fifty Thousand (250,000) Shares. The Shares may be
authorized, but unissued or reacquired Shares other than reacquired shares
delivered pursuant to Section 7(c) hereof as payment of consideration in the
exercise of an option. If an Option should expire or become unexercisable for
any reason without having been exercised in full, the unpurchased Shares shall,
unless this Plan shall have been terminated, return to this Plan and become
available for other Options under this Plan.
4. Administration of this Plan
(a) Procedure This Plan shall be administered by the Board. The Board
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may appoint a Committee consisting of two (2) or more members of the Board (or
such greater number as is required to qualify for the exemption from the
provisions of Section 16(b) of the Exchange Act provided by Rule 16b-3
promulgated pursuant to the Exchange Act) to administer this Plan on behalf of
the Board, subject to such terms and conditions as the Board may prescribe. Once
appointed, the Committee shall continue to serve until otherwise directed by the
Board. From time to time, the Board may increase the size of the Committee and
appoint additional members of the Board thereto, remove members (with or without
cause) and appoint new members of the Board in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and,
thereafter, directly administer this Plan. Members of the Board or Committee who
are either eligible for Options or have been granted Options may vote on any
matters affecting the administration of this Plan or the grant of Options
pursuant to this Plan, except that no such member shall act upon the granting of
an Option to such person nor shall any such members presence at a meeting of the
Board of Directors establish the existence of a quorum at any meeting of the
Board or the Committee during which action is taken with respect to the granting
of an Option to him.
(b) Procedure After Registration Date Notwithstanding the provisions of
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subsection (a), after the Registration Date this Plan shall be administered
either by: (i) the full Board, provided that at all times each member of the
Board is a Disinterested Person; or (ii) a Committee which at all times consists
solely of Board members who are Disinterested Persons. After the Registration
Date, the Board shall take all action necessary to administer this Plan in
accordance with the then-effective provisions of Rule 16b-3 promulgated under
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the Exchange Act, provided that any amendment to this Plan required for
compliance with such provisions shall be made in accordance with Section 13 of
this Plan.
(c) Powers of the Board and/or Committee Subject to the provisions of
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this Plan, the Committee or the Board, as appropriate, shall have the authority,
in its discretion: (i) to grant Incentive Stock Options and Nonstatutory Stock
Options; (ii) to determine, upon review of relevant information and in
accordance with Section 7 of this Plan, the fair market value per Share; (iii)
to determine the exercise price of the Options, which exercise price and type of
consideration shall be determined in accordance with Section 7 of this Plan;
(iv) to determine the Employees to whom, and the time or times at which, Options
shall be granted, and the number of Shares to be subject to each Option; (v) to
prescribe, amend and rescind rules and regulations relating to this Plan; (vi)
to determine the terms and provisions of each Option Agreement and each Stock
Purchase Agreement (each of which need not be identical with the terms of other
Option Agreements and Stock Purchase Agreements) and, with the consent of the
holder thereof, to modify or amend each Option Agreement and Stock Purchase
Agreement; (vii) to determine whether a stock repurchase agreement or other
agreement will be required to be executed by any Employee as a condition to the
exercise of an Option, and to determine the terms and provisions of any such
agreement (which need not be identical with the terms of any other such
agreement) and, with the consent of the Optionee, to amend any such agreement;
(viii) to interpret this Plan, the Option Agreements, the Stock Purchase
Agreements or any agreement entered into with respect to the grant or exercise
of Options; (ix) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted by
the Board or to take such other actions as may be necessary or appropriate with
respect to the Company's rights pursuant to Options or agreements relating to
the grant or exercise thereof; and (x) to make such other determinations and
establish such other procedures as it deems necessary or advisable for the
administration of this Plan.
(d) Effect of the Board's or Committee's Decision All decisions,
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determinations and interpretations of the Board or the Committee shall be final
and binding on all Optionees and any other holders of Options.
5. Eligibility
Incentive Stock Options may be granted only to Employees. An Employee who has
been granted an Incentive Stock Option may, if such Employee is otherwise
eligible, be granted additional Incentiv Stock Options.
6. Term of Plan
This Plan shall become effective upon the earlier to occur of its adoption by
the Board or its approval by vote of a majority of the outstanding shares of the
Company's capital stock entitled to vote on the adoption of this Plan. This
Plan shall continue in effect for a term of ten (10) years unless sooner
terminated in accordance with the terms and provisions of this Plan.
7. Option Price & Consideration
(a) Exercise Price The exercise price per Share for the Shares to be
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issued pursuant to the exercise of an Option shall be such price as is
determined by the Board; provided, however, that such price shall in no event be
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less than eighty-five percent (85%) with respect to Nonstatutory Stock Options,
and one hundred percent (100%) with respect to Incentive Stock Options, of the
fair market value per Share on the date of grant. In the case of an Option
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granted to an Employee who, at the time the Option is granted, owns stock (as
determined under Section 425(d) of the Code) constituting more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or its Parent or Subsidiaries, the exercise price per Share shall be no less
than one hundred ten percent (110%) of the fair market value per Share on the
date of grant.
(b) Fair Market Value The fair market value per Share on the date of
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grant shall be determined by the Board in its sole discretion, exercised in good
faith; provided, however, that where there is a public market for the Common
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Stock, the fair market value per Share shall be the average of the closing bid
and asked prices of the Common Stock on the date of grant, as reported in The
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Wall Street Journal (or, if not so reported, as otherwise reported by the
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National Association of Securities Dealers Automated Quotations ("NASDAQ")
System), or, in the event the Common Stock is listed on a stock exchange or on
the NASDAQ System, the fair market value per Share shall be the closing price on
the exchange or on the NASDAQ System as of the date of grant of the Option, as
reported in The Wall Street Journal.
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(c) Payment of Consideration The consideration to be paid for the
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Shares to be issued upon exercise of an Option, including the method of payment,
shall be determined by the Board and may consist entirely of cash, check, Shares
held by the Optionee for the requisite period necessary to avoid a charge to the
Company's earnings for financial reporting purposes which have a fair market
value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, or any combination of such
methods of payment. Subject to subparagraphs (i) and (ii) hereto, utilization of
Shares as the method of payment may be completed by the tender of Shares then
held by the Optionee. In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration is deemed to be such as may be reasonably expected to benefit the
Company.
(i) If the consideration for the exercise of an Option is the surrender
of previously acquired and owned Shares, the Optionee will be required to make
representations and warranties satisfactory to the Company regarding his title
to the Shares used to effect the purchase, including, without limitation,
representations and warranties that the Optionee has good and marketable title
to such Shares free and clear of any and all liens, encumbrances, charges,
equities, claims, security interests, options or restrictions and has full power
to deliver such Shares without obtaining the consent or approval of any person
or governmental authority other than those which have already given consent or
approval in a form satisfactory to the Company. The value of the Shares used to
effect the purchase shall be the fair market value of those Shares as determined
by the Board in its sole discretion, exercised in good faith.
(ii) If an Optionee is permitted to exercise an Option by delivering
shares of the Company's Common Stock, the option agreement covering such Option
may include provisions authorizing the Optionee to exercise the Option, in whole
or in part, by delivering whole shares of the Company's Common Stock previously
owned by such Optionee (whether or not acquired through the prior exercise of a
stock option) having a fair market value equal to the option price. Shares of
the Company's Common Stock so delivered or withheld shall be valued at their
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fair market value on the date of exercise of the Option, as determined by the
Committee and/or the Board, as appropriate. Any balance of the exercise price
shall be paid in cash or by check or a promissory note, each in accordance with
the terms of this Section 7.
8. Options
(a) Terms & Provisions of Options As provided in Section 4 of this Plan
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and subject to any limitations specified herein, the Board and/or Committee
shall have the authority to determine the terms and provisions of any Option
granted under this Plan or any agreement required to be executed in connection
with the grant or exercise of an Option. Each Option granted pursuant to this
Plan shall be evidenced by an Option Agreement. Options granted pursuant to this
Plan are conditioned upon the Company obtaining any required permit or order
from appropriate governmental agencies authorizing the Company to issue such
Options and Shares issuable upon exercise thereof.
(b) Term of Option The term of each Option may be up to ten (10) years
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from the date of grant thereof as determined by the Board upon the grant of the
Option and specified in the Option Agreement, except that the term of an Option
granted to an Employee who, at the time the Option is granted, owns stock
comprising more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or its Parent or Subsidiaries, shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.
(c) Exercise of Option
(i) Procedure for Exercise; Rights as a Shareholder. Any Option shall
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be exercisable at such times, in such installments and under such conditions as
may be determined by the Board and specified in the Option Agreement, including
performance criteria with respect to the Company and/or the Optionee, and as
shall be permissible under the terms of this Plan.
An Option may be exercised in accordance with the provisions of this Plan
as to all or any portion of the Shares then exercisable under an Option, from
time to time during the term of the Option. An Option may not be exercised for a
fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company at its principal business office in
accordance with the terms of the Option Agreement by the person entitled to
exercise the Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company, accompanied by an executed
Stock Purchase Agreement and any other agreements required by the terms of this
Plan and/or the Option Agreement. Full payment may consist of such consideration
and method of payment allowable under Section 7 of this Plan. Until the Option
is properly exercised in accordance with the terms of this paragraph, no right
to vote or receive dividends or any other rights as a stockholder exist with
respect to the Optioned Stock. No adjustment shall be made for a dividend or
other right for which the record date is prior to the date the Option is
exercised, except as provided in Section 11 of this Plan.
As soon as practicable after any proper exercise of an Option in
accordance with the provisions of this Plan, the Company shall, without transfer
or issue tax to the Optionee, deliver to the Optionee at the principal executive
office of the Company or such other place as shall be mutually agreed upon
between the Company and the Optionee, a certificate or certificates representing
the Shares for which the Option shall have been exercised. The time of issuance
and delivery of the certificate(s) representing the Shares for which the Option
4.1-5
shall have been exercised may be postponed by the Company for such period as may
be required by the Company, with reasonable diligence, to comply with any
applicable listing requirements of any national or regional securities exchange
or any law or regulation applicable to the issuance or delivery of such Shares.
No Option may be exercised unless this Plan has been duly approved by the
shareholders of the Company in accordance with applicable law. Notwithstanding
anything to the contrary herein, the terms of a Stock Purchase Agreement
required to be executed and delivered in connection with the exercise of an
Option may require the certificate or certificates representing the Shares
purchased upon exercise of an Option to be delivered and deposited with the
Company as security for the Optionee's faithful performance of the terms of his
Stock Purchase Agreement.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of this
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(ii) Termination of Status as an Employee If an Optionee ceases to serve as
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an Employee for any reason other than death or permanent and total disability
(within the meaning of Section 22(e)(3) of the Code) and thereby terminates his
Continuous Status as an Employee, such Optionee shall have the right to exercise
the Option at any time within thirty (30) days (or such other period of time not
exceeding three (3) months as is determined by the Board at the time of granting
the Option), following the date such Optionee ceases his Continuous Status as an
Employee of the Company to the extent that such Optionee was entitled to
exercise the Option at the date of such termination; provided, however, that no
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Option shall be exercisable after the expiration of the term set forth in the
Option Agreement. To the extent that such Optionee was not entitled to exercise
the Option at the date of such termination, or if such Optionee does not
exercise such Option (which such Optionee was entitled to exercise) within the
time specified herein, the Option shall terminate.
(iii) Death or Disability of Optionee If an Optionee ceases to serve as
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an Employee due to death or permanent and total disability (within the meaning
of Section 22(e)(3) of the Code) and thereby terminates his Continuous Status as
an Employee, the Option may be exercised at any time within six (6) months
following the date of death or termination of employment due to disability, in
the case of death, by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, or, in the case of
disability, by the Optionee, but in any case only to the extent the Optionee was
entitled to exercise the Option at the date of his termination of employment by
death or disability; provided, however, that no Option shall be exercisable
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after the expiration of the Option term set forth in the Option Agreement. To
the extent that such Optionee was not entitled to exercise such Option at the
date of his termination of employment by death or disability or if such Option
is not exercised (to the extent it could be exercised) within the time specified
herein, the Option shall terminate.
(iv) Extension of Time to Exercise Notwithstanding anything to the
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contrary in this Section 8, the Board may at any time and from time to time
prior to the termination of a Nonstatutory Stock Option, with the consent of the
Optionee, extend the period of time during which the Optionee may exercise his
Nonstatutory Stock Option following the date the Optionee ceases such Optionee's
4.1-6
Continuous Status as an Employee; provided, however, that (1) the maximum period
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of time during which a Nonstatutory Stock Option shall be exercisable following
such termination date shall not exceed an aggregate of six (6) months, (2) the
Nonstatutory Stock Option shall not become exercisable after the expiration of
the term of such Option as set forth in the Option Agreement as a result of such
extension, and (3) notwithstanding any extension of time during which the
Nonstatutory Stock Option may be exercised, such Option, unless otherwise
amended by the Board, shall only be exercisable to the extent to which the
Optionee was entitled to exercise it on the date Optionee ceased Continuous
Status as an Employee. To the extent that such Optionee was not entitled to
exercise the Option at the date of such termination, or if such Optionee does
not exercise an Option which Optionee was entitled to exercise within the time
specified herein, the Option shall terminate.
9. Limit on Value of Optioned Stock
No Incentive Stock Option may be granted to an Employee if, as a result of such
grant, the aggregate fair market value (determined at the time an Incentive
Stock Option is granted) of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by an Optionee during any calendar
year under all incentive stock option plans of the Company, its Parents or its
Subsidiaries, if any, exceeds One Hundred Thousand Dollars ($100,000).
10. Non-Transferability of Options
Options granted under this Plan may not be sold, pledged, assigned,
hypothecated, gifted, transferred or disposed of in any manner, either
voluntarily or involuntarily by operation of law, other than by will or by the
laws of descent or distribution, and may be exercised during the lifetime of the
Optionee only by such Optionee.
11. Adjustments Upon Changes in Capitalization or Merger
(a) Subject to any required action by the shareholders of the Company,
the number of Shares covered by each outstanding Option, and the number of
Shares which have been authorized for issuance under this Plan but as to which
no Options have yet been granted or which have been returned to this Plan upon
cancellation or expiration of an Option or repurchase of shares from an Optionee
upon termination of employment or service, as well as the exercise or purchase
price per Share covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a stock split, reverse stock split, combination or
reclassification of the Common Stock, or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued shares of Common Stock effected without receipt of consideration by the
Company (other than stock bonuses to Employees, including, without limitation,
officers and directors); provided, however, that the conversion of any
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convertible securities of the Company shall not be deemed to have been effected
without the receipt of consideration. Such adjustment shall be made by the
Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to this Plan or an Option.
(b) In the event of the merger, consolidation or reorganization of the
Company with or into another corporation as a result of which the Company is not
the surviving corporation or as a result of which the outstanding Shares are
exchanged for or converted into cash or property or securities not of the
Company, the Board may (i) make provision for the assumption of all outstanding
4.1-7
Options by the successor corporation or a Parent or a Subsidiary thereof, or
(ii) declare that outstanding Options shall terminate as of a date fixed by the
Board which is at least thirty (30) days after the notice thereof to the
Optionee, unless such thirty (30) day period is waived by the Optionee. In the
event of a dissolution or liquidation of the Company or the sale of all or
substantially all of the assets of the Company, the Company's outstanding
Options shall terminate as to an Optionee upon termination of Continuous Status
as an Employee.
(c) No fractional shares of Common Stock shall be issuable on account
of any action described in this Section, and the aggregate number of shares into
which Shares then covered by the Option, when changed as the result of such
action, shall be reduced to the largest number of whole shares resulting from
such action, unless the Board, in its sole discretion, shall determine to issue
scrip certificates in respect to any fractional shares, which scrip
certificates, in such event, shall be in a form and have such terms and
conditions as the Board in its discretion shall prescribe.
12. Time of Granting Options
The date of grant of an Option shall be the date on which the Board makes the
determination granting such Option; provided, however, that if the Board
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determines that such grant shall be as of some future date, the date of grant
shall be such future date. Notice of the determination shall be given to each
Employee to whom an Option is so granted within a reasonable time after the date
of such grant.
13. Amendment & Termination of this Plan
(a) Amendment & Termination The Board may amend or terminate this Plan from
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time to time in such respects as the Board may deem advisable and shall make any
amendments which may be required so that Options intended to be Incentive Stock
Options shall at all times continue to be Incentive Stock Options for the
purpose of the Code, except that, without approval of the holders of a majority
of the outstanding shares of the Company's capital stock, no such revision or
amendment shall:
(i) Increase the number of Shares subject to this Plan, other than in
connection with an adjustment under Section 11 of this Plan;
(ii) Materially change the designation of the class of Employees eligible
to be granted Options;
(iii) Remove the administration of this Plan from the Board (other than to
the Committee);
(iv) Materially increase the benefits accruing to participants under this
Plan; or
(v) Extend the term of this Plan.
(b) Effect of Amendment or Termination Except as otherwise provided in Section
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11, any amendment or termination of this Plan shall not affect Options already
granted and such Options shall remain in full force and effect as if this Plan
had not been amended or terminated, unless mutually agreed otherwise between the
Optionee and the Company, which agreement must be in writing and signed by the
Optionee and the Company.
14. Conditions Upon Issuance of Shares
(a) Shares shall not be issued pursuant to the exercise of an Option
unless the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
applicable state securities laws, the rules and regulations promulgated
4.1-8
thereunder, and the requirement of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
(b) As a condition to the exercise of an Option, the Board may require
the person exercising such Option to execute an agreement with, and/or may
require the person exercising such Option to make any representation and
warranty to, the Company as may in the judgment of counsel to the Company be
required under applicable law or regulation, including but not limited to a
representation and warranty that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
appropriate under any of the aforementioned relevant provisions of law.
15. Reservation of Shares
The Company, during the term of this Plan, at all times shall reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of this Plan.
The Company, during the term of this Plan, shall use diligent efforts to
seek to obtain from appropriate regulatory agencies any requisite authorization
in order to issue and sell such number of Shares as shall be sufficient to
satisfy the requirements of this Plan. The inability of the Company to obtain
the requisite authorization(s) deemed by the Company's counsel to be necessary
for the lawful issuance and sale of any Shares hereunder, or the inability of
the Company to confirm to its satisfaction that any issuance and sale of any
Shares hereunder will meet applicable legal requirements, shall relieve the
Company of any liability in respect to the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.
16. Stock Option and Stock Purchase Agreements
Options shall be evidenced by written stock option agreements in such form or
forms as the Board shall approve from time to time. Upon the exercise of an
Option, the Optionee shall sign and deliver to the Company at the Company's
option, (i) a Stock Purchase Agreement
(if required to be executed and delivered to the Company by an Optionee as a
condition to the exercise of an Option) in such form or forms as the Board shall
approve from time to time, and/or (ii) an investment representation statement
acceptable to the Company.
17. Shareholder Approval
Continuance of this Plan shall be subject to approval by the shareholders of the
Company within twelve (12) months before or after the date this Plan is adopted
by the Board. If such shareholder approval is obtained at a duly held
shareholders' meeting, it may be obtained by the affirmative vote of the holders
of a majority of the outstanding shares of the Company entitled to vote thereon.
All Options granted prior to shareholder approval of this Plan are subject to
such approval, and if such approval is not obtained within twelve (12) months
before or after the date this Plan is adopted by the Board all such Options
shall expire and shall be of no further force or effect.
18. Taxes Fees, Expenses & Withholding of Taxes
(a) The Company shall pay all original issue and transfer taxes (but not
income taxes, if any) with respect to the grant of Options and/or the issue and
transfer of Shares pursuant to the exercise thereof, and all other fees and
expenses necessarily incurred by the Company in connection therewith, and will
from time to time use diligent efforts to comply with all laws and regulations
which, in the opinion of counsel for the Company, shall be applicable thereto.
(b) The grant of Options hereunder and the issuance of Shares pursuant
to the exercise thereof is conditioned upon the Company's reservation of the
right to withhold, in accordance with any applicable law, from any compensation
4.1-9
payable to the Optionee any taxes required to be withheld by federal, state or
local law as a result of the grant or exercise of such Option or the sale of the
Shares issued upon exercise thereof. To the extent that compensation or other
amounts, if any, payable to the Optionee are insufficient to pay any taxes
required to be so withheld, the Company may, in its sole discretion, require the
Optionee, as a condition of the exercise of an Option, to pay in cash to the
Company an amount sufficient to cover such tax liability or otherwise to make
adequate provision for the Company's satisfaction of its withholding obligations
under federal and state law.
(c) The Board or any Committee may, in its discretion and upon such terms
and conditions as it may deem appropriate (including the applicable
safe-harbor provisions of SEC Rule 16b-3 and interpretations thereof by the
staff of the Securities and Exchange Commission) provide any or all holders of
outstanding option grants under this Plan with the election (a "Withholding
Election") to have the Company withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such options, one or more of such shares
with an aggregate fair market value equal to the designated percentage (any
multiple of 5% specified by the optionee) of the Federal and State income taxes
("Taxes") incurred in connection with the acquisition of such Shares. In lieu of
such direct withholding, one or more optionees may also be granted the right to
deliver shares of Common Stock to the Company in satisfaction of such Taxes. The
withheld or delivered shares shall be valued at the Fair Market Value on the
applicable determination date for such Taxes (the "Tax Date") or such other date
required by the applicable safe-harbor provisions of SEC Rule 16b-3.
Notwithstanding the foregoing, Optionees subject to the short-swing profit
limitations of Section 16 of the Exchange Act shall have the right to elect to
deliver previously owned stock or make a Withholding Election: (a) six months or
more prior to the Tax Date and/or (b) prior to the Tax Date and within a "window
period": specified in Rule 16(b)-3(e)(iii) promulgated pursuant to the Exchange
Act.
18. Liability of Company
The Company, its Parent or any Subsidiary which is in existence or hereafter
comes into existence shall not be liable to an Optionee or other person if it is
determined for any reason by the Internal Revenue Service or any court having
jurisdiction that any Options intended to be Incentive Stock Options granted
hereunder do not qualify as incentive stock options within the meaning of
Section 422 of the Code.
19. Information to Optionee
The Company shall provide without charge at least annually to each Optionee
during the period his Option is outstanding a balance sheet and income statement
of the Company. In the event that the Company provides annual reports or
periodic reports to its shareholders during the period in which an Optionee's
Option is outstanding, the Company shall provide to each Optionee a copy of each
such report.
20. Notices
Any notice required or permitted hereunder shall be given in writing and shall
be deemed effectively given upon personal delivery or upon deposit in the United
States mail, as first class, registered or certified mail, with postage and fees
prepaid and addressed (i) if to the Company, at its principal place of business,
attention: Secretary, or (ii) if to the Optionee at his address as set forth on
the signature page of his Option Agreement, or at such other address as either
party may from time to time designate in writing to other. It shall be the
obligation of each Optionee and each transferee holding Shares purchased upon
exercise of an Option to provide the Secretary of the Company, by letter mailed
as provided hereinabove, with written notice of his direct mailing address.
4.1-10
21. No Enlargement of Employee Rights This Plan is purely voluntary on the part
of the Company, and the continuance of this Plan shall not be deemed to
constitute a contract between the Company and any Employee, or to be
consideration for or a condition of the employment or service of any Employee.
Nothing contained in this Plan shall be deemed to give any Employee the right to
be retained in the employ or service of the Company, its Parent, Subsidiary or a
successor corporation, or to interfere with the right of the Company or any such
corporations to discharge or retire any Employee at any time with or without
cause and with or without notice. No Employee shall have any right to or
interest in Options authorized hereunder prior to the grant thereof to such
Employee, and upon such grant such Employee shall have only such rights and
interests as are expressly provided herein, subject, however, to all applicable
provisions of the Company's Articles of Incorporation, as the same may be
amended from time to time.
23. Legends on Certificates
(a) Federal Law Unless an appropriate registration statement is filed
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pursuant to the Securities Act of 1933, as amended, with respect to the Options
and Shares issuable under this Plan, each document or certificate representing
such Options or Shares shall be endorsed thereon with a legend substantially as
follows:
"THIS OPTION AND THE SECURITIES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS
SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION
WITH, THE SALE OR DISTRIBUTION THEREOF. NO SALE, TRANSFER OR DISTRIBUTION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
(b) Texas Legend If required by the Texas Securities Commissioner, each
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document or certificate representing the Options or Shares issuable under this
Plan shall be endorsed thereon with a legend substantially as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS OPTION AND THE
SECURITIES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS OPTION, OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE TEXAS SECURITIES COMMISSIONER OF THE STATE OF TEXAS, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S RULES."
(c) Additional Legends Each document or certificate representing the
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Options or Shares issuable under this Plan shall also contain legends as may be
required under applicable blue sky laws or by any Stock Purchase Agreement or
other agreement the execution of which is a condition to the exercise of an
Option under this Plan.
24. Availability of Plan
A copy of this Plan shall be delivered to the Secretary of the Company and shall
be shown by him to any eligible person making reasonable inquiry concerning it.
25. Compliance with Exchange Act Rule 16b-3
With respect to persons subject to Section 16 of the Exchange Act, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3, promulgated pursuant to the Exchange Act, or its successors. To the
extent any provision of this Plan or action by the Board or any Committee fails
so to comply, it shall be deemed null and void to the extent permitted by law
and deemed advisable by the Board or any Committee.
4.1-11
26. Invalid Provisions
In the event that any provision of this Plan is found to be invalid or otherwise
unenforceable under any applicable law, such invalidity or unenforceability
shall not be construed as rendering any other provisions contained herein as
invalid or unenforceable, and all such other provisions shall be given full
force and effect to the same extent as though the invalid or unenforceable
provision was not contained herein.
27. Applicable Law
This Plan shall be governed by and construed in accordance with the laws of the
State of Texas.
4.1-12