EXHIBIT 4.1
STOCK OPTION PLAN
FOR KEY EMPLOYEES
OF
COBBLESTONE HOLDINGS, INC.
Cobblestone Holdings, Inc., a corporation organized under the laws of
the State of Delaware, hereby adopts this Stock Option Plan for Key Employees of
Cobblestone Holdings, Inc. The purposes of this Plan are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its key Employees who
have been or will be given responsibility for the management or administration
of the Company's business affairs, by assisting them to become owners of the
Company's Common Stock and thus to benefit directly from its growth, development
and financial success.
(2) To enable the Company to obtain and retain the services of the
type of professional, technical and managerial employees considered essential to
the long-range success of the Company by providing and offering them an
opportunity to become owners of the Company's Common Stock under options,
including options that are intended to qualify as "incentive stock options"
under Section 422 of the Code.
ARTICLE I
DEFINITIONS
-----------
Whenever the following terms are used in this Plan, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall include the feminine and neuter and the
singular shall include the plural, where the context so indicates.
Section 1.1 - Board
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"Board" shall mean the Board of Directors of the Company.
Section 1.2 - Code
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
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Section 1.3 - Company
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"Company" shall mean Cobblestone Holdings, Inc. In addition, "Company"
shall mean any corporation assuming, or issuing new employee stock options in
substitution for, Incentive Stock Options, outstanding under the Plan, in a
transaction to which Section 424(a) of the Code applies.
Section 1.4 - Director
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"Director" shall mean a member of the Board.
Section 1.5 - Employee
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"Employee" shall mean any employee (as defined in accordance with the
regulations and revenue rulings then applicable under Section 3401(c) of the
Code) of the Company, or of any corporation which is then a Parent Corporation
or a Subsidiary, whether such employee is so employed at the time this Plan is
adopted or becomes so employed subsequent to the adoption of this Plan.
Section 1.6 - Exchange Act
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.7 - Incentive Stock Option
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"Incentive Stock Option" shall mean an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive Stock Option
by the Board.
Section 1.8 - Non-Qualified Option
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"Non-Qualified Option" shall mean an Option which is not an
Incentive Stock Option and which is designated as a Non-Qualified Option by
the Board.
Section 1.9 - Officer
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"Officer" shall mean an officer of the Company, as defined in
Rule 16a-1(f) under the Exchange Act, as such Rule may be amended in the future.
Section 1.10 - Option
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"Option" shall mean an option to purchase Common Stock of the Company,
granted under the Plan. "Options" includes both Incentive Stock Options and
Non-Qualified Options.
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Section 1.11 - Optionee
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"Optionee" shall mean an Employee to whom an Option is granted under
the Plan.
Section 1.12 - Parent Corporation
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"Parent Corporation" shall mean any corporation in an unbroken
chain of corporations ending with the Company if each of the corporations
other than the Company then owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Section 1.13 - Plan
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"Plan" shall mean this Stock Option Plan for Key Employees of
Cobblestone Holdings, Inc.
Section 1.14 - Secretary
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"Secretary" shall mean the Secretary of the Company.
Section 1.15 - Securities Act
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"Securities Act" shall mean the Securities Act of 1933, as amended.
Section 1.16 - Subsidiary
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"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
Section 1.17 - Termination of Employment
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"Termination of Employment" shall mean the time when the
employee-employer relationship between the Optionee and the Company, a Parent
Corporation or a Subsidiary is terminated for any reason, with or without
cause, including, but not by way of limitation, a termination by resignation,
discharge, death or retirement, but excluding terminations where there is a
simultaneous reemployment by the Company, a Parent Corporation or a Subsidiary.
The Board, in its absolute discretion, shall determine the effect of all other
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether
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particular leaves of absence constitute Terminations of Employment; provided,
however, that, with respect to Incentive Stock Options, a leave of absence shall
constitute a Termination of Employment if, and to the extent that, such leave
of absence interrupts employment for the purposes of Section 422(a)(2) of the
Code and the then applicable regulations and revenue rulings under said Section.
ARTICLE II
SHARES SUBJECT TO PLAN
----------------------
Section 2.1 - Shares Subject to Plan
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The shares of stock subject to Options shall be shares of the
Company's $.01 par value Common Stock. The aggregate number of such shares
which may be issued upon exercise of Options shall not exceed 250,000.
Section 2.2 - Unexercised Options
- ---------------------------------
If any Option expires or is cancelled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
optioned hereunder, subject to the limitations of Section 2.1.
Section 2.3 - Changes in Company's Shares
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In the event that the outstanding shares of Common Stock of the
Company are hereafter changed into or exchanged for a different number of kind
of shares or other securities of the Company, or of another corporation, by
reason or reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares,
appropriate adjustments shall be made by the Board in the number and kind of
shares for the purchase of which Options may be granted, including adjustments
of the limitations in Section 2.1 on the maximum number and kind of shares
which may be issued on exercise of Options.
ARTICLE III
GRANTING OF OPTIONS
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Section 3.1 - Eligibility
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Any key Employee of the Company or of any corporation which is then
a Parent Corporation or a Subsidiary shall be eligible to be granted Options,
except as provided in Section 3.2.
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Section 3.2 - Qualification of Incentive Stock Options
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No Incentive Stock Option shall be granted unless such Option, when
granted, qualifies as an "incentive stock option" under Section 422 of the Code.
Section 3.3 - Granting of Options
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(a) The Board shall from time to time, in its absolute discretion:
(i) Determine which Employees are key Employees and select from
among the key Employees (including those to whom Options have been
previously granted under the Plan) such of them as in its opinion should
be granted Options; and
(ii) Determine the number of shares to be subject to such
Options granted to such selected key Employees, and determine whether such
Options are to be Incentive Stock Options or Non-Qualified Options; and
(iii) Determine the terms and conditions of such Options,
consistent with the Plan.
(b) Upon the selection of a key Employee to be granted an Option, the
Board shall instruct the Secretary to issue such Option and may impose such
conditions on the grant of such Option as it deems appropriate. Without limiting
the generality of the preceding sentence, the Board may, in its discretion and
on such terms as it deems appropriate, require as a condition on the grant of an
Option to an Employee that the Employee surrender for cancellation some or all
of the unexercised Options which have been previously granted to him. An Option
the grant of which is conditioned upon such surrender may have an option price
lower (or higher) than the option price of the surrendered Option, may cover the
same (or a lesser or greater) number of shares as the surrendered Option, may
contain such other terms as the Board deems appropriate and shall be exercisable
in accordance with its terms, without regard to the number of shares, price,
option period or any other term or condition of the surrendered Option.
ARTICLE IV
TERMS OF OPTIONS
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Section 4.1 - Option Agreement
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Each Option shall be evidenced by a written Stock Option Agreement,
which shall be executed by the Optionee and an authorized Officer of the Company
and which shall contain such terms and conditions as the Board shall determine,
consistent with the Plan. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and
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conditions as may be necessary to qualify such Options as "incentive stock
options" under Section 422 of the Code.
Section 4.2 - Option Price
- --------------------------
(a) The price of the shares subject to each Option shall be set by
the Board; provided, however, that the price per share shall be not less than
100% of the fair market value of such shares on the date such Option is granted;
provided, further, that, in the case of an Incentive Stock Option, the price
per share shall not be less than 110% of the fair market value of such shares
on the date such Option is granted in the case of an individual then owning
(within the meaning of Section 424(d)of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company, any Subsidiary
or any Parent Corporation.
(b) For purposes of the Plan, the fair market value of a share of the
Company's Common Stock as of a given date shall be: (i) the closing price of a
share of the Company's Common Stock on the principal exchange on which shares
of the Company's Common Stock are then trading, if any, on the day previous
to such date, or, if shares were not traded on the day previous to such date,
then on the next preceding trading day during which a sale occurred; or (ii) if
such Common Stock is not traded on an exchange but is quoted on NASDAQ or a
successor quotation system, (1) the last sales price (if the Company's Common
Stock is then listed a National Market Issue under the NASD National Market
System) or (2) the mean between the closing representative bid and asked prices
(in all other cases) for the Company's Common Stock on the day previous to such
date as reported by NASDAQ or such successor quotation system; or (iii) if such
Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and asked prices
for the Company's Common Stock, on the day previous to such date, as determined
in good faith by the Board; or (iv) if the Company's Common Stock is not
publicly traded, the fair market value established by the Board acting in good
faith.
Section 4.3 - Commencement of Exercisability
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(a) Except as the Board may otherwise provide with respect to Options
granted to Employees who are not Officers, no Option may be exercised in whole
or in part during the first year after such Option is granted.
(b) Subject to the provisions of Sections 4.3(a), 4.3(c), 4.3(d) and
7.3, Options shall become exercisable at such times and in such installments
(which may be cumulative) as the Board shall provide in the terms of each
individual Option; provided, however, that by a resolution adopted after an
Option is granted the Board may, on such terms and conditions as it may
determine to be appropriate and subject to Sections 4.3(a),
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4.3(c), 4.3(d) and 7.3, accelerate the time at which such Option or any
portion thereof may be exercised.
(c) No portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable.
(d) Notwithstanding any other provision of this Plan, in the case
of an Incentive Stock Option, the aggregate fair market value (determined at
the time the Incentive Stock Option is granted) of the shares of the Company's
stock with respect to which "incentive stock options" (within the meaning
of Section 422 of the Code) are exercisable for the first time by the Optionee
during any calendar year (under the Plan and all other incentive stock option
plans of the Company, any Subsidiary and any Parent Corporation) shall not
exceed $100,000.
Section 4.4 - Expiration of Options
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(a) No Option may be exercised to any extent by anyone after the
first to occur of the following events:
(i) The expiration of ten years from the date the Option was
granted; or
(ii) With respect to an Incentive Stock Option in the case of
an Optionee owning (within the meaning of Section 424(d) of the Code), at
the time the Incentive Stock Option was granted, more than 10% of the
total combined voting power of all classes of stock of the Company, any
Subsidiary or any Parent Corporation, the expiration of five years from
the date the Incentive Stock Option as granted; or
(iii) Except in the case of any Optionee who is disabled (within
the meaning of Section 22(e)(3) of the Code), the expiration of three
months from the date of the Optionee's Termination of Employment for any
reason other than such Optionee's death unless the Optionee dies within
said three-month period; or
(iv) In the case of an Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of one year from
the date of the Optionee's Termination of Employment for any reason other
than such Optionee's death unless the Optionee dies within said one-year
period; or
(v) The expiration of one year from the date of the
Optionee's death.
(b) Subject to the provisions of Section 4.4(a), the Board shall
provide, in the terms of each individual Option, when such Option expires and
becomes unexercisable; and (without limiting the generality of the foregoing)
the Board may provide in the terms of
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individual Options that said Options expire immediately upon a Termination
of Employment for any reason.
Section 4.5 - Consideration
- ---------------------------
In consideration of the granting of an Option, the Optionee shall
agree, in the written Stock Option Agreement, to remain in the employ of the
Company, a Parent Corporation or a Subsidiary for a period of at least one year
after the Option is granted. Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to continue in
the employ of the Company, any Parent Corporation or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company, its Parent
Corporations and its Subsidiaries, which are hereby expressly reserved, to
discharge any Optionee at any time for any reason whatsoever, with or without
cause.
Section 4.6 - Adjustments in Outstanding Options
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In the event that the outstanding shares of the stock subject to
Options are changed into or exchanged for a different number or kind of shares
of the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split-up, stock
dividend or combination of shares, the Board shall make an appropriate and
equitable adjustment in the number and kind of shares as to which all
outstanding Options, or portions thereof then unexercised, shall be exercisable,
to the end that after such event the Optionee's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in an
outstanding Option shall be made without change in the total price applicable
to the Option or the unexercised portion of the Option (except for any change
in the aggregate price resulting from rounding-off of share quantities or
prices) and with any necessary corresponding adjustment in Option price per
share; provided, however, that, in the case of Incentive Stock Options, each
such adjustment shall be made in such manner as not to constitute a
"modification" within the meaning of Section 424(h)(3) of the Code. Any such
adjustment made by the Board shall be final and binding upon all Optionees, the
Company and all other interested persons.
Section 4.7 - Merger, Consolidation, Acquisition, Liquidation or Dissolution
- ----------------------------------------------------------------------------
Notwithstanding the provisions of Section 4.6, in its absolute
discretion, and on such terms and conditions as it deems appropriate, the
Board may provide by the terms of any Option that such Option cannot be
exercised after the merger or consolidation of the Company with or into
another corporation, the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock or the liquidation or dissolution of the Company; and
if the Board so provides, it may, in its absolute discretion and on such terms
and conditions as it deems appropriate, also provide, either by the terms of
such Option or by a resolution adopted prior to the occurrence of such merger,
consolidation, acquisition, liquidation or dissolution, that,
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for some period of time prior to such event, such Option shall be exercisable
as to all shares covered hereby, notwithstanding anything to the contrary in
Section 4.3(a), Section 4.3(b) and/or any installment provisions of such Option,
but subject to Section 4.3(d).
ARTICLE V
EXERCISE OF OPTIONS
-------------------
Section 5.1 - Person Eligible to Exercise
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During the lifetime of the Optionee, only he may exercise an Option
(or any portion thereof) granted to him. After the death of the Optionee, any
exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock Option Agreement,
be exercised by his personal representative or by any person empowered to do so
under the deceased Optionee's will or under the then applicable laws of descent
and distribution.
Section 5.2 - Partial Exercise
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At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Stock Option Agreement, such Option or portion
thereof may be exercised in whole or in part; provided, however, that the
company shall not be required to issue fractional shares and the Board may,
by the terms of the Option, require any partial exercise to be with respect to
a specified minimum number of shares.
Section 5.3 - Manner of Exercise
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An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:
(a) Notice in writing signed by the Optionee or other person
then entitled to exercise such Option or portion, stating that such Option or
portion is exercised, such notice complying with all applicable rules
established by the Board;
(b) Full payment (in cash or by check) for the shares with respect
to which such Option or portion is thereby exercised;
(c) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option;
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(d) Such representations and documents as the Board, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Board may, in its absolute discretion, also
take whatever additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and
issuing stop-transfer orders to transfer agents and registrars; and
(e) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.
Section 5.4 - Conditions to Issuance of Stock Certificates
- ----------------------------------------------------------
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the
Company. The Company shall not be required to issue or deliver any certificate
or certificates for shares of stock purchased upon the exercise of any Option
or portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges
on which such class of stock is then listed; and
(b) The completion of any registration or other qualification of
such shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body, which the Board shall, in its absolute discretion, deem necessary or
advisable; and
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Board shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of
all amounts which it is required to withhold under federal, state or local law
in connection with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Board may establish from time to time for
reasons of administrative convenience.
Section 5.5 - Rights as Shareholders
- ------------------------------------
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect of any shares
purchasable upon the exercise of
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any part of an Option unless and until certificates representing such shares
have been issued by the Company to such holders.
Section 5.6 - Transfer Restrictions
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Unless otherwise approved in writing by the Board, no shares acquired
upon exercise of any Option by any Officer may be sold, assigned, pledged,
encumbered or otherwise transferred until at least six months have elapsed from
(but excluding) the date that such Option was granted. The Board, in its
absolute discretion, may impose such other restrictions on the transferability
of the shares purchasable upon the exercise of an Option as it deems
appropriate. Any such other restriction shall be set forth in the respective
Stock Option Agreement and may be referred to on the certificates evidencing
such shares. The Board may require the Employee to give the Company prompt
notice of any disposition of shares of stock, acquired by exercise of an
Incentive Stock Option, within two years from the date of granting such Option
or one year after the transfer of such shares to such Employee. The Board may
direct that the certificates evidencing shares acquired by exercise of an
Incentive Stock Option refer to such requirement to give prompt notice of
disposition.
ARTICLE VI
ADMINISTRATION
--------------
Section 6.1 - Duties and Powers of Board
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It shall be the duty of the Board to conduct the general
administration of the Plan in accordance with its provisions. The Board shall
have the power to interpret the Plan and the Options and to adopt such rules for
the administration, interpretation and application of the Plan as are consistent
therewith and to interpret, amend or revoke any such rules. Any such
interpretations and rules in regard to Incentive Stock Options shall be
consistent with the basic purpose of the Plan to grant "incentive stock options"
within the meaning of Section 422 of the Code.
Section 6.2 - Professional Assistance; Good Faith Actions
- ---------------------------------------------------------
All expenses and liabilities incurred by members of the Board in
connection with the administration of the Plan shall be borne by the Company.
The Board may employ attorneys, consultants, accountants, appraisers, brokers or
other persons. The Board, the Company and its Officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the Board
in good faith shall be final and binding upon all Optionees, the Company and all
other interested persons. No member of the Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan or the
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Options, and all members of the Board shall be fully protected by the Company
in respect to any such action, determination or interpretation.
ARTICLE VII
OTHER PROVISIONS
----------------
Section 7.1 - Options Not Transferable
- --------------------------------------
No Option or interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the Optionee or his successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section 7.1 shall
prevent transfers by will or by the applicable laws of descent and distribution.
Section 7.2 - Amendment, Suspension or Termination of the Plan
- --------------------------------------------------------------
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board. However,
without approval of the Company's shareholders given within 12 months before or
after the action by the Board, no action of the Board may, except as provided in
Section 2.3, increase any limit imposed in Section 2.1 on the maximum number of
shares which may be issued on exercise of Options, materially modify the
eligibility requirements of Section 3.1, reduce the minimum Option price
requirements of Section 4.2(a) or extend the limit imposed on this Section 7.2
on the period during which Options may be granted. Neither the amendment,
suspension nor termination of the Plan shall, without the consent of the holder
of the Option, impair any rights or obligations under any Option theretofore
granted. No Option may be granted during any period of suspension nor after
termination of the Plan, and in no event may any Option be granted under this
Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's shareholders under Section 7.3.
Section 7.3 - Approval of Plan by Shareholders
- ----------------------------------------------
This Plan will be submitted for the approval of the Company's
shareholders within 12 months after the date of the Board's initial adoption of
the Plan. Options may be
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granted prior to such shareholder approval; provided, however, that such Options
shall not be exercisable prior to the time when the Plan is approved by the
shareholders; provided, further, that is such approval has not been obtained at
the end of said 12-month period, all Options previously granted under the Plan
shall thereupon be cancelled and become null and void.
Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans
- ---------------------------------------------------------------------
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary. Nothing in this Plan shall be construed to limit the right of the
Company, any Parent Corporation or any Subsidiary (a) to establish any other
forms of incentives or compensation for employees of the Company, any Parent
Corporation or any Subsidiary or (b) to grant or assume options otherwise than
under this Plan in connection with any proper corporate purpose, including, but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, firm or association.
Section 7.5 - Titles
- --------------------
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan.
* * * *
I hereby certify that the foregoing Plan was duly adopted by the Board
of Directors of Cobblestone Holdings, Inc. on January 24, 1995.
Executed on this 11th day of December, 1997.
/s/ Stefan C. Karnavas
----------------------
Secretary
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* * * *
I hereby certify that the foregoing Plan was duly approved by the
shareholders of Cobblestone Holdings, Inc. on January 24, 1995.
Executed on this 23rd day of June, 1998.
/s/ Stefan C. Karnavas
-----------------------
Secretary
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