EXHIBIT 10.1
EXCEL SWITCHING CORPORATION
AMENDED AND RESTATED 1997 STOCK OPTION PLAN
1. PURPOSE. This Amended and Restated 1997 Stock Option Plan (the
"Plan") is intended to provide incentives: (a) to the officers and other
employees of Excel Switching Corporation (the "Company"), any present or future
parent 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.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be
administered 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 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
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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;
(viii) interpret the Plan and prescribe and rescind rules and regulations
relating to it; and (ix) authorize executive officers of the Company to (a)
execute option agreements with individuals hired as employees of the Company
during the periods between Committee meetings, not including individuals hired
as executive officers, and (b) determine the number of Options to be issued to
such employee, subject to the specific limitations set forth by the Committee in
its grant of authority to such executive officer. 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 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. 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
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 are
either (i) 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 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, 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
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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 Right 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
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, participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Options, Awards and Purchases shall be
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 5,000,000 shares, subject to adjustment as provided in
paragraph 13. 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. No employee of the
Company or any Related Corporation may be granted Options to acquire, in the
aggregate, more than 3,500,000 shares of Common Stock under the Plan during any
fiscal year of the Company, subject to adjustment as provided in paragraph 13.
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, as amended. 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
at any time on or after September 16, 1997 and prior to September 15, 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 paragraph 2(d) (relating to compliance with Section 162(m) 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 shall in no event 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.
B. PRICE FOR ISOS. The exercise price per share specified in
the 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 may be granted options treated as 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, such 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, and the Company shall issue separate certificates to the optionee with
respect to options that are Non-Qualified Options and Options that are ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an
Option is 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.
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7. OPTION DURATION. Subject to earlier termination as provided in
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 and one day from the date of grant in the case of Non-Qualified Options,
(ii) ten years from the date of grant in the case of ISOs generally, and (iii)
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 12, 21 and 22 each Option granted under the Plan shall be
exercisable as follows:
A. FULL VESTING OR PARTIAL VESTING. The Option shall either be
fully 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
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 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. Subject to any accounting
considerations with respect to "Accounting for Business Combinations" pursuant
to Accounting Principles Board Opinion No. 16, The Committee shall have the
right to 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 OF EMPLOYMENT. Unless otherwise specified in the
Agreement relating to such ISO, if an ISO Optionee ceases to be employed by the
Company 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 after the passage of ninety (90) days
from the date of termination of his employment, but in no event later than on
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 16. 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
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during which such Optionee's right to re-employment 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 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.
A. DEATH. If an ISO Optionee ceases to be employed by the
Company and 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
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. ASSIGNABILITY. During the lifetime of the optionee, each Option
shall be exercisable only by him or her and no Option shall be assignable or
transferable by the optionee EXCEPT by will or by the laws of descent and
distribution or, in the case of Non-Qualified Options, pursuant to a valid
domestic relations order or in accordance with the terms of the Optionee's
option agreement and in compliance with the provisions of the Securities Act of
1933, as amended.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
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 11 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
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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.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
Optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, 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 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 with or acquired by another entity in a merger or other
reorganization in which the holders of the outstanding voting stock of the
Company immediately preceding the consummation of such event, shall, immediately
following such event, hold as a group, less than a majority of the voting
securities of the surviving or successor entity, or in the event of a 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 such other
securities as the Successor Board deems appropriate, the fair market value of
which shall not materially exceed the fair market value of the shares of Common
Stock subject to such Options immediately preceding the Acquisition; 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. The
foregoing actions are subject in all instances to the approval of the Board of
Directors and any accounting considerations for any acquisition which is treated
as a "pooling of interests" transaction pursuant to the Accounting Principles
Board (APB) Opinion No. 16, if any discretionary action by the Board of
Directors would otherwise violate the accounting rules for treatment of the
Acquisition as a "pooling of interests" under APB No. 16.
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C. RECAPITALIZATION OR REORGANIZATION. In the event of a
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 or she would
have received if he or she had exercised his or her Option prior to such
recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments 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.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed
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 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 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 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 13 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.
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14. MEANS OF EXERCISING STOCK RIGHTS. A Stock Right (or any part or
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 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 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 13 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.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board as
of September 16, 1997 and approved by the stockholders of the Company on
September 16, 1997. The Plan shall expire at the end of the day on September 15,
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 13); (b) the benefits accruing to participants
under the Plan may not be materially increased; (c) the requirements as to
eligibility for participation in the Plan may not be materially modified; (d)
the provisions of paragraph 3 regarding eligibility for grants of ISOs may not
be modified; (e) 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 13); (f) the expiration date of the Plan may
not be extended; and (g) the Board may not take any action which would cause the
Plan to fail to comply with Rule 16b-3. Except as otherwise provided in this
paragraph 15 or in paragraph 23, 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.
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16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS.
Subject to paragraph 13(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(h)(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
converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Committee takes appropriate action. Upon the taking of such
action, the Company shall issue separate certificates to the Optionee with
respect to Options that are Non-Qualified Options and Options that are ISOs.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver 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.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-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 20), 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
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use of any method of payment other than by cash or check in some cases may
require or cause additional withholding obligations.
20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each ISO Optionee thereby agrees to notify the Company
in writing immediately after such Optionee makes a Disqualifying Disposition of
any Common Stock acquired pursuant to the exercise of an ISO. 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.
21. NO EXERCISE OF OPTION IF ENGAGEMENT OR EMPLOYMENT TERMINATED FOR
CAUSE. If the employment of an Optionee that is an employee or consultant of the
Company or any Related Corporation is terminated for "Cause," such Optionee's
options shall terminate on the date of such termination and the 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 or consultant 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; or (iii) the
unauthorized disclosure or misappropriation 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 or consultant of a felony involving any financial
impropriety or which would materially interfere with such Optionee's ability to
perform his or her services or otherwise be injurious to the Company; or (vi)
the failure of the employee or consultant to perform in a material respect his
or her employment obligations without proper cause. In making such
determination, the Board shall act fairly and in utmost good faith. For the
purposes of this Section 21, termination of employment shall be deemed to occur
when the employee receives notice that his employment is terminated.
22. ACCELERATION AND VESTING OF OPTION FOR BUSINESS COMBINATIONS.
Unless otherwise specifically provided in the written agreement between the
Optionee and the Company relating to such Option, upon 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
not apply to any reincorporation of the Company in a different State pursuant to
a migratory merger:
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(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.
(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.
23. POOLING-OF INTERESTS-ACCOUNTING. If the Company proposes to engage
in an Acquisition intended to be accounted for as a pooling-of-interests, and in
the event that the provisions of this Plan or of any Stock Right granted
hereunder, or any actions of the Board taken in connection with such
Acquisition, are determined by either the Company's Board, or by both the
acquiring company's board and the Company's Board, to cause such Acquisition to
fail to be accounted for as a pooling-of-interests, then such provisions or
actions shall be amended or rescinded by the Board, without the consent of any
Optionee, to be consistent with pooling-of-interests accounting treatment for
such Acquisition.
24. GOVERNING LAW; CONSTRUCTION. The validity and construction of the
Plan and the instruments evidencing Stock Rights shall be governed by the laws
of the Commonwealth of Massachusetts 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.