Exhibit 10.1
NEXTLINK COMMUNICATIONS, INC.
STOCK OPTION PLAN
(as amended on September 30, 1997, December 31, 1997 and February 5, 1998)
SECTION 1. Purpose. The purpose of this Stock Option Plan (this
"Plan") is to provide a means whereby Nextlink Communications, Inc. (the
"Company") or any parent or subsidiary of the Company, as defined in Subsection
5.9 (the "related entities"), may continue to attract, motivate and retain
selected employees, officers and independent contractors who can materially
contribute to the Company's growth and success, and to encourage stock ownership
in the Company through granting incentive stock options or nonqualified stock
options, or both, to purchase the Class A Common Stock of the Company (as
defined in Section 3), so that such key employees and other persons and entities
will more closely identify their interests with those of the Company and its
shareholders. In addition, options under this Plan may serve as replacement
options for options issued under the Equity Option Plan sponsored by the
Company's predecessor.
SECTION 2. Administration. This Plan shall be administered by the
Board of Directors of the Company (the "Board") or, in the event the Board shall
appoint or authorize a committee to administer this Plan, by such committee.
The administrator of this Plan shall hereinafter be referred to as the "Plan
Administrator."
2.1 Procedures. The Board may designate one of the members of the
Plan Administrator as chairperson. The Plan Administrator may hold meetings at
such times and places as it shall determine. The acts of a majority of the
members of the Plan Administrator present at meetings at which a quorum exists,
or acts reduced to or approved in writing by all Plan Administrator members,
shall be valid acts of the Plan Administrator.
2.2 Responsibilities. Except for the terms and conditions explicitly
required in this Plan, the Plan Administrator shall have the authority, in its
discretion, to determine all matters relating to the options to be granted under
this Plan, including selection of the individuals to be granted options, the
number of shares to be subject to each option, the exercise price, and all other
terms and conditions of the options. Grants under this Plan need not be
identical in any respect, even when made simultaneously. The interpretation and
construction by the Plan Administrator of any terms or provisions of this Plan
or any option issued under this Plan, or of any rule or regulation promulgated
in connection with this Plan, shall be conclusive and binding on all interested
parties, so long as such interpretation and construction with respect to
incentive stock options correspond to the requirements of Section 422 of the
Internal Revenue Code (the "Code"), as amended, and the regulations thereunder.
2.3 Section 16(b) Compliance and Bifurcation of Plan. In the event
the Company registers any of its equity securities pursuant to Section 12(b) or
12(g) of the Exchange Act, it is the intention of the Company that this Plan,
and options granted under this Plan, comply in all respects with Rule 16b-3
under the Exchange Act and, if any Plan provision is later found not to be in
compliance with such Section, the provision shall be deemed null and void, and
in all events this Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3. Notwithstanding anything in this Plan to the
contrary, the Board, in its absolute discretion, may
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bifurcate this Plan so as to restrict, limit or condition the use of any
provision of this Plan to participants who are officers and directors subject to
Section 16(b) of the Exchange Act without so restricting, limiting or
conditioning other Plan participants.
SECTION 3. Stock Subject to This Plan. The stock subject to this Plan
shall be the Company's Class A Common Stock (the "Class A Common Stock"),
presently authorized but unissued or now held or subsequently acquired by the
Company as treasury shares. Subject to adjustment as provided in Section 7 of
this Plan, the aggregate amount of Class A Common Stock to be delivered upon the
exercise of all options granted under this Plan shall not exceed 9,854,696
shares as such Class A Common Stock was constituted on the effective date of
this Plan. If any option granted under this Plan expires or is surrendered,
canceled, terminated or exchanged for another option for any reason without
having been exercised in full, the unpurchased shares subject to such option
shall again be available for purposes of this Plan, including use as replacement
options that may be granted in exchange for such surrendered, canceled or
terminated options.
SECTION 4. Eligibility. An incentive stock option may be granted only
to an individual who, at the time the option is granted, is an employee of the
Company (or a corporate related entity, as described in Section 5.9) and who the
Board may from time to time select for participation in this Plan. Members of
the Board shall not be eligible for grants of incentive stock options unless
they are also employees of the Company. At the discretion of the Plan
Administrator, employees and independent contractors of the Company (including
nonemployee directors) or any related entity may receive nonqualified stock
options. Any party to whom an option is granted under this Plan shall be
referred to in this Plan as an "Optionee."
SECTION 5. Terms and Conditions of Options. Options granted under this
Plan shall be evidenced by written agreements that contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan. Notwithstanding the
foregoing, options shall include or incorporate by reference the following terms
and conditions:
5.1 Number of Shares. The maximum number of shares that may be
purchased pursuant to the exercise of each option, which number shall be as
established by the Plan Administrator.
5.2 Price of Shares. The price per share at which each option is
exercisable (the "exercise price") shall be as established by the Plan
Administrator, provided that the Plan Administrator shall act in good faith to
establish the exercise price as follows:
5.2.1 Incentive Stock Options and Nonqualified Stock Options.
With respect to incentive stock options intended to qualify under Section 422 of
the Code, and subject to Subsection 5.2.2 below, the exercise price shall be not
less than the fair market value per share of the Class A Common Stock at the
time the option is granted, except with respect to the substitution of a new
option for an old option, or an assumption of an old option, in accordance with
Code Section 424(a). With respect to nonqualified stock options, the exercise
price shall be the amount set by the Plan Administrator.
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5.2.2 Incentive Stock Options to Greater than 10%
Shareholders. With respect to incentive stock options granted to greater than
10% shareholders of the Company, the exercise price shall be as required by
Section 6.
5.2.3 Fair Market Value. The fair market value per share of
the Class A Common Stock for the purpose of determining the exercise price under
this Section 5.2 shall be determined as follows:
(a) if the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the fair market value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange for the last market trading date prior to the time of
determination as reported in The Wall Street Journal or such other source as the
Plan Administrator deems reliable;
(b) if the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, the fair market value
shall be the mean between the high and low asked prices for the Common Stock on
the last market trading date prior to the day of determination, as reported in
The Wall Street Journal or such other source as the Plan Administrator deems
reliable; or
(c) In the absence of an established market for the Common
Stock, fair market value shall be determined by the Plan Administrator in good
faith at the time the option is granted.
5.3 Term and Maturity. Subject to the restrictions contained in
Section 6 with respect to granting incentive stock options to greater than 10%
shareholders of the Company, the term of each incentive stock option shall be 10
years from the date it is granted unless a shorter period of time is established
by the Plan Administrator, but in no event shall the term of any incentive stock
option exceed 10 years. The term of each nonqualified stock option shall be 15
years from the date it is granted, unless a shorter period of time is
established by the Plan Administrator in the individual option agreement. To
ensure that the Company or related entities will achieve the purpose and receive
the benefits contemplated in this Plan, any option granted under this Plan
shall, unless this condition is waived or modified by the Plan Administrator in
the agreement evidencing the option, or by subsequent resolution of the Plan
Administrator, be exercisable according to the following schedule:
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Period of Optionee's Continuous Relationship Portion of Total Option
With the Company or Related Entity from the Which is Exercisable
Date the Option is Granted
After one year 25%
After two years 50%
After three years 75%
After four years 100%
5.4 Exercise. Subject to the vesting schedule described in
subsection 5.3 above, if any, and to any additional holding period required by
applicable law, each option may be exercised in whole or in part; provided,
however, that only whole shares will be issued pursuant to the exercise of any
option and that the exercise price shall not be less than the par value per
share of the Class A Common Stock at the time the option is exercised. During
an Optionee's lifetime, any stock options granted under this Plan are personal
to him or her and are exercisable solely by such Optionee, except as provided in
Section 5.8. Options shall be exercised by delivery to the Company of notice of
the number of shares with respect to which the option is exercised, together
with payment of the exercise price.
5.5 Payment of Exercise Price. Payment of the option exercise price
shall be made in full at the time the notice of exercise of the option is
delivered to the Company and shall be in cash, bank certified or cashier's check
or personal check (unless at the time of exercise the Plan Administrator in a
particular case determines not to accept a personal check) for the Class A
Common Stock being purchased.
The Plan Administrator can determine at the time the option is granted
for incentive stock options, or at any time before exercise for nonqualified
stock options, that additional forms of payment will be permitted, including
installment payments on such terms and over such period as the Plan
Administrator may determine in its discretion. To the extent permitted by the
Plan Administrator and applicable laws and regulations (including, but not
limited to, federal tax and securities laws and regulations and state corporate
law), an option may be exercised by:
(a) delivery of shares of stock of the Company held by an Optionee
having a fair market value equal to the exercise price, such fair market value
to be determined in good faith by the Plan Administrator;
(b) delivery of a full-recourse promissory note executed by the
Optionee, provided that (i) such note delivered in connection with an incentive
stock option shall, and such note delivered in connection with a nonqualified
stock option may, in the sole discretion of the Plan Administrator, bear
interest at a rate specified by the Plan Administrator but in no case less than
the rate required to avoid imputation of interest (taking into account any
exceptions to the imputed interest rules) for federal income tax purposes; (ii)
the Plan Administrator in its sole discretion shall specify the term and other
provisions of such note at the time an incentive stock
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option is granted or at any time prior to exercise of a nonqualified stock
option; (iii) the Plan Administrator may require that the Optionee pledge the
Optionee's shares to the Company for the purpose of securing the payment of such
note and may require that the certificate representing such shares be held in
escrow in order to perfect the Company's security interest; (iv) the note
provides that 90 days following the Optionee's termination of employment with
the Company or a related entity, the entire outstanding balance under the note
shall become due and payable, if not previously due and payable; and (v) the
Plan Administrator in its sole discretion may at any time restrict or rescind
this right upon notification to the Optionee;
(c) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the regulations of
the Federal Reserve Board, to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price and any federal, state or local
withholding tax obligations that may arise in connection with the exercise;
provided, that the Plan Administrator, in its sole discretion, may at any time
determine that this Subparagraph (c), to the extent the instructions to the
broker call for an immediate sale of the shares, shall not be applicable to any
Optionee who is subject to Section 16(b) of the Exchange Act if such transaction
would result in a violation of Section 16(b), or is not an employee at the time
of exercise;
(d) delivery of a properly executed exercise notice, together with a
request by the Optionee for the Company to pay the exercise price by withholding
from the shares that would otherwise be issued that number of shares having a
fair market value equal to the option exercise price; provided, the Plan
Administrator retains complete discretion to honor or deny the Optionee's
request for such a method of exercise.
5.6 Shareholders' Agreement. To the extent required by the Plan
Administrator upon exercise of an option the Optionee shall agree to enter into
and be bound by the agreement then in effect, if any, between the Company and
its shareholders relating to the repurchase by the Company of its outstanding
Class A Common Stock.
5.7 Withholding Tax Requirement. The Company or any related entity
shall have the right to retain and withhold from any payment of cash or Class A
Common Stock under this Plan the amount of taxes required by any government to
be withheld or otherwise deducted and paid with respect to such payment. At its
discretion, the Company may require an Optionee receiving shares of Class A
Common Stock to reimburse the Company or a related entity for any such taxes
required to be withheld and may withhold any distribution in whole or in part
until the Company, or related entity, is so reimbursed. In lieu of such
withholding or reimbursement, the Company (or related entity) shall have the
right to withhold from any other cash amounts due or to become due from the
Company (or related entity) to the Optionee an amount equal to such taxes or to
retain and withhold a number of shares having a market value not less than the
amount of such taxes required to be withheld as reimbursement for any such taxes
and cancel (in whole or in part) any such shares so withheld.
5.8 Nontransferability of Option. Options granted under this Plan
and the rights and privileges conferred by this Plan may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by the applicable
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laws of descent and distribution; provided, with respect to a non-qualified
stock option, an Optionee may transfer the option to a revocable trust created
by the Optionee for the benefit of his or her descendants, to an immediate
family member or to a partnership in which only immediate family members or such
trusts are partners. Options under this Plan shall not be subject to execution,
attachment or similar process. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any option under this Plan or of any right
or privilege conferred by this Plan, contrary to the Code or to the provisions
of this Plan, or the sale or levy or any attachment or similar process upon the
rights and privileges conferred by this Plan shall be null and void.
Notwithstanding the foregoing, an Optionee may during the Optionee's lifetime,
designate a person who may exercise the option after the Optionee's death by
giving written notice of such designation to the Plan Administrator. Such
designation may be changed from time to time by the Optionee by giving written
notice to the Plan Administrator revoking any earlier designation and making a
new designation.
5.9 Termination of Relationship. If the Optionee's employment
relationship with the Company or any related entity ceases for any reason other
than termination for cause, death or permanent and total disability, and unless
by its terms the option sooner terminates or expires, then the Optionee may
exercise, for a period of three months after such cessation, that portion of the
Optionee's option which is exercisable at the time of such cessation. The
Optionee's option, however, shall terminate at the end of the three month period
following such cessation as to all Shares for which it has not been exercised,
unless such provision is waived in the agreement evidencing the option or by
resolution adopted by the Plan Administrator. If, in the case of an incentive
stock option, an Optionee's relationship with the Company or related entity
changes (i.e., from employee to nonemployee, such as a consultant), such change
shall constitute a termination of an Optionee's employment with the Company or
related entity and the Optionee's incentive stock option shall terminate in
accordance with this subsection. Upon the expiration of the three month period
following cessation of employment, the Plan Administrator shall have sole
discretion in a particular circumstance to extend the exercise period following
such cessation beyond that specified above. If, however, in the case of an
incentive stock option, the Optionee does not exercise the Optionee's option
within three months after cessation of employment, the option will no longer
qualify as an incentive stock option under the Code.
Upon an Optionee's termination of employment for cause, all of the
optionee's outstanding (i.e., unexercised) options issued under this Plan shall
immediately expire and no longer be available for exercise. For purposes of
this Plan, a termination shall be considered for "cause" if the termination is
attributable to the Optionee's: (a) Embezzlement; (b) use of illegal drugs or
alcohol that materially impairs the Optionee's ability to fulfill his or her
duties as an employee or independent contractor; (c) willful disclosure of trade
secrets or confidential information of the Company; (d) dishonesty which results
in substantial harm to the Company; or (e) conviction or confession of a
criminal felony.
If an Optionee's relationship with the Company or any related entity
ceases because of a permanent and total disability, the Optionee's option shall
not terminate, and in the case of an incentive stock option, shall not cease to
be treated as an incentive stock option, until the end of the 12-month period
following such cessation (unless by its terms it sooner terminates
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and expires). As used in this Plan, the term "permanent and total disability"
has the same meaning provided in Code Section 22(e)(3).
For purposes of this subsection 5.9, a transfer of relationship
between or among the Company and/or any related entity shall not be deemed to
constitute a cessation of relationship with the Company or any of its related
entities. For purposes of this subsection 5.9, with respect to incentive stock
options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first 90 days of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
As used in this Plan, the term "related entity," when referring to a
subsidiary, shall mean any business entity (other than the Company) which, at
the time of the granting of the option, is in an unbroken chain of entities
ending with the Company, if stock or voting interests possessing 50% or more of
the total combined voting power of all classes of stock or other ownership
interests of each of the entities other than the Company is owned by one of the
other entities in such chain. When referring to a parent entity, the term
"related entity" shall mean any entity in an unbroken chain of entities ending
with the Company if, at the time of the granting of the option, each of the
entities other than the Company owns stock or other ownership interests
possessing 50% or more of the total combined voting power of all classes of
stock (or other ownership interests) in one of the other entities in such chain.
In addition, with respect to an incentive stock option, the definition of
"related entity" as used in this Plan shall apply by only considering entities
that are corporations.
5.10 Death of Optionee. If an Optionee dies while he or she has a
relationship with the Company or any related entity or dies within the three
month period (or 12-month period in the case of totally disabled Optionees)
following cessation of such relationship, any option held by such Optionee to
the extent that the Optionee would have been entitled to exercise such option,
may be exercised within one year after his or her death by the personal
representative of his or her estate or by the person or persons to whom the
Optionee's rights under the option shall pass by will or by the applicable laws
of descent and distribution.
5.11 Status of Shareholder. Neither the Optionee nor any party to
which the Optionee's rights and privileges under the option may pass shall be,
or have any of the rights or privileges of, a shareholder of the Company with
respect to any of the shares issuable upon the exercise of any option granted
under this Plan unless and until such option has been exercised.
5.12 Continuation of Employment. Nothing in this Plan or in any
option granted pursuant to this Plan shall confer upon any Optionee any right to
continue in the employ of the Company or of a related entity, or to interfere in
any way with the right of the Company or of any related entity to terminate his
or her employment or other relationship with the Company or a related entity at
any time.
5.13 Modification and Amendment of Option. Subject to the
requirements of Code Section 422 with respect to incentive stock options and to
the terms and conditions and within
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the limitations of this Plan, the Plan Administrator may modify or amend
outstanding options granted under this Plan. The modification or amendment of
an outstanding option shall not, without the consent of the Optionee, impair or
diminish any of his or her rights or any of the obligations of the Company under
such option. Except as otherwise provided in this Plan, no outstanding option
shall be terminated without the consent of the Optionee. Unless the Optionee
agrees otherwise, any changes or adjustments made to outstanding incentive stock
options granted under this Plan shall be made in such a manner so as not to
constitute a "modification" as defined in Code Section 424(h) and so as not to
cause any incentive stock option issued hereunder to fail to continue to qualify
as an incentive stock option as defined in Code Section 422(b).
5.14 Limitation on Value for Incentive Stock Options. As to all
incentive stock options granted under the terms of this Plan, to the extent that
the aggregate fair market value (determined at the time the incentive stock
option is granted) of the stock with respect to which incentive stock options
are exercisable for the first time by the Optionee during any calendar year
(under this Plan and all other incentive stock option plans of the Company, a
related entity or a predecessor corporation) exceeds $100,000, those options (or
the portion of an option) beyond the $100,000 threshold shall be treated as
nonqualified stock options. The previous sentence shall not apply if the
Internal Revenue Service publicly rules, issues a private ruling to the Company,
any Optionee, or any legatee, personal representative or distributee of an
Optionee or issues regulations changing or eliminating such annual limit.
SECTION 6. Greater Than 10% Shareholders.
6.1 Exercise Price and Term of Incentive Stock Options. If incentive
stock options are granted under this Plan to employees who own more than 10% of
the total combined voting power of all classes of stock of the Company or any
related entity, the term of such incentive stock options shall not exceed five
years and the exercise price shall be not less than 110% of the fair market
value of the Class A Common Stock at the time the incentive stock option is
granted. This provision shall control notwithstanding any contrary terms
contained in an option agreement or any other document.
6.2 Attribution Rule. For purposes of subsection 6.1, in determining
stock ownership, an employee shall be deemed to own the stock owned, directly or
indirectly, by or for his brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be deemed to be owned proportionately by or
for its shareholders, partners or beneficiaries. If an employee or a person
related to the employee owns an unexercised option or warrant to purchase stock
of the Company, the stock subject to that portion of the option or warrant which
is unexercised shall not be counted in determining stock ownership. For
purposes of this Section 6, stock owned by an employee shall include all stock
actually issued and outstanding immediately before the grant of the incentive
stock option to the employee.
SECTION 7. Adjustments Upon Changes in Capitalization. The aggregate
number and class of shares for which options may -be granted under this Plan,
the number and class of shares covered by each outstanding option and the
exercise price per share thereof (but not the total
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price), and each such option, shall all be proportionately adjusted for any
increase or decrease in the number of issued shares of Class A Common Stock of
the Company resulting from a split-up or consolidation of shares or any like
capital adjustment, or the payment of any stock dividend.
7.1 Effect of Liquidation, Reorganization or Change in Control.
7.1.1 Cash, Stock or Other Property for Stock. Except as
provided in subsection 7.1.2, upon a merger (other than a merger of the Company
in which the holders of Class A Common Stock immediately prior to the merger
have the same proportionate ownership of Class A Common Stock in the surviving
corporation immediately after the merger), consolidation, acquisition of
property or stock, separation, reorganization (other than a mere reincorporation
or the creation of a holding company) or liquidation of the Company, as a result
of which the shareholders of the Company receive cash, stock or other property
in exchange for or in connection with their shares of Class A Common Stock, any
option granted under this Plan shall terminate. Notwithstanding the foregoing,
the Optionee shall have the right immediately prior to any such merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to exercise such option in whole or in part, to the extent the
vesting requirements set forth in this Plan have been satisfied, unless stated
otherwise in the Optionee's individual option agreement.
7.1.2 Conversion of Options on Stock for Stock Exchange. If
the shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Class A Common Stock in any
transaction involving a merger (other than a merger of the Company in which the
holders of Class A Common Stock immediately prior to the merger have the same
proportionate ownership of common stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), all options granted under this Plan shall be converted into
options to purchase shares of Exchange Stock unless the Company and the
corporation issuing the Exchange Stock, in their sole discretion, determine that
any or all such options granted under this Plan shall not be converted into
options to purchase shares of Exchange Stock, but instead shall terminate in
accordance with the provisions of subsection 7.1.1. The amount and price of
converted options shall be determined by adjusting the amount and price of the
options granted under this Plan in the same proportion as used for determining
the number of shares of Exchange Stock the holders of the Class A Common Stock
receive in such merger, consolidation, acquisition of property or stock,
separation or reorganization. Unless accelerated by the Board, the vesting
schedule set forth in the option agreement shall continue to apply for the
Exchange Stock.
7.1.3 Change in Control. In the event of a "Change in
Control," as defined in Section 7.1.4 below, of the Company after the Company
has registered any of its equity securities pursuant to Section 12(b) or 12(g)
of the Exchange Act, unless otherwise determined by the Board prior to the
occurrence of such Change in Control, any options or portions of such options
outstanding as of the date such Change in Control is determined to have occurred
that are not yet fully vested shall not become fully vested merely by the
occurrence of a Change in Control.
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7.1.4 Definition of "Change in Control." For purposes of this
Plan, a "Change in Control" shall mean (a) the first approval by the Board or by
the stockholders of the Company of an Extraordinary Event, (b) a Purchase, or
(c) a Board Change.
For purposes of the Plan, an "Extraordinary Event" shall mean any of
the following actions:
(i) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
Class A Common Stock would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of common stock
immediately prior to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger;
(ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, the assets of
the Company; or
(iii) the adoption of any plan or proposal for liquidation or
dissolution of the Company.
For purposes of the Plan, a "Purchase" shall mean the acquisition by
any person (as such term is defined in Section 13(d) of the Exchange Act) of any
shares of Class A Common Stock or securities convertible into Class A Common
Stock) without the prior approval of a majority of the Continuing Directors (as
defined below) of the Company, if after making such acquisition such person is
the beneficial owner (as such term is defined in Rule 13d-3 under the Exchange
Act) directly or indirectly of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding securities
(calculated as provided in paragraph (d) of such Rule 13d-3).
For purposes of the Plan, a "Board Change" shall have occurred if
individuals who constitute the Board of the Company at the time of adoption of
this Plan (the "Continuing Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a Director
subsequent to the date of adoption of this Plan whose nomination for election
was approved by a vote of at least a majority of the Continuing Directors (other
than a nomination of an individual whose initial assumption of office is in
connection with an actual threatened election contest relating to the election
of the Directors of the Company, as such terms are used in Rule 14a-11 of
Regulation 14A under the Exchange Act) shall be deemed to be a Continuing
Director.
7.2 Fractional Shares. In the event of any adjustment in the number
of shares covered by any option, any fractional shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full shares resulting from such adjustment.
7.3 Determination of Board to Be Final. All Section 7 adjustments
shall be made by the Board, and its determination as to what adjustments shall
be made, and the extent of such adjustments, shall be final, binding and
conclusive. Unless an Optionee agrees otherwise,
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any change or adjustment to an incentive stock option shall be made in such a
manner so as not to constitute a "modification" as defined in Code Section
424(h) and so as not to cause his or her incentive stock option issued under
this Plan to fail to continue to qualify as an incentive stock option as defined
in Code Section 422(b).
SECTION 8. Securities Regulation. Shares shall not be issued with
respect to an option granted under this Plan unless the exercise of such option
and the issuance and delivery of such shares pursuant to the exercise of such
option shall comply with all relevant provisions of law, including, without
limitation, any applicable state securities laws, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements 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, including the availability of an exemption from
registration for the issuance and sale of any shares under this Plan. Inability
of the Company to obtain from any regulatory body having jurisdiction, the
authority deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares under this Plan or the unavailability of an
exemption from registration for the issuance and sale of any shares under this
Plan shall relieve the Company of any liability in respect of the nonissuance or
sale of such shares as to which such requisite authority shall not have been
obtained.
As a condition to the exercise of an option, the Company may require
the Optionee to represent and warrant at the time of any such exercise 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 required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order
against any shares of stock may be placed on the official stock books and
records of the Company, and a legend indicating that the stock may not be
pledged, sold or otherwise transferred unless an opinion of counsel is provided
(concurred in by counsel for the Company) stating that such transfer is not in
violation of any applicable law or regulation, may be stamped on stock
certificates in order to assure exemption from registration. The Plan
Administrator may also require such other action or agreement by the Optionees
as may from time to time be necessary to comply with the federal and state
securities laws. THIS PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE
REGISTRATION OF THE OPTIONS OR STOCK HEREUNDER.
Should any of the Company's capital stock of the same class as the
stock subject to options granted under this Plan be listed on a national
securities exchange, all stock issued under this Plan if not previously listed
on such exchange shall be authorized by that exchange for listing on such
exchange prior to the issuance of such stock.
SECTION 9. Amendment and Termination.
9.1 Board Action. The Board may at any time suspend, amend or
terminate this Plan, provided that except as set forth in Section 7, the
approval of the Company's shareholders is necessary within 12 months before or
after the adoption by the Board of any amendment which will:
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(a) increase the number of shares which are to be reserved for
the issuance of options under this Plan;
(b) permit the granting of stock options to a class of persons
other than those presently permitted to receive stock options under this Plan;
or
(c) require shareholder approval under applicable law, including
Section 16(b) of the Exchange Act.
Any amendment to this Plan that would constitute a "modification" to
incentive stock options outstanding on the date of such amendment shall not be
applicable to outstanding incentive stock options, but shall have prospective
effect only, unless individual Optionees agree otherwise.
9.2 Automatic Termination. Unless sooner terminated by the Board,
this Plan shall terminate ten years from the earlier of (a) the date on which
this Plan is adopted by the Board or (b) the date on which this Plan is approved
by the shareholders of the Company. No option may be granted after such
termination or during any suspension of this Plan. The amendment or termination
of this Plan shall not, without the consent of the option holder, alter or
impair any rights or obligations under any option previously granted under this
Plan.
SECTION 10. Effectiveness of This Plan. This Plan shall become
effective upon adoption by the Board so long as it is approved by the Company's
shareholders any time within 12 months before or after the adoption of this
Plan.
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