Exhibit 10.10
ASTEA INTERNATIONAL INC.
1997 STOCK OPTION PLAN
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1. PURPOSE. This 1997 Stock Option Plan (the "Plan") is intended to
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provide incentives: (a) to the officers and other employees of Astea
International Inc. (the "Company"), its parent (if any) and any present or
future subsidiaries of the Company (collectively, "Related Corporations") by
providing them with opportunities to purchase stock in the Company pursuant to
options granted hereunder which qualify as "incentive stock options" ("ISO" or
"ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code"); (b) to directors, officers, employees and consultants of the
Company and Related Corporations by providing them with opportunities to
purchase stock in the Company pursuant to options granted hereunder which do not
qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"); (c) to
directors, officers, employees and consultants of the Company and Related
Corporations by providing them with awards of stock in the Company ("Awards");
and (d) to directors, officers, employees and consultants of the Company and
Related Corporations by providing them with opportunities to make direct
purchases of stock in the Company ("Purchases"). Both ISOs and Non-Qualified
Options are referred to hereafter individually as an "Option" and collectively
as "Options". Options, Awards and authorizations to make Purchases are referred
to hereafter collectively as "Stock Rights." As used herein, the terms "parent"
and "subsidiary" mean "parent corporation" and "subsidiary corporation",
respectively, as those terms are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
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A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered
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by the Board of Directors of the Company (the "Board") or, subject to
paragraph 2(D) (relating to compliance with Section 162(m) of the Code), by a
committee appointed by the Board (the "Committee"). Hereinafter, all
references in this Plan to the "Committee" shall mean the Board if no
Committee has been appointed. Subject to ratification of the grant or
authorization of each Stock Right by the Board (if so required by applicable
state law), and subject to the terms of the Plan, the Committee shall have
the authority to (i) determine the employees of the Company and Related
Corporations (from among the class of employees eligible under paragraph 3 to
receive ISOs) to whom ISOs may be granted, and to determine (from among the
class of individuals and entities eligible under paragraph 3 to receive Non-
Qualified Options and Awards and to make Purchases) to whom Non-Qualified
Options, Awards and authorizations to make Purchases may be granted; (ii)
determine the time or times at which Options or Awards may be granted or
Purchases made; (iii) determine the exercise price per share subject to each
Option, which
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price shall not be less than the minimum price specified in paragraph 6, and
the purchase price of shares subject to each Purchase; (iv) determine whether
each Option granted shall be an ISO or a Non-Qualified Option; (v) determine
(subject to paragraph 7) the time or times when each Option shall become
exercisable and the duration of the exercise period; (vi) extend the period
during which outstanding Options may be exercised; (vii) determine whether
restrictions such as repurchase options are to be imposed on shares subject
to Options, Awards and Purchases and the nature of such restrictions, if any,
and (viii) interpret the Plan and prescribe and rescind rules and regulations
relating to it. If the Committee determines to issue a Non-Qualified Option,
it shall take whatever actions it deems necessary, under Section 422 of the
Code and the regulations promulgated thereunder, to ensure that such Option
is not treated as an ISO. The interpretation and construction by the
Committee of any provisions of the Plan or of any Stock Right granted under
it shall be final unless otherwise determined by the Board. The Committee may
from time to time adopt such rules and regulations for carrying out the Plan
as it may deem best. No member of the Board or the Committee shall be liable
for any action or determination made in good faith with respect to the Plan
or any Stock Right granted under it.
B. COMMITTEE ACTION. The Committee may select one of its members as
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its chairman, and shall hold meetings at such time and places as it may
determine. Acts by a majority of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be
the valid acts of the Committee. All references in this Plan to the
Committee shall mean the Board if no Committee has been appointed. From time
to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies however caused,
or remove all members of the Committee and thereafter directly administer the
Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be
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granted to members of the Board. All grants of Stock Rights to members of the
Board shall in all other respects be made in accordance with the provisions
of this Plan applicable to other eligible persons. Members of the Board who
either (i) are eligible for Stock Rights pursuant to the Plan or (ii) have
been granted Stock Rights may vote on any matters affecting the
administration of the Plan or the grant of any Stock Rights pursuant to the
Plan, except that no such member shall act upon the granting to himself of
Stock Rights, but any such member may be counted in determining the existence
of a quorum at any meeting of the Board during which action is taken with
respect to the granting to him of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its discretion, may
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take such action as may be necessary to ensure that Stock Rights granted
under the Plan qualify as "qualified performance-based compensation" within
the meaning of Section 162(m) of the Code and applicable regulations
promulgated thereunder ("Performance-Based Compensation"). Such action may
include, in the Board's discretion some or all of the following (i) if the
Board determines that Stock Rights granted under the Plan generally shall
constitute Performance-Based Compensation, the Plan shall be administered, to
the extent required for such Stock Rights to constitute Performance-Based
Compensation by a Committee consisting solely of two or more "outside
directors" (as defined in applicable regulations promulgated under Section
162(m) of the Code) (ii) if any Non-Qualified Options with an exercise price
less than the fair market value per share of Common Stock are granted under
the Plan and the Board determines that such Options should constitute
Performance-Based Compensation such options shall be made exercisable only
upon the attainment of a pre-established objective performance goal
established by the Committee and such grant shall be submitted for and shall
be contingent upon shareholder approval and (iii) Stock Rights granted under
the Plan may be subject to such other terms and conditions as are necessary
for compensation recognized in connection with the exercise or disposition of
such Stock Rights or the disposition of Common Stock acquired pursuant to
such Stock Right to constitute Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
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of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any director (whether or not
an employee), officer, employee or consultant of the Company or any Related
Corporation. The Committee may take into consideration a recipient's individual
circumstances in determining whether to grant an ISO, a Non-Qualified Option or
an authorization to make a Purchase. Granting of any Stock Right to any
individual or entity shall neither entitle that individual or entity to, nor
disqualify him from,
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participation in any other grant of Stock Rights. Any person who owns more than
fifteen percent (15%) of the outstanding shares of the Common Stock of the
Company and who is not an employee of the Company or any person who owns more
than fifteen percent (15%) of the outstanding shares of the Common Stock of the
Company and who is also an officer of the Company, shall be ineligible to
participate in this Plan.
4. STOCK. The stock subject to Options, Awards and Purchases shall be
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authorized but unissued shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 500,000 shares, subject to adjustment as provided in
paragraph 14. If any Option granted under the Plan shall expire or terminate
for any reason without having been exercised in full or shall cease for any
reason to be exercisable in whole or in part, the shares subject to such Options
shall again be available for grants of Stock Rights under the Plan.
The following provision shall be effective only on and after the date of
the initial public offering of shares of Common Stock of the Company pursuant to
the Securities Act of 1933. No employee of the Company or any Related
Corporation may be granted, during the term of the Plan, Options to acquire, in
the aggregate, more than 150,000 shares of Common Stock under the Plan. If any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part or shall be repurchased by the Company, the shares subject to
such Option shall be included in the determination of the aggregate number of
shares of Common Stock deemed to have been granted to such employee under the
Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
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at any time on or after February 19, 1997 and prior to February 19, 2007. The
date of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
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A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS, AND PURCHASES. Subject to
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paragraph 2(D) (relating to compliance with Section 162(A) of the code), the
exercise price per share specified in the agreement relating to each Non-
Qualified Option granted and the purchase price per share of stock granted in
any Award or authorized as a Purchase under the Plan may be less than the fair
market value of the Common Stock of the Company on the date of grant; provided
that in no event shall such exercise price or such purchase price be less than
the minimum legal consideration required therefor under the laws of any
jurisdiction in which the Company or its successors in interest may be
organized.
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B. PRICE FOR ISOS. The exercise price per share specified in the
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agreement relating to each ISO granted under the Plan shall not be less than
the fair market value per share of Common Stock on the date of such grant. In
the case of an ISO to be granted to an employee owning stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Related Corporation, the price per share
specified in the agreement relating to such ISO shall not be less than one
hundred ten percent (110%) of the fair market value per share of Common Stock
on the date of grant. For purposes of determining stock ownership under this
paragraph, the rules of Section 424(d) of the Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee
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may be granted ISOs only to the extent that, in the aggregate under this Plan
and all incentive stock option plans of the Company and any Related
Corporation, ISOs do not become exercisable for the first time by such
employee during any calendar year in a manner which would entitle the
employee to purchase more than $100,000 in fair market value (determined at
the time the ISOs were granted) of Common Stock in that year. Any options
granted to an employee in excess of such amount will be granted as Non-
Qualified Options.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
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granted under the Plan, the Company's Common Stock is publicly traded, "fair
market value" shall be determined as of the date of grant or, if the prices
or quotes discussed in this sentence are unavailable for such date, the last
business day for which such prices or quotes are available prior to the date
such Option is granted and shall mean (i) the average (on that date) of the
high and low prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is then
traded on a national securities exchange; or (ii) the last reported sale
price (on that date) of the Common Stock on the Nasdaq National Market, if
the Common Stock is not then traded on a national securities exchange; or
(iii) the average of the closing bid and asked prices last quoted (on that
date) by an established quotation service for over-the-counter securities, if
the Common Stock is not reported on the Nasdaq National Market. However, if
the Common Stock is not publicly traded at the time an Option is granted
under the Plan, "fair market value" shall be deemed to be the fair value of
the Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
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paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally, and
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(ii) five years from the date of grant in the case of ISOs granted to an
employee owning stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Related
Corporation, as determined under paragraph 6(B). Subject to earlier termination
as provided in paragraphs 9 and 10, the term of each ISO shall be the term set
forth in the original instrument granting such ISO, except with respect to any
part of such ISO that is converted into a Non-Qualified Option pursuant to
paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
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13, each Option granted under the Plan shall be exercisable as follows:
A. FULL VESTING OR PARTIAL VESTING. The Option shall either be fully
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exercisable on the date of grant or shall become exercisable thereafter in
such installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
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exercisable it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Committee or as otherwise
provided in this Plan.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at
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any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to
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accelerate the date of exercise of any installment of any Option; provided
that the Committee shall not accelerate the exercise date of any installment
of any Option granted to any employee as an ISO (and not previously converted
into a Non-Qualified Option pursuant to paragraph 16) if such acceleration
would violate the annual vesting limitation contained in Section 422(d) of
the Code, as described in paragraph 6(C).
9. TERMINATION. If an ISO Optionee ceases to be employed by the Company
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and all Related Corporations other than by reason of death or disability as
defined in paragraph 10, no further installments of his ISOs shall become
exercisable, and his ISOs shall terminate on the earlier of (a) three months
after the date of termination of his employment, or (b) their specified
expiration dates, except to the extent that such ISOs (or unexercised
installments thereof) have been converted into Non-Qualified Options pursuant to
paragraph 17. Employment shall be considered as continuing uninterrupted during
any bona fide leave of absence (such as those attributable to illness, military
obligations or governmental service) provided that the period of such leave does
not exceed ninety (90) days or, if longer, any period during which such
Optionee's right to reemployment is guaranteed by statute or by contract. A bona
fide leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Company or any Related Corporation
to continue the employment of the Optionee after the approved period of absence.
ISOs granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the Optionee
continues to be an employee of the Company or any Related Corporation. Nothing
in
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the Plan shall be deemed to give any grantee of any Stock Right the right to
be retained in employment or other service by the Company or any Related
Corporation for any period of time.
10. DEATH; DISABILITY.
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A. DEATH. If an ISO Optionee ceases to be employed by the Company and
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all Related Corporations by reason of his or her death, any ISO owned by such
Optionee may be exercised, to the extent of the number of shares with respect
to which he or she could have exercised it on the date of his or her death,
by the estate, personal representative or beneficiary who has acquired the
ISO by will or by the laws of descent and distribution, at any time prior to
the earlier of (i) the specified expiration date of the ISO or (ii) 180 days
from the date of the Optionee's death.
B. DISABILITY. If an ISO Optionee ceases to be employed by the
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Company and all Related Corporations by reason of his or her disability, such
Optionee shall have the right to exercise any ISO held by him or her on the
date of termination of employment, to the extent of the number of shares with
respect to which he or she could have exercised it on that date, until the
earlier of (i) the specified expiration date of the ISO or (ii) 180 days from
the date of the termination of the Optionee's employment. For the purposes
of the Plan, the term "disability" shall mean "permanent and total
disability" as defined in Section 22(e)(3) of the Code or successor statute.
11. [Intentionally Omitted].
12. ASSIGNABILITY. Except to the extent permitted by Rule 16b-3, no
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Option shall be assignable or transferable by the grantee except (a) to members
of Optionee's immediate family or (b) by will or by the laws of descent and
distribution or (c) in case of Non-Qualified Options only, pursuant to a valid
domestic relations order, and during the lifetime of the grantee each Option
shall be exercisable only by him.
13. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
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instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 12 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Committee may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other termination
and cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
14. ADJUSTMENTS. Upon the occurrence of any of the following events, an
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Optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided,
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unless otherwise specifically provided in the written agreement between the
Optionee and the Company relating to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
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shall be subdivided or combined into a greater or smaller number of shares or
if the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock
deliverable upon the exercise of Options shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or stock
dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated
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with or acquired by another entity in a merger, sale of all or substantially
all of the Company's assets or otherwise (an "Acquisition"), the Committee or
the board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Options, take one
or more of the following actions: (i) make appropriate provision for the
continuation of such Options by substituting on an equitable basis for the
shares then subject to such Options the consideration payable with respect to
the outstanding shares of Common Stock in connection with the Acquisition; or
(ii) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such
Options any equity securities of the successor corporation; or (iii) upon
written notice to the Optionees, provide that all Options must be exercised,
to the extent then exercisable, within a specified number of days of the date
of such notice, at the end of which period the Options shall terminate; or
(iv) terminate all Options in exchange for a cash payment equal to the excess
of the fair market value of the shares subject to such Options (to the extent
then exercisable) over the exercise price thereof; or (v) accelerate the date
of exercise of such Options or of any installment of any such Options; or
(vi) terminate all Options in exchange for the right to participate in any
stock option or other employee benefit plan of any successor corporation.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a
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recapitalization or reorganization of the Company (other than a transaction
described in subparagraph B above) pursuant to which securities of the
Company or of another corporation are issued with respect to the outstanding
shares of Common Stock, an Optionee upon exercising an Option shall be
entitled to receive for the purchase price paid upon such exercise the
securities he would have received if he had exercised his Option prior to
such recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any adjustments
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made pursuant to subparagraphs A, B or C with respect to ISOs shall be made
only after the Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424 of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs or would cause adverse tax consequences to the
holders, it may refrain from making such adjustments.
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E. DISSOLUTION OR LIQUIDATION. In the event of the proposed
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dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such
other time and subject to such other conditions as shall be determined by the
Committee.
F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
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issuance 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 Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the
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Plan and the Optionee shall receive from the Company cash in lieu of such
fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the foregoing events
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described in subparagraphs A, B or C above, the class and aggregate number of
shares set forth in paragraph 4 hereof that are subject to Stock Rights which
previously have been or subsequently may be granted under the Plan shall also
be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 14 and, subject to
paragraph 2, its determination shall be conclusive.
If any person or entity owning restricted Common Stock obtained by exercise of a
Stock Right made hereunder receives shares or securities or cash in connection
with a corporate transaction described in subparagraphs A, B or C above as a
result of owning such restricted Common Stock, such shares or securities or cash
shall be subject to all of the conditions and restrictions applicable to the
restricted Common Stock with respect to which such shares or securities or cash
were issued, unless otherwise determined by the Committee or the Successor
Board.
15. MEANS OF EXERCISING STOCK RIGHTS. A Stock Right (or any part or
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installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the Committee, through delivery of shares of Common Stock having a
fair market value equal as of the date of the exercise to the cash exercise
price of the Stock Right, or (c) at the discretion of the Committee, by delivery
of the grantee's personal recourse note bearing interest payable not less
frequently than annually at no less than 100% of the lowest applicable Federal
rate, as defined in Section 1274(d) of the Code, or (d) at the discretion of the
Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
If the Committee exercises its discretion to
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permit payment of the exercise price of an ISO by means of the methods set forth
in clauses (b), (c), (d) or (e) of the preceding sentence, such discretion shall
be exercised in writing at the time of the grant of the ISO in question. The
holder of a Stock Right shall not have the rights of a shareholder with respect
to the shares covered by his Stock Right until the date of issuance of a stock
certificate to him for such shares. Except as expressly provided above in
paragraph 14 with respect to changes in capitalization and stock dividends, no
adjustment shall be made for dividends or similar rights for which the record
date is before the date such stock certificate is issued.
16. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board as of
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February 19, 1997, subject (with respect to the validation of ISOs granted under
the Plan) to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained by February 19, 1998, any grants of ISOs under
the Plan made prior to that date will be automatically converted into grants of
Non-Qualified Options. The Plan shall expire at the end of the day on February
18, 2007 (except as to Options outstanding on that date). Subject to the
provisions of paragraph 5 above, Stock Rights may be granted under the Plan
prior to the date of stockholder approval of the Plan. The Board may terminate
or amend the Plan in any respect at any time, except that, without the approval
of the stockholders obtained within 12 months before or after the Board adopts a
resolution authorizing any of the following actions: (a) the total number of
shares that may be issued under the Plan may not be increased (except by
adjustment pursuant to paragraph 14); (b) the provisions of paragraph 3
regarding eligibility for grants of ISOs may not be modified; (c) the provisions
of paragraph 6(B) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
14); and (d) the expiration date of the Plan may not be extended. Except as
otherwise provided in this paragraph 16, in no event may action of the Board or
stockholders alter or impair the rights of a grantee, without his consent, under
any Stock Right previously granted to him.
17. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS.
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Subject to paragraph 14(d), without the prior written consent of the holder of
an ISO, the Committee shall not alter the terms of such ISO (including the means
of exercising such ISO) if such alteration would constitute a modification
(within the meaning of Section 424(b)(3) of the Code). The Committee, at the
written request or with the written consent of any Optionee, may in its
discretion take such actions as may be necessary to convert such Optionee's ISOs
(or any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time prior
to the expiration of such ISOs, regardless of whether the Optionee is an
employee of the Company or a Related Corporation at the time of such conversion.
Such actions may include, but shall not be limited to, extending the exercise
period or reducing the exercise price of the appropriate installments of such
ISOs. At the time of such conversion, the Committee (with the consent of the
Optionee) may impose such conditions on the exercise of the resulting Non-
Qualified Options as the Committee in its discretion may determine, provided
that such conditions shall not be inconsistent with this Plan. Nothing in the
Plan shall be deemed to give any Optionee the right to have such Optionee's ISOs
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converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Committee takes appropriate action. Upon the taking of any such
action, the Company shall issue separate certificates to the optionee with
respect to the Options that are Non-Qualified Options and Options that are ISOs.
18. APPLICATION OF FUNDS. The proceeds received by the Company from the
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sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
19. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
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shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
20. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a Non-
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Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 21), the making of a distribution or other
payment with respect to such stock or securities, or the vesting or transfer of
restricted Common Stock acquired on the exercise of a Stock Right hereunder, the
Company may withhold income and/or employment taxes in respect of amounts that
constitute compensation includible in gross income, or otherwise treated by law
as wages for withholding for income or employment tax purposes. The Committee
in its discretion may condition (i) the exercise of an Option, (ii) the grant of
an Award, (iii) the making of a Purchase of Common Stock for less than its fair
market value, or (iv) the vesting or transferability of restricted Common Stock
acquired by exercising a Stock Right, on the grantee's making satisfactory
arrangement for such withholding. Such arrangement may include payment by the
grantee in cash or by check of the amount of the withholding taxes or, at the
discretion of the Company, by the grantee's delivery of previously held shares
of Common Stock or the withholding from the shares of Common Stock otherwise
deliverable upon exercise of Option shares having an aggregate fair market value
equal to the amount of such withholding taxes. The use of any method of payment
other than by cash or check in some cases may require or cause additional
withholding obligations.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
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granted under the Plan, each ISO Optionee thereby agrees to notify the Company
in writing immediately after such Optionee makes a Disqualifying Disposition (as
described in Sections 421, 422, and 424 of the Code and regulations thereunder)
of any stock acquired pursuant to the exercise of ISOs granted under the Plan.
Generally, a Disqualifying Disposition is any disposition (including any sale)
of such Common Stock occurring on or before the later of the date (a) two years
after the date the employee was granted the ISO, or (b) one year after the date
the employee acquired Common Stock by exercising the ISO.
22. NO EXERCISE OF OPTION IF ENGAGEMENT OR EMPLOYMENT TERMINATED FOR
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CAUSE. If the employment of the Optionee is terminated for "Cause," this option
shall terminate on the date of such termination and this option shall thereupon
not be exercisable to any extent whatsoever. "Cause" is conduct, as determined
by the Board of Directors, involving one or more of the following: (i) gross
misconduct by the Employee which is materially injurious to the Company; or (ii)
the commission of an act of embezzlement, fraud or deliberate disregard of the
rules or policies of the Company which results in material economic loss, damage
or injury to the
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Company; or (iii) the unauthorized disclosure of any trade secret or
confidential information of the Company or any third party who has a business
relationship with the Company or the violation of any noncompetition covenant or
assignment of inventions obligation with the Company; or (iv) the commission of
an act which induces any customer or prospective customer of the Company to
break a contract with the Company or to decline to do business with the Company;
or (v) the conviction of the Employee of a felony involving any financial
impropriety or which would materially interfere with the Employee's ability to
perform his or her services or otherwise be injurious to the Company; or (vi)
the failure of the Employee to perform in a material respect his or her
employment obligations without proper cause. In making such determination, the
Board of Directors shall act fairly and in utmost good faith. For the purposes
of this Section 22, termination of employment shall be deemed to occur when the
Employee receives notice that his employment is terminated.
23. ACCELERATION AND VESTING OF OPTION FOR BUSINESS COMBINATIONS. Upon
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any merger, consolidation, sale of all (or substantially all) of the assets of
the Company, or other business combination involving the sale or transfer of all
(or substantially all) of the capital stock or assets of the Company in which
the Company is not the surviving entity, or, if it is the surviving entity, does
not survive as an operating going concern in substantially the same line of
business (an "Acquisition"), then the remaining unvested portions of any Option
outstanding to any Optionee shall, immediately prior to the consummation of any
of the foregoing events, become vested and immediately exercisable by the
Optionee according to the following formula and dependent upon the length of the
Optionee's continuous months of employment or engagement by the Company prior to
the consummation of the Acquisition, provided, however, that this Section shall
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not apply to any reincorporation of the Company in a different State pursuant to
a migratory merger:
For an ISO Optionee:
(i) If the Optionee has been employed by the Company for 36 months or
more, then the remaining unvested portion of any Option held by such Optionee
shall become fully vested and exercisable.
(ii) If the Optionee has been employed by the Company for more than 30
but less than 36 months, then 80% of the remaining unvested portion of any
Option held by such Optionee shall become fully vested and exercisable.
(iii) If the Optionee has been employed by the Company for more than 24
but less than 30 months, then 50% of the remaining unvested portion of any
Option held by such Optionee shall become fully vested and exercisable.
(iv) If the Optionee has been employed by the Company for more than 18
but less than 24 months, then 40% of the remaining unvested portion of any
Option held by such Optionee shall become fully vested and exercisable.
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(v) If the Optionee has been employed by the Company for more than 12
but less than 18 months, then 30% of the remaining unvested portion of any
Option held by such Optionee shall become fully vested and exercisable.
(vi) If the Optionee has been employed by the Company for more than 6 but
less than 12 months, then 20% of the remaining unvested portion of any Option
held by such Optionee shall become fully vested and exercisable.
(vii) If the Optionee has been employed by the Company for more than 1 but
less than 6 months, then 10% of the remaining unvested portion of any Option
held by such Optionee shall become fully vested and exercisable.
For a Non-Qualified Option Optionee, the remaining unvested portion of any
Option held by such Optionee shall become fully vested and exercisable.
24. GOVERNING LAW; CONSTRUCTION. The validity and construction of the
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Plan and the instruments evidencing Stock Rights shall be governed by the laws
of the State of Delaware or the laws of any jurisdiction in which the Company or
its successors in interest may be organized. In construing this Plan, the
singular shall include the plural and the masculine gender shall include the
feminine and neuter, unless the context otherwise requires.