EXHIBIT 10.1
DURA PHARMACEUTICALS, INC.
1992 STOCK OPTION PLAN
AS AMENDED AND RESTATED MARCH 3, 1999
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ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
A. IMPLEMENTATION. This 1992 Stock Option Plan ("Plan") was
implemented as of December 9, 1992 ("Effective Date"), to enable Dura
Pharmaceuticals, Inc. ("Company") to grant options to the following eligible
individuals ("Eligible Individuals") in order to attract them and to retain
their services: (a) key employees (including officers and directors) of the
Company or its subsidiaries or any parent corporation who are primarily
responsible for the management, growth and financial success of the Company
or its subsidiaries, (b) non-employee members of the Board of Directors
("Board") of the Company or any of its subsidiaries, and (c) consultants and
independent contractors who perform valuable services for the Company or its
subsidiaries.
B. SUCCESSOR PLAN. This Plan is a successor to the Company Stock
Option Plan that was adopted by the Board in 1983 ("1983 Plan"). No further
option grants (including, but not limited to automatic option grants) will be
made under the 1983 Plan on and after the Effective Date of this Plan. All
options outstanding under the 1983 Plan on the Effective Date have been
incorporated into this Plan and will be treated as outstanding options under
this Plan. Each outstanding option so incorporated will continue to be
governed solely by the express terms and conditions of the instruments
evidencing such grant. No provision of this Plan will be deemed to affect or
otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of the
Company's Common Stock under the terms of the incorporated options.
II. ADMINISTRATION OF THE PLAN
A. COMMITTEE. The Plan will be administered by the Board of
Directors or by a committee or committees appointed by the Board, and
consisting of two or more members of the Board. The Board may delegate the
responsibility for administration of the Plan with respect to designated
classes of optionees to different committees, subject to such limitations as
the Board deems appropriate. With respect to any matter, the term
"Committee," when used in this Plan, will refer to the committee that has
been delegated authority with respect to such matter. Members of a committee
will serve for such term as the Board may determine, and will be subject to
removal by the Board at any time.
B. SECTION 16(b) COMMITTEE. Notwithstanding any other provision
of this Agreement, each grant of an option or other transaction between the
Company and any Section 16 Insider shall be valid and enforceable only if
approved by the Board of Directors or by a committee composed exclusively of
two or more Non-Employee Directors. For this
purpose, a "Section 16 Insider" shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of
the 1934 Act, and a Non-Employee Director shall have the meaning set forth in
Rule 16b-3(b)(3).
C. AUTHORITY. Any Committee will have full authority to
administer the Plan within the scope of its delegated responsibilities,
including authority to interpret and construe any relevant provision of the
Plan, to adopt such rules and regulations as it may deem necessary, and to
determine the terms of grants made under the Plan (which need not be
identical). Decisions of a Committee made within the discretion delegated to
it by the Board will be final and binding on all persons.
III. STOCK SUBJECT TO THE PLAN
A. NUMBER OF SHARES. Shares of the Company's Common Stock
available for issuance under the Plan shall be drawn from either the
Company's authorized but unissued shares of Common Stock or from reacquired
shares of Common Stock, including shares repurchased by the Company on the
open market. The maximum number of shares of Common Stock that may be issued
over the term of the Plan shall not exceed 10,107,360 shares, subject to
adjustment from time to time in accordance with the provisions of this
Section. To the extent one or more outstanding options under the 1983 Plan
that have been incorporated into this Plan are subsequently exercised, the
number of shares issued with respect to each such option will reduce, on a
share-for-share basis, the number of shares available for issuance under this
Plan.
B. EXPIRED OPTIONS. Should an outstanding option under this Plan
(including any outstanding option under the 1983 Plan incorporated into this
Plan) expire or terminate for any reason prior to exercise in full (including
any option cancelled in accordance with the cancellation-regrant provisions
of this Plan), the shares subject to the portion of the option not so
exercised will be available for subsequent option grant under this Plan.
Shares subject to any option or portion thereof cancelled in accordance with
the stock appreciation (or limited stock appreciation) rights provisions of
this Plan will not be available for subsequent option grant under the Plan.
C. ADJUSTMENTS. If any change is made to the Common Stock
issuable under the Plan (including Common Stock issuable under an Automatic
Option Grant) by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Company's receipt of
consideration, then appropriate adjustments will be made to (i) the number
and/or class of shares issuable under the Plan, (ii) the number and/or class
of shares and price per share in effect under each outstanding option under
the Plan, (iii) the maximum number and/or class of shares for which any one
participant may be granted stock options and separately exercisable stock
appreciation rights in any fiscal year or over the term of the Plan and (iv)
the number and/or class of shares and price per share in effect under each
outstanding option incorporated into this Plan from the 1983 Plan. The
purpose of these adjustments will be to preclude the enlargement or dilution
of rights and benefits under the options.
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ARTICLE TWO
STANDARD OPTION PROVISIONS
I. TERMS AND CONDITIONS OF OPTIONS
A. COMMITTEE DISCRETION.
(1) Except as provided under the Automatic Option Grant
provisions of this Plan, the Committee will have full authority to determine
which Eligible Individuals are to receive option grants under the Plan, the
number of shares to be governed by each such grant, whether the option is to
be an incentive stock option ("Incentive Option") that satisfies the
requirements of Section 422 of the Internal Revenue Code or a non-qualified
option not intended to satisfy such requirements ("Non-Qualified Option"),
the time or times at which each such option is to become exercisable, and the
maximum term for which the option is to remain outstanding.
(2) Notwithstanding any other provision of this Plan, no
individual shall be granted stock options or separately exercisable stock
appreciation rights for more than 400,000 shares in the aggregate in any
fiscal year or for more than 1,500,000 shares in the aggregate over the
lifetime of the Plan.
B. TERM. No option granted under the Plan will be exercisable
after the expiration of 10 years from the date the option was granted.
C. PRICE. The exercise price per share shall be fixed by the
Plan Administrator but shall not be less than 100% percent of the Fair Market
Value per share of Common Stock on the option grant date, provided that the
Plan Administrator may fix the exercise price at less than 100% if the
optionee, at the time of the option grant, shall have made a payment to the
Company (including payment made by means of an agreed salary reduction) equal
to the excess of the Fair Market Value of the Common Stock on the option
grant date over such exercise price.
D. EXERCISE AND PAYMENT. After any option granted under the Plan
becomes exercisable, it may be exercised by notice to the Company at any time
prior to the termination of such option. The option price will be payable in
full in cash or check made payable to the Company; provided, however, that
the Committee may, either at the time the option is granted or at the time it
is exercised and subject to such limitations as it may determine, authorize
payment of all or a portion of the option price in one or more of the
following alternative forms:
(1) a promissory note authorized pursuant to Section IV of
this Article; or
(2) full payment in shares of Common Stock valued as of the
exercise date and held for the requisite period to avoid a charge to the
Company's earnings; or
(3) full payment through a sale and remittance procedure
under which the option holder delivers a properly executed exercise notice
together with irrevocable instructions
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to a broker to promptly deliver to the Company the amount of sale proceeds to
pay the option prices.
For purposes of Subparagraphs (1) and (3) immediately above, the
Exercise Date shall be the date on which written notice of the exercise of
the option is delivered to the Company. In all other cases, the Exercise
Date will be the date on which written notice and actual payment is received
by the Company.
The sale and remittance procedure authorized for the exercise of
outstanding options under this Plan shall be available for all options
granted under this Plan on or after the Effective Date and for all
non-qualified options outstanding under the 1983 Plan and incorporated into
this Plan. The Plan Administrator may also allow such procedure to be
utilized in connection with one or more disqualifying dispositions of
Incentive Option shares effected after the Effective Date, whether such
Incentive Options were granted under this Plan or the 1983 Stock Option Plan.
E. SHAREHOLDER RIGHTS. An option holder will have no shareholder
rights with respect to any shares covered by an option (including an
Automatic Option Grant) prior to the Exercise Date of the option, as defined
in the immediately preceding Paragraph and in the Automatic Option Grant
provisions of Section II of Article Three of this Plan.
F. SEPARATION FROM SERVICE. The Committee will determine whether
options will continue to be exercisable, and the terms of such exercise, on
and after the date that an optionee ceases to be employed by, or to provide
services to, the Company or its subsidiaries provided, however, that in no
event will an option be exercisable after the specified expiration date of
the option term. The date of termination of an optionee's employment or
services will be determined by the Committee, which determination will be
final.
G. INCENTIVE OPTIONS. Options granted under the Plan that are
intended to be Incentive Options will be subject to the following additional
terms:
(1) DOLLAR LIMITATION. The aggregate fair market value
(determined as of the respective date or dates of grant) of the Common Stock
for which one or more options granted to any Employee after December 31, 1986
under this Plan (or any other option plan of the Company or its parent or
subsidiary corporations) may for the first time become exercisable as
incentive stock options under the Federal tax laws during any one calendar
year shall not exceed the sum of $100,000. To the extent the Employee holds
two or more such options which become exercisable for the first time in the
same calendar year, the foregoing limitation on the exercisability of such
options as incentive stock options under the Federal tax laws shall be
applied on the basis of the order in which such options are granted.
(2) 10% SHAREHOLDER. If any employee to whom an Incentive
Option is to be granted pursuant to the provisions of the Plan is, on the
date of grant, the owner of stock (determined with application of the
ownership attribution rules of Section 424(d) of the Internal Revenue Code)
possessing more than 10% of the total combined voting power of all classes of
stock of his or her employer corporation or of its parent or subsidiary
corporation ("10%
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Shareholder"), then the following special provisions will apply to the option
granted to such individual:
(i) The option price per share of the stock subject to
such Incentive Option will not be less than 110% of the Fair Market Value of
the option shares on the date of grant; and
(ii) The option will not have a term in excess of 5
years from the date of grant.
(3) PARENT AND SUBSIDIARY. For purposes of this Section,
"parent corporation" and "subsidiary corporation" will have the meaning
attributed to those terms, as they are used in Section 422(b) of the Internal
Revenue Code.
(4) EMPLOYEES. Incentive Options may only be granted to
employees of the Company or its subsidiaries.
H. FAIR MARKET VALUE. For all purposes under this Plan
(including, but not limited to Automatic Option Grants) the fair market value
per share of Common Stock on any relevant date under the Plan ("Fair Market
Value") will be determined as follows:
(1) If the Common Stock is not at the time listed or admitted
to trading on any national stock exchange but is traded in the
over-the-counter market, the fair market value will be the mean between the
highest bid and lowest asked prices (or, if such information is available,
the closing selling price) per share of Common Stock on the date in question
in the over-the-counter market, as such prices are reported by the National
Association of Securities Dealers on the Nasdaq National Market. If there are
no reported bid and asked prices (or closing selling price) for the Common
Stock on the date in question, then the mean between the highest bid price
and lowest asked price (or the closing selling price) on the last preceding
date for which such quotations exist will be determinative of fair market
value.
(2) If the Common Stock is at the time listed or admitted to
trading on any national stock exchange, then the fair market value will be
the closing selling price per share of Common Stock on the date in question
on the stock exchange determined by the Committee to be the primary market
for the Common Stock, as such price is officially quoted in the composite
tape of transactions on such exchange. If there is no reported sale of
Common Stock on such exchange on the date in question, then the fair market
value will be the closing selling price on the exchange on the last preceding
date for which such quotation exists.
(3) If the Common Stock is at the time neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, then the fair market value will be determined by the Committee after
taking into account such factors as the Committee shall deem appropriate.
I. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of
the Optionee, Incentive Options shall be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the Optionee's death. However, a
Non-Qualified Option may be assigned in whole or in part during the
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Optionee's lifetime. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant
to the assignment. The terms applicable to the assigned portion shall be the
same as those in effect for the option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate.
II. STOCK APPRECIATION RIGHTS
If, and only if the Committee, in its discretion, elects to
implement an option surrender program under the Plan, one or more option
holders may, upon such terms as the Committee may establish at the time of
the option grant or at any time thereafter, be granted the right to surrender
all or part of an unexercised option in exchange for a distribution equal in
amount to the excess of (i) the Fair Market Value (at date of surrender) of
the shares for which the surrendered option or portion thereof is at the time
exercisable over (ii) the aggregate option price payable for such shares.
The distribution to which an option holder becomes entitled under this
Section may be made in shares of Common Stock, valued at Fair Market Value at
the date of surrender, in cash, or partly in shares and partly in cash, as
the Committee, in its sole discretion, deems appropriate.
III. CORPORATE TRANSACTION/CHANGE OF CONTROL/HOSTILE TAKEOVER
A. CORPORATE TRANSACTION. In the event of any of the following
transactions ("Corporate Transaction"):
(1) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is
to change the state of the Company's incorporation,
(2) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in liquidation or dissolution
of the Company,
(3) any reverse merger in which the Company is the surviving
entity but in which fifty percent (50%) or more of the Company's outstanding
voting stock is transferred to holders different from those who held such
securities immediately prior to such merger, or
(4) an acquisition by any person or related group of persons
(other than the Company or a person that directly or indirectly controls, is
controlled by or is under common control with, the Company) of ownership of
more than fifty percent (50%) of the Company's outstanding Common Stock,
pursuant to a tender or exchange offer,
the exercisability of each option at the time outstanding under this
Article Two shall automatically accelerate so that each such option shall,
immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such shares. Upon the consummation of
the Corporate Transaction, all outstanding options under this Article Two
shall terminate and cease to be outstanding.
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B. HOSTILE TAKEOVER. One or more officers of the Company subject
to the short-swing profit restrictions of the Federal securities laws may, in
the Committee's sole discretion, be granted, in tandem with their outstanding
options, limited stock appreciation rights as described below. In addition
all Automatic Option Grants under this Plan will be made in tandem with
limited stock appreciation rights as described below.
(1) Upon the occurrence of a Hostile Takeover, each
outstanding option with such a limited stock appreciation right in effect for
at least six (6) months will automatically be cancelled in return for a cash
distribution from the Company in an amount equal to the excess of (i) the
Takeover Price (defined below) of the shares of Common Stock at the time
subject to the cancelled option (whether or not the option is otherwise at
the time exercisable for such shares) over (ii) the aggregate exercise price
payable for such shares. The cash distribution payable upon such cancellation
shall be made within five (5) days following the consummation of the Hostile
Takeover. Neither the approval of the Committee nor the consent of the Board
shall be required in connection with such option cancellation and cash
distribution.
(2) For purposes of the limited stock appreciation rights
described above, the following definitions shall be in effect:
(i) A Hostile Takeover shall be deemed to occur upon
the acquisition by any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Company) of ownership of more than 50%
of the Company's outstanding Common Stock (excluding the Common Stock
holdings of officers and directors of the Company who participate in this
Plan) pursuant to a tender or exchange offer which the Board does not
recommend the Company's shareholders accept.
(ii) The Takeover Price per share shall be deemed to be
equal to the greater of (a) the Fair Market Value per share on the date of
cancellation, or (b) the highest reported price per share paid in effecting
the Hostile Takeover. However, if the cancelled option is an Incentive
Option, the Takeover Price shall not exceed the clause (a) price per share.
C. COMPANY RIGHTS. The grant of options (including Automatic
Option Grants) under this Plan shall in no way affect the right of the
Company to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. LOANS OR GUARANTEE OF LOANS
The Committee may assist any optionee (including any officer) in
the exercise of one or more outstanding options under this Article by (a)
authorizing the extension of a loan to such optionee from the Company, (b)
permitting the optionee to pay the option price for the purchased Common
Stock in installments over a period of years or (c) authorizing a guarantee
by the Company of a third-party loan to the optionee. The terms of any loan,
installment method of payment or guarantee (including the interest rate and
terms of repayment) will be established by the Committee in its sole
discretion. Loans, installment payments and guarantees may be
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granted without security or collateral (other than to optionees who are
consultants or independent contractors, in which event the loan must be
adequately secured by collateral other than the purchased shares), but the
maximum credit available to the optionee shall not exceed the sum of (i) the
aggregate option price (less par value) of the purchased shares plus (ii) any
federal and state income and employment tax liability incurred by the
optionee in connection with the exercise of the option. Automatic Option
Grants will not be subject to these loan and loan guarantee provisions.
V. CANCELLATION AND REGRANT OF OPTIONS
The Committee shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under this Article (including
outstanding options under the 1983 Plan incorporated into this Plan) and to
grant in substitution new options under the Plan covering the same or
different numbers of shares of Common Stock but having an option price per
share not less than 100% of the fair market value of the Common Stock on the
new grant date. Automatic Option Grants will not be subject to these
cancellation and regrant provisions.
VI. REPURCHASE RIGHTS
The Committee may in its discretion determine that it shall be a
term and condition of one or more options exercised under the Plan that the
Company (or its assigns) shall have the right, exercisable upon the
optionee's separation from service with the Company and its subsidiaries, to
repurchase any or all of the shares of Common Stock previously acquired by
the optionee upon the exercise of such option. Any such repurchase right
shall be exercisable upon such terms and conditions (including the
establishment of the appropriate vesting schedule and other provisions for
the expiration of such right in one or more installments) as the Committee
may specify in the instrument evidencing such right. The Committee shall
also have full power and authority to provide for the automatic termination
of these repurchase rights, in whole or in part, and thereby accelerate the
vesting of any or all of the purchased shares.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
The provisions of this Article Three reflect the amendments to the
Automatic Option Grant Program authorized by the Board on March 3, 1999,
subject to stockholder approval at the 1999 Annual Meeting.
I. GRANTS
A. AUTOMATIC OPTION GRANTS. Non-employee members of the Board
will automatically be granted Non-Qualified Options to purchase the number of
shares of Common Stock set forth below (subject to adjustment under Section
III(D) of Article One of this Plan) on the dates and pursuant to the terms
set forth below ("Automatic Option Grants").
B. CONTINUING DIRECTORS. On the date of each Annual Stockholders
Meeting, beginning with the Annual Meeting in calendar year 2000, each
continuing non-employee member of the Board will receive an Automatic Option
Grant to purchase 6,000 shares of Common Stock; provided, however, that an
individual who has not served as a non-employee member of the Board for the
immediately preceding 180 days will not receive such a grant.(1)
C. NEW DIRECTORS. Each individual person who is first elected or
appointed as a non-employee member of the Board on or after May 20, 1999 will
receive, on the effective date of such initial election or appointment, an
Automatic Option Grant to purchase 15,000 shares of Common Stock.(2)
D. SPECIAL OPTION GRANT. Each individual serving as a
non-employee Board member on May 20, 1999 shall receive at that time a
one-time Automatic Option Grant for 15,000 shares. Such grant shall be in
substitution for the Automatic Option Grant which would otherwise be made to
such individual at the 1999 Annual Stockholders Meeting pursuant to the
provisions of Section I(B) of this Article Three.
II. TERMS
The terms applicable to each Automatic Option Grant will be as
follows:
A. PRICE. The option price per share will be equal to 100% of
the Fair Market Value of a share of Common Stock on the date of grant.
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(1) The reduction in the number of shares subject to this grant from 8,000
to 6,000 shares was authorized by the Board on March 3, 1999, subject to
stockholder approval at the 1999 Annual Meeting. If so approved, this change
shall become effective as of the Annual Meeting in calendar year 2000.
(2) The reduction in the number of shares subject to this grant from
30,000 to 15,000 shares was authorized by the Board on March 3, 1999, subject
to stockholder approval at the 1999 Annual Meeting. If so approved, this
change shall become effective on May 20, 1999.
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B. OPTION TERM. Each Automatic Option Grant will have a maximum
term of 10 years measured from the automatic grant date.
C. EXERCISABILITY. Each Automatic Option Grant will become
exercisable for all Automatic Option Grant shares one (1) year after the
automatic grant date, provided the optionee continues to serve as a Board
member throughout that one (1)-year period.
D. PAYMENT. Upon exercise of the option, the option price for
the purchased shares will become payable immediately in one or more of the
following alternative forms: cash, shares of Common Stock held for the
requisite period to avoid a charge to the Company's reported earnings and
valued at Fair Market Value on the Exercise Date (as defined below), or
pursuant to a sale and remittance procedure under which the option holder
delivers a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of
sale proceeds to pay the option price. For these purposes, the Exercise Date
shall be the date on which written notice of the exercise of the option is
delivered to the Company. Except to the extent the sale and remittance
procedure specified above is utilized for the exercise of the option, payment
of the exercise price for the purchased shares must accompany the notice.
E. EFFECT OF TERMINATION OF BOARD MEMBERSHIP.
(1) Should the optionee cease to be a Board member for any
reason (other than death) while holding one or more Automatic Option Grants,
then the optionee will have 6 months following the date of such cessation of
Board membership in which to exercise each such option for any or all of the
shares of Common Stock for which the option is exercisable at the time Board
membership ceases; provided however, that in no event may such an option be
exercised after the expiration of its 10-year term.
(2) Should the optionee die while holding one or more
Automatic Option Grants, then each such option may subsequently be exercised,
for any or all of the shares of Common Stock for which the option is
exercisable at the time of the optionee's death, by the personal
representative of the optionee's estate or by the person or persons to whom
the option is transferred pursuant to the optionee's will or in accordance
with the laws of descent and distribution following optionee's death. Any
such exercise must, however, occur before the earlier of (i) the expiration
of the option's 10-year term, or (ii) 12 months after the date of the
optionee's death.
F. ACCELERATION. Automatic Option Grants will be subject to
acceleration and termination in the event of a Corporate Transaction as
described in Article Two, Section III(A) of this Plan.
G. HOSTILE TAKEOVER. Automatic Option Grants will be granted in
tandem with limited stock appreciation rights, as described in the Hostile
Takeover provisions contained in Article Two, Section III(B) of this Plan.
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ARTICLE FOUR
MISCELLANEOUS
I. AMENDMENT OF THE PLAN
A. GENERAL RULES. The Board shall have complete and exclusive
power and authority to amend or modify the Plan in any or all respects
whatsoever. However, no such amendment or modification shall, without the
consent of the option holders, adversely affect rights and obligations with
respect to options at the time outstanding under the Plan. In addition,
certain amendments may be made conditional on first having obtained
stockholder approval if required by the Board or pursuant to any applicable
laws or regulations.
B. AUTOMATIC OPTION GRANTS. Amendment of the Automatic Option
Grant provisions of this Plan is subject to the requirements outlined above.
In addition, the Automatic Option Grant provisions of this Plan may not be
amended more than once every 6 months, other than to comport with changes in
the Internal Revenue Code or rules thereunder.
C. AMENDMENT OF OPTIONS. The Committee shall have full power and
authority to modify or waive any or all of the terms, conditions or
restrictions applicable to any outstanding option, to the extent not
inconsistent with the Plan; provided, however, that no such modification or
waiver shall (1) without the consent of the option holder, adversely affect
the holder's rights thereunder or (2) affect any outstanding option granted
pursuant to the Automatic Option Grant provisions of this Plan except to the
extent necessary to conform to any amendment to this Plan.
II. TAX WITHHOLDING
A. OBLIGATION. The Company's obligation to deliver shares or
cash upon the exercise of stock options or stock appreciation rights granted
under the Plan is subject to the satisfaction of all applicable Federal,
State and local income and employment tax withholding requirements.
B. STOCK WITHHOLDING. The Plan Administrator may, in its
discretion and upon such terms and conditions as it may deem appropriate
(including the applicable safe-harbor provisions of SEC Rule 16b-3) provide
any or all holders of outstanding option grants under the Plan with the
election to have the Company withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such options, one or more of such
shares with an aggregate fair market value equal to the designated percentage
(any multiple of 5% specified by the optionee) of the Federal and State
income and employment withholding taxes ("Withholding Taxes") incurred in
connection with the acquisition of such shares. In lieu of such direct
withholding, one or more optionees may also be granted the right to deliver
shares of Common Stock to the Company in satisfaction of such Withholding
Taxes. The withheld or delivered shares shall be valued at the Fair Market
Value on the applicable determination date for such Taxes or such other date
required by the applicable safe-harbor provisions of SEC Rule 16b-3.
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III. EFFECTIVE DATE AND TERM OF PLAN
A. IMPLEMENTATION. This Plan, as successor to the Company's 1983
Stock Option Plan, became effective as of the Effective Date, and no further
option grants shall be made under the 1983 Plan on or after the Effective
Date of this Plan. The Plan was amended on March 3, 1999 (the "1999
Amendment") to effect the following changes: (i) increase the number of
shares of Common Stock available for issuance by an additional 1,500,000
shares, (ii) reduce the number of shares of Common Stock for which an
Automatic Option Grant is to be made to a newly-elected or appointed
non-employee Board member under Section I(C) of Article Three from 30,000
shares to 15,000 shares, effective May 20, 1999, (iii) reduce the number of
shares of Common Stock for which an Automatic Option Grant is to be made on
an annual basis to each continuing non-employee Board member under Section
I(B) of Article Three from 8,000 shares to 6,000 shares, effective as of the
calendar year 2000 Annual Stockholders Meeting, and (iv) effect a one-time
Automatic Option Grant of 15,000 shares to each individual serving as a
non-employee Board member on May 20, 1999 pursuant to Section I(D) of Article
Three. The 1999 Amendment is subject to stockholder approval at the 1999
Annual Meeting, and no option grants made on the basis of the share increase
authorized by that amendment shall become exercisable in whole or in part
unless and until the 1999 Amendment is approved by the stockholders. Should
such stockholder approval not be obtained at the 1999 Annual Meeting, then
the 1,500,000 share increase shall not be implemented, and none of the
revisions to the Automatic Option Grant Program under Article Three shall
become effective. Subject to the foregoing limitations, options may be
granted under the Plan at any time before the date fixed herein for the
termination of the Plan.
B. TERMINATION. Unless sooner terminated due to a Corporate
Transaction or a Change in Control, the Plan will terminate upon the earlier
of (i) December 8, 2002, or (ii) the date on which all shares available for
issuance under the Plan have been issued or cancelled pursuant to exercise,
surrender or cash-out of options. If the date of termination is determined
under clause (i) above, then options outstanding on such date shall
thereafter continue to have force and effect in accordance with the
provisions of the instruments evidencing those options.
C. ADDITIONAL SHARES. Options to purchase shares of Common Stock
may be granted under the Plan which are in excess of the number of shares
then available for issuance under the Plan, provided any excess shares
actually issued are held in escrow until shareholder approval is obtained for
a sufficient increase in the number of shares available for issuance under
the Plan. If such shareholder approval is not obtained within twelve (12)
months after the date the first such excess option grants are made, then (i)
any unexercised excess options shall terminate and cease to be exercisable
and (ii) the Corporation shall promptly refund the purchase price paid for
any excess shares actually issued under the Plan and held in escrow, together
with interest (at the applicable Short Term Federal Rate) for the period the
shares were held in escrow.
IV. USE OF PROCEEDS
Any cash proceeds received by the Company from the sale of shares
pursuant to options granted under the Plan shall be used for general
corporate purposes.
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V. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option under the
Plan, and the issuance of stock upon the exercise or surrender of any such
option shall be subject to the procurement by the Company of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options granted under it and the stock issued pursuant to it.
VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the establishment of this Plan, nor any action taken under the
terms of this Plan, nor any provision of this Plan shall be construed so as to
grant any individual the right to remain in the employ or service of the Company
(or any parent or subsidiary corporation) for any period of specific duration,
and the Company (or any parent or subsidiary corporation retaining the services
of such individual) may terminate such individual's employment or service at any
time and for any reason, with or without cause.
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