EXHIBIT 10.3
------------
DATAWATCH CORPORATION
1996 STOCK PLAN
1. PURPOSE. The purpose of the Datawatch Corporation 1996 Stock
Plan (the "Plan") is to encourage key employees of Datawatch Corporation (the
"Company") and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations") and other individuals who render services
to the Company or a Related Corporation, by providing opportunities to
participate in the ownership of the Company and its future growth through (a)
the grant of options which qualify as "incentive stock options" ("ISOs") under
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code");
(b) the grant of options which do not qualify as ISOs ("Non-Qualified Options");
(c) awards of stock in the Company ("Awards"); and (d) 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 to whom (from among the
class of employees eligible under paragraph 3 to receive
ISOs) ISOs shall be granted, and to whom (from among the
class of individuals and entities eligible under paragraph 3
to receive Non-Qualified Options and Awards and to make
Purchases) Non-Qualified Options, Awards and authorizations
to make Purchases may be granted; (ii) determine the time or
times at which Options or Awards shall be granted or
Purchases made; (iii) determine the purchase price of shares
subject to each Option or Purchase, which prices shall not
be less than the minimum price specified in paragraph 6;
(iv) determine whether each Option granted shall be an ISO
or a Non-Qualified Option; (v) determine (subject to
paragraph 7) the time or times when each Option shall become
exercisable and the duration of the exercise period; (vi)
extend the period during which outstanding Options may be
exercised; (vii) determine whether restrictions such as
repurchase options are to be imposed on shares subject to
Options, Awards and Purchases and the nature of such
restrictions, if any, and (viii) interpret the Plan and
-2-
prescribe and rescind rules and regulations relating to it.
If the Committee determines to issue a Non-Qualified Option,
it shall take whatever actions it deems necessary, under
Section 422 of the Code and the regulations promulgated
thereunder, to ensure that such Option is not treated as an
ISO. The interpretation and construction by the Committee of
any provisions of the Plan or of any Stock Right granted
under it shall be final unless otherwise determined by the
Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem
advisable. 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 ACTIONS. The Committee may select one of
its members as its chairman, and shall hold meetings at such
time and places as it may determine. A majority of the
Committee shall constitute a quorum and acts of a majority
of the members of the Committee at a meeting at which a
quorum is present, or acts reduced to or approved in writing
by all the members of the Committee (if consistent with
applicable state law), 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 respects be made
in accordance with the provisions of this Plan applicable to
other eligible persons. Members of the Board who either (i)
are eligible to receive grants of 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 or
herself 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 such member 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,
the Plan shall be administered, to the extent required for
such Stock Rights to constitute Performance-Based
Compensation, by a Committee consisting solely of two or
more "outside directors" (as defined in applicable
-3-
regulations promulgated under Section 162(m) of the Code),
(ii) if any Non-Qualified Options with an exercise price
less than the fair market value per share of Common Stock
are granted under the Plan and the Board determines that
such Options should constitute Performance-Based
Compensation, such options shall be made exercisable only
upon the attainment of a pre-established, objective
performance goal established by the Committee, and such
grant shall be submitted for, and shall be contingent upon
shareholder approval and (iii) Stock Rights granted under
the Plan may be subject to such other terms and conditions
as are necessary for compensation recognized in connection
with the exercise or disposition of such Stock 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 employee,
officer or director (whether or not also an 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 a Stock
Right. The granting of any Stock Right to any individual or entity shall neither
entitle that individual or entity to, nor disqualify such individual or entity
from, participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Stock Rights 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 494,4001, 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 or shall be repurchased by the Company, the unpurchased shares of
Common Stock subject to such Option 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 155,556 shares of Common Stock
under the Plan during any fiscal year of the Company. 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 December 10, 1996 and prior to December 10,
2006. 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
- --------
1 An amendment increasing the number of shares available for issuance under the
Plan from 366,667 to 494,400 was approved by the Board of Directors pursuant to
a Meeting of the Board of Directors held on January 29, 2002 and was approved by
the stockholders at the Annual Meeting of Stockholders held on March 8, 2002.
-4-
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.
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 may be less than the fair market
value of the Common Stock of the Company on the date of
grant; provided that, in no event shall such exercise price
or such purchase price be less than the minimum legal
consideration required therefor under the laws of any
jurisdiction in which the Company or its successors in
interest may be organized.
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, ISOs do not become exercisable for the
first time by such employee during any calendar year with
respect to stock having a fair market value (determined at
the time the ISOs were granted) in excess of $100,000. The
Company intends to designate any Options granted in excess
of such limitation 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 of grant 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
-5-
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
closing bid price (or average of bid 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. If the Common Stock
is not publicly traded at the time an Option is granted
under the Plan, "fair market value" shall mean the fair
value of the Common Stock as determined by the Committee
after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and
offer prices of the Common Stock in private transactions
negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided
in paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs
9 through 12, each Option granted under the Plan shall be exercisable as
follows:
A. 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.
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. The Committee shall have
the right to accelerate the date that any installment of any
Option becomes exercisable; provided that the Committee
shall not, without the consent of an optionee, accelerate
the permitted 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).
-6-
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 or her ISOs shall
become exercisable, and his or her ISOs shall terminate on the earlier of (a)
three months after the date of termination of his or her employment, or (b)
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. For purposes of this paragraph 9, 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 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute or by contract. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, 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 otherwise exercisable on the date of death, by
the estate, personal representative or beneficiary who has
acquired the ISO by will or by the laws of descent and
distribution, until 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, for the number of shares for
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
any successor statute.
11. ASSIGNABILITY. No ISO shall be assignable or transferable by
the optionee except by will or by the laws of descent and distribution, and
during the lifetime of the optionee shall be
-7-
exercisable only by such optionee. Stock Rights other than ISOs shall be
transferable to the extent set forth in the agreement relating to such Stock
Right.
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. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following
events, an optionee's rights with respect to Options granted to such optionee
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 (each, 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,
either (i) make appropriate provision for the continuation
of such Options by substituting on an equitable basis for
the shares then subject to such Options either (a) the
consideration payable with respect to the outstanding shares
of Common Stock in connection with the Acquisition, (b)
shares of stock of the surviving or successor corporation or
(c) 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
-8-
Common Stock subject to such Options immediately preceding
the Acquisition; or (ii) upon written notice to the
optionees, provide that all Options must be exercised, to
the extent then exercisable or to be exercisable as a result
of the Acquisition, within a specified number of days of the
date of such notice, at the end of which period the Options
shall terminate; or (iii) 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 or to be exercisable as a result of the
Acquisition) over the exercise price thereof.
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 such 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.
-9-
H. ADJUSTMENTS. Upon the happening of any of the 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.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (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 Option, (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, (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 an Option shall not
have the rights of a shareholder with respect to the shares covered by such
Option until the date of issuance of a stock certificate to such holder 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 on December 10, 1996, subject, with respect to the validation of ISOs
granted under the Plan, to approval of the Plan by the stockholders of the
Company at the next Meeting of Stockholders or, in lieu thereof, by written
consent. If the approval of stockholders is not obtained prior to December 10,
1997, any grants of ISOs under the Plan made prior to that date will be
rescinded. The Plan shall expire at the end of the day on December 9, 2006
(except as to Options outstanding on that date). Subject to the provisions of
paragraph 5 above, Options 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
-10-
may not be increased (except by adjustment pursuant to paragraph 13); (b) the
provisions of paragraph 3 regarding eligibility for grants of ISOs may not be
modified; (c) the provisions of paragraph 6(B) regarding the exercise price at
which shares may be offered pursuant to ISOs may not be modified (except by
adjustment pursuant to paragraph 13); and (d) the expiration date of the Plan
may not be extended. Except as otherwise provided in this paragraph 15, in no
event may action of the Board or stockholders alter or impair the rights of a
grantee, without such grantee's consent, under any Stock Right previously
granted to such grantee.
16. MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO NON-QUALIFIED
OPTIONS. 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. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting
an ISO granted under the Plan, each optionee agrees to notify the Company in
writing immediately after such optionee makes a Disqualifying Disposition (as
described in Sections 421, 422 and 424 of the Code and regulations thereunder)
of any stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of
a Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, 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 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option
-11-
hereunder, or the making of a distribution or other payment with respect to such
stock or securities, the Company may withhold taxes in respect of amounts that
constitute compensation includible in gross income. The Committee in its
discretion may condition (i) the exercise of an Option, (ii) the transfer of a
Non-Qualified Stock Option, (iii) the grant of an Award, (iv) the making of a
Purchase of Common Stock for less than its fair market value, or (v) the vesting
or transferability of restricted stock or securities acquired by exercising an
Option, 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 Committee, 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 a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.
20. 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.
Government regulations may impose reporting or other obligations on
the Company with respect to the Plan. For example, the Company may be required
to send tax information statements to employees and former employees that
exercise ISOs under the Plan, and the Company may be required to file tax
information returns reporting the income received by grantees of Options in
connection with the Plan.
21. GOVERNING LAW. The validity and construction of the Plan
and the instruments evidencing Stock Rights shall be governed by the laws of the
State of Delaware, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.