EXHIBIT 4.1
WORLDS INC.
a New Jersey Corporation
1997 Incentive and Non-Qualified Stock Option Plan
1. Purpose. The purposes of this 1997 Incentive and Non-Qualified Stock
Option Plan are to attract and retain the best available personnel, to provide
additional incentive to the Employees, Consultants and Outside Directors of
Worlds Inc., a New Jersey corporation (the "Company"), and to promote the
success of the Company's business.
Options granted hereunder may, consistent with the terms of
this Plan, be either Incentive Stock Options or Nonstatutory Stock Options, at
the discretion of the Committee (or the Board) and as reflected in the terms of
the written option agreement.
2. Definitions. As used in this Plan, the following definitions
shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the rules and reguations promulgated thereunder.
(c) "Commission" means the United States Securities and Exchange
Commission.
(d) "Committee" means the Committee appointed by the Board or
otherwise determined in accordance with Section 4(a) of this Plan.
(e) "Common Stock" means the common stock of the Company, par
value $0.001 per share.
(f) "Consultant" means any person who is engaged by the
Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services; provided that the term Consultant
shall not include directors who are not compensated for their services or are
paid only a director's fee by the Company.
(g) "Continuous Status as an Employee, Consultant or Outside
Director" means the absence of any interruption or termination of service as an
Employee, Consultant or Outside Director, as applicable. Continuous Status as an
Employee, Consultant or Outside Director shall not be considered interrupted in
the case of sick leave or military leave, any other leave provided pursuant to a
written policy of the Company in effect at the time of determination, or any
other leave of absence approved by the Board or the Committee; provided that
such leave is for a period of not more than the greatest of (i) 90 days, (ii)
the date of the resumption of such service upon the expiration of such leave
which is guaranteed by contract or statute or is provided in a written policy of
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the Company which was in effect upon the commencement of such leave, or (iii)
such period of leave as may be determined by the Board or the Committee in its
sole discretion.
(h) "Disinterested Person" shall have the meaning set forth in
Rule 16b- 3(d)(3), or any successor definition adopted by the Commission,
provided the person is also an "outside director" under Section 162(m) of the
Code.
(i) "Employee" means any person employed by the Company or any
Parent or Subsidiary of the Company within the meaning of code Section 3401(c),
including employees who are also officers or directors or both of the Company or
any Parent or Subsidiary of the Company. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and the rules and regulations promulgated
thereunder.
(k) "Holder" means the recipient of a Stock Appreciation
Right.
(l) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code, and the rules and regulations promulgated thereunder.
(m) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to this
Plan.
(o) "Optioned Stock" means the Common Stock subject to an
Option.
(p) "Optionee" means an Employee, Consultant or Outside
Director who receives an Option.
(q) "Outside Director" means any member of the Board of
Directors of the Company who is not an Employee or Consultant.
(r) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(s) "Plan" means this 1997 Incentive and Non-Qualified Stock
Option Plan of Worlds Inc., as amended from time to time.
(t) "Rule 16b-3" means Rule 16b-3, as promulgated by the
Commission under Section 16(b) of the Exchange Act, as such rule is amended from
time to time and as interpreted by the Commission.
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(u) "Securities Act" means the Securities Act of 1933, as
amended from time to time, and the rules and regulations promulgated thereunder.
(v) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of this Plan.
(w) "Stock Appreciation Right" means a right, the value of
which is determined relative to appreciation in value of Shares pursuant to an
award granted under Section 12 hereof.
(x) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Scope of Plan. Subject to the provisions of Section 10 of this Plan,
and unless otherwise amended by the Board and approved by the stockholders of
the Company as required by law, the maximum aggregate number of Shares issuable
under this Plan is 1,000,000, and such Shares are hereby made available and
shall be reserved for issuance under this Plan. The Shares may be authorized but
unissued, or reacquired, Common Stock.
If an Option shall expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares subject
thereto shall (unless this Plan shall have terminated) become available for
grants of other Options under this Plan.
4. Administration of Plan.
(a) Procedure. This Plan shall be administered either by the
Board or by a Committee appointed pursuant to this Section 4(a). The Committee
shall consist of two or more Outside Directors appointed by the Board, but all
Committee members must be Disinterested Persons. If the Board fails to appoint
such persons, the Committee shall consist of all Outside Directors who are
Disinterested Persons. It is the intent of this provision that the Plan shall at
all times be administered so as to comply with the requirements of Rule 16b-3
and the Code for issuing Incentive Stock Options. In the event it is not
required to appoint a Committee, then all references herein to a Committee shall
mean the Board.
(b) Powers of Committee. Subject to the provisions of this
Plan, the Committee (or the Board) shall have full and final authority in its
discretion to: (i) grant Incentive Stock Options and Nonstatutory Stock Options,
(ii) determine, upon review of relevant information and in accordance with
Section 7 below, the Fair Market Value of the Common Stock; (iii) determine the
exercise price per share of Options to be granted, in accordance with this Plan,
(iv) determine the Employees and Consultants to whom, and the time or times at
which, Options shall be granted, and the number of shares to be represented by
each Option; (v) cancel, with the consent of the Optionee, outstanding Options
and grant new Options in substitution therefor; (vi) interpret this Plan; (vii)
accelerate or defer (with the consent of Optionee) the exercise date of any
Option; (viii) prescribe, amend and rescind rules and regulations relating to
this Plan; (ix) determine the terms and provisions of each Option granted
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(which need not be identical) by which Options shall be evidenced and, with the
consent of the holder thereof, modify or amend any provisions (including without
limitation provisions relating to the exercise price and the obligation of any
Optionee to sell purchased Shares to the Company upon specified terms and
conditions) of any Option; (x) require withholding from or payment by an
Optionee of any federal, state or local taxes; (xi) appoint and compensate
agents, counsel, auditors or other specialists as the Committee deems necessary
or advisable; (xii) correct any defect or supply any omission or reconcile any
inconsistency in this Plan and any agreement relating to any Option, in such
manner and to such extent the Committee determines to carry out the purposes of
this Plan, and; (xiii) construe and interpret this Plan, any agreement relating
to any Option, and make all other determinations deemed by the Committee to be
necessary or advisable for the administration of this Plan, even in conflict
with an express provision of the Plan.
A majority of the Committee shall constitute a quorum at any
meeting, and the acts of a majority of the members present, or acts unanimously
approved in writing by the entire Committee without a meeting, shall be the acts
of the Committee. A member of the Committee shall not participate in any
decisions with respect to himself under this Plan.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Committee, if appointed, shall be
final and binding on all Optionees and any other holders of any Options granted
under this Plan.
5. Eligibility.
(a) Options may be granted to any Employee or Consultant as
the Committee may from time to time designate, provided that Incentive Stock
Options may be granted only to Employees (unless permitted by the Code). In
selecting the individuals to whom Options shall be granted, as well as in
determining the number of Options granted, the Committee (or the Board) shall
take into consideration such factors as it deems relevant in connection with
accomplishing the purpose of this Plan. Subject to the provisions of Section 3
above, an Optionee may, if he or she is otherwise eligible, be granted an
additional Option or Options if the Committee shall so determine.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
Notwithstanding such designations, if and to the extent that the aggregate Fair
Market Value of the Shares with respect to which Options designated as Incentive
Stock Options are exercisable for the first time by any Optionee during any
calendar year (under all plans of the Company) exceeds $100,000, such options
shall be treated as Nonstatutory Stock Options. For purposes of this Section
5(b), Options shall be taken into account in the order in which they are
granted, and the Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(c) This Plan shall not confer upon any Optionee any right
with respect to continuation of employment by or the rendition of services to
the Company or any Parent or Subsidiary, nor shall it interfere in any way with
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his or her right or the right of the Company or any Parent or Subsidiary to
terminate his or her employment or services at any time, with or without cause.
The terms of this Plan or any Options granted hereunder shall not be construed
to give any Optionee the right to any benefits not specifically provided by this
Plan or in any manner modify the Company's right to modify, amend or terminate
any of its pension or retirement plans.
(d) All grants of Options to Outside Directors under this Plan
shall be automatic and non-discretionary and shall be made strictly in
accordance with the following provisions:
(i) No person shall have any discretion to
select which Outside Directors shall be granted options or to determine the
number of Shares to be covered by options granted to Outside Directors;
provided, that nothing in this Plan shall be construed to prevent an Outside
Director from declining to receive an Option under this Plan.
(ii) Each Outside Director shall be
automatically granted an option to purchase 60,000 Shares (subject to adjustment
as provided in Section 10 below) on the date this Plan is adopted. Commencing in
1999, each Outside Director shall be automatically granted on the first business
day following their election (or re-election, as the case may be), an option to
purchase 5,000 Shares (subject to adjustment as provided in Section 10 below).
(iii) The terms of each Option granted under this
Section 5(d) shall be as follows:
(A) the term of the Option shall be ten
(10) years;
(B) the Option shall become exercisable
cumulatively with respect to one-third of the Shares on each of the first,
second and third anniversaries of the date of grant; and
(C) the exercise price per share of
Common Stock shall be 100% of the "Fair Market Value" (as defined in Section
7(b) below) on the date of grant of the Option.
6. Term of Plan. This Plan shall become effective upon its adoption by
the Board of Directors of the Company) subject to the approval thereof by vote
of the holders of a majority of the outstanding shares of the Company present,
or represented, and entitled to vote at a meeting to be duly held (or through
written consents in lieu of a meeting) in accordance with the applicable laws of
the State of Delaware. Such meeting shall be held within twelve months of the
adoption of the Plan by the Board of Directors. The Plan shall terminate no
later than ten years after the date of stockholder approval. No grants shall be
made under this Plan after the date of termination of this Plan. Any
termination, either partially or wholly, shall not affect any Options then
outstanding under this Plan.
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7. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Committee as follows:
(i) In the case of an Incentive Stock Option
granted to any Employee, the per Share exercise price shall be no less than 100%
of the Fair Market Value per Share on the date of grant, but if granted to an
Employee who, at the time of the grant of such Incentive Stock Option, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of grant.
(ii) With respect to (i) above, the per Share
exercise price is subject to adjustment as provided in Section 10 below. For
purposes of this Section 7(a), if an Option is amended to reduce the exercise
price, the date of grant of such option shall thereafter be considered to be the
date of such amendment.
(b) Fair Market Value. The "Fair Market Value" of the Common
Stock shall be determined by the Committee in its discretion; provided, that if
the Common Stock is listed on a stock exchange, the Fair Market Value per Share
shall be the closing price on such exchange on the date of grant of the Option
as reported in the Wall Street Journal (or, (i) if not so reported, as otherwise
reported by the exchange, and (ii) if not reported on the date of grant, then on
the last prior date on which a sale of the Common Stock was reported); or if not
listed on an exchange but traded on the National Association of Securities
Dealers Automated Quotation National Market System ("NASDAQ"), the Fair Market
Value per Share shall be the closing price per share of the Common Stock for the
date of grant, as reported in the Wall Street Journal (or, (i) if not so
reported, as otherwise reported by NASDAQ, and (ii) if not reported on the date
of grant, then on the last prior date on which a sale of the Common Stock was
reported); or, if the Common Stock is otherwise publicly traded, the mean of the
closing bid price and asked price or the last known sale or as otherwise
reasonably determined by the Board.
(c) Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Committee (and in the case of an Incentive Stock Option,
shall be determined at the time of grant) and may consist entirely of (i) cash;
(ii) check; (iii) the Optionee's personal interest bearing full recourse
promissory note with such terms and provisions as the Committee may authorize
(provided that no person who is not an Employee of the Company may purchase
Shares with a promissory note); (iv) other Shares of Common Stock which have a
Fair Market Value on the date of surrender (determined without regard to any
limitations on transferability imposed by securities laws) equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised; (v) any combination of such methods of payment; or (iv) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under applicable laws.
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(d) Withholding. No later than the date as of which an amount
first becomes includable in the gross income of the Optionee for Federal income
tax purposes with respect to an option, the Optionee shall pay to the Company
(or other entity identified by the Committee), or make arrangements satisfactory
to the Company or other entity identified by the Committee regarding the payment
of, any Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount required in order for the Company to obtain
a current deduction. Unless otherwise determined by the Committee, withholding
obligations may be settled with Common Stock, including Common Stock underlying
the subject option, provided that any applicable requirements under Section 16
of the Exchange Act are satisfied so as to avoid liability thereunder. The
obligations of the Company under this Plan shall be conditional upon such
payment or arrangements, and the Company shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment otherwise due to the
Optionee.
8. Options.
(a) Term of Option. The term of each Option granted shall be
for a period of no more than ten (10) years from the date of grant thereof or
such shorter term as may be provided in the Option agreement. However, in the
case of an Option granted to an Optionee who, at the time the Option is granted,
owns stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
time as may be provided in the Option Agreement.
(b) Exercise of Options.
(i) Procedure for Exercise; Rights as a
Stockholder. Any Option granted under this Plan shall be exercisable at such
times and under such conditions as determined by the Committee, including
performance criteria with respect to the Company and/or the Optionee, and as
shall otherwise be permissible under the terms of this Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may, as authorized by the Committee, consist of any
consideration and method of payment allowable under Section 7 of this Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. If the
exercise of an Option is treated in part as the exercise of an Incentive Stock
Option and in part as the exercise of a Nonstatutory Stock Option, the Company
shall issue a separate stock certificate evidencing the Shares treated as
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acquired upon exercise of an Incentive Stock Option and a separate stock
certificate evidencing the Shares treated as acquired upon exercise of a
Nonstatutory Stock Option and shall identify each such certificate accordingly
in its stock transfer records. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 10 of this Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
this Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(ii) Method of Exercise. An Optionee may
exercise an Option, in whole or in part, at any time during the option period by
the Optionee's giving written notice of exercise on a form provided by the
Committee (if available) to the Company specifying the number of shares of
Common Stock subject to the Option to be purchased. Such notice shall be
accompanied by payment in full of the purchase price by cash or check or such
other form of payment as the Company may accept. If approved by the Committee,
payment in full or in part may also be made (A) by delivering Common Stock
already owned by the Optionee having a total Fair Market Value on the date of
such delivery equal to the exercise price of the subject Option; (B) by the
execution and delivery of a note or other evidence of indebtedness (and any
security agreement thereunder) satisfactory to the Committee; (C) by authorizing
the Company to retain shares of Common Stock which would otherwise be issuable
upon exercise of the Option having a total Fair Market Value on the date of
delivery equal to the exercise price of the subject Option; (D) by the delivery
of cash by a broker-dealer to whom the Optionee has submitted an irrevocable
notice of exercise (in accordance with Part 220, Chapter II, Title 12 of the
Code of Federal Regulations, so-called "cashless" exercise); or (E) by any
combination of the foregoing. In the case of an Incentive Stock Option, the
right to make a payment in the form of already owned shares of Common Stock of
the same class as the Common Stock subject to the Option may be authorized only
at the time the Option is granted. No shares of Common Stock shall be issued
until full payment therefor has been made. An Optionee shall have all of the
rights of a stockholder of the Company holding the class of Common Stock that is
subject to such Option (including, if applicable, the right to vote the shares
and the right to receive dividends), when the Optionee has given written notice
of exercise, has paid in full for such shares and such shares have been recorded
on the Company's official stockholder records as having been issued or
transferred.
(iii) Termination of Status as an Employee,
Consultant or Outside Director. If an Optionee's Continuous Status as an
Employee, Consultant or Outside Director (as the case may be) is terminated for
any reason whatever, such Optionee may, but only within such period of time as
provided in the Option agreement, after the date of such termination (but in no
event later than the date of expiration of the term of such Option as set forth
in the Option agreement and determined by the Committee), exercise the Option to
the extent that such Employee, Consultant or Outside Director was entitled to
exercise it at the date of such termination pursuant to the terms of the Option
agreement. To the extent that such Employee, Consultant or Outside Director was
not entitled to exercise the Option at the date of such termination, or if such
Employee, Consultant or Outside Director does not exercise such Option
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(which such Employee, Consultant or Outside Director was entitled to exercise)
within the time specified in the Option agreement, the Option shall terminate.
(iv) Company Loan or Guarantee. Upon the
exercise of any Option and subject to the pertinent Option agreement and the
discretion of the Committee, the Company may at the request of the Optionee; (A)
lend to the Optionee, with recourse, an amount equal to such portion of the
option exercise price as the Committee may determine; or (B) guarantee a loan
obtained by the Optionee from a third-party for the purpose of tendering the
option exercise price.
9. Non-transferability of Options. An Option granted hereunder shall by
its terms not be sold, pledged, assigned, hypothecated, transferred, or disposed
of in any manner other than by will or the laws of descent and distribution. An
Option shall also be transferable to the extent such transfer will not cause
either the Option or the Plan to no longer qualify as an Incentive Stock Option
under the Code or as meeting the requirements of Rule 16b-3. An Option may be
exercised during the Optionee's lifetime only by the Optionee.
10. Adjustments Upon Changes in Capitalization or Merger.
(a) Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock which have
been authorized for issuance under this Plan but as to which no Options have yet
been granted or which have been returned to this Plan upon cancellation or
expiration of an Option, and the number of shares of Common Stock subject to
each outstanding Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock of the Company. 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 of Common Stock subject to an Option.
(b) 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, unless otherwise
provided by the Committee. The Committee may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Committee and give each Optionee the right to exercise his or
her Option as to all or any part of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable.
(c) Sale or Merger. "Sale" means: (i) sale (other than a sale
by the Company) of securities entitled to more than 75% of the voting power of
the Company in a single transaction or a related series of transactions; or (ii)
sale of substantially all of the assets of the Company; or (iii) approval by the
stockholders of the Company of a reorganization, merger or consolidation of the
Company, as a result of which the persons who were the stockholders of the
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Company immediately prior to such reorganization, merger or consolidation do not
own securities immediately after the reorganization, merger or consolidation
entitled to more than 50% of the voting power of the reorganized, merged or
consolidated company. Immediately prior to a Sale, each Optionee may exercise
his or her Option as to all Shares then subject to the Option, regardless of any
vesting conditions otherwise expressed in the Option. Voting power, as used in
this Section 10(c), shall refer to those securities entitled to vote generally
in the election of directors, and securities of the Company not entitled to vote
but which are convertible into, or exercisable for, securities of the Company
entitled to vote generally in the election of directors shall be counted as if
converted or exercised, and each unit of voting securities shall be counted in
proportion to the number of votes such unit is entitled to cast.
(d) Purchased Shares. No adjustment under this Section 10
shall apply to any purchased Shares already deemed issued at the time any
adjustment would occur.
(e) Notice of Adjustments. Whenever the purchase price or the
number or kind of securities issuable upon the exercise of the Option shall be
adjusted pursuant to Section 10, the Company shall give each Optionee written
notice setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, and the method by which such adjustment was
calculated.
(f) Mitigation of Excise Tax. If any payment or right accruing
to an Optionee under this Plan (without the application of this Section), either
alone or together with other payments or rights accruing to the Optionee from
the Company or an affiliate ("Total Payments") would constitute a "parachute
payment" (as defined in Section 280G of the Code and regulations thereunder),
the Committee may in each particular instance determine to (i) reduce such
payment or right to the largest amount or greatest right that will result in no
portion of the amount payable or right accruing under the Plan being subject to
an excise tax under Section 4999 of the Code or being disallowed as a deduction
under Section 280G of the Code, or (ii) take such other actions, or make such
other arrangements or payments with respect to any such payment or right as the
Committee may determine in the circumstances. Any such determination shall be
made by the Committee in the exercise of its sole discretion, and such
determination shall be conclusive and binding on the Optionee. The Optionee
shall cooperate as may be requested by the Committee in connection with the
Committee's determination, including providing the Committee with such
information concerning such Optionee as the Committee may deem relevant to its
determination.
11. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Committee makes the determination
granting such Option. Notice of the determination shall be given to each
Employee, Consultant or Outside Director to whom an Option is so granted within
a reasonable time after the date of such grant. If the Committee cancels, with
the consent of Optionee, any Option granted under this Plan, and a new Option is
substituted therefor, the date that the canceled Option was originally granted
shall be the date used to determine the earliest date for exercising the new
substituted Option under Section 7 so that the Optionee may exercise the
substituted Option at the same time as if the Optionee had held the substituted
Option since the date the canceled Option was granted, unless the canceled
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Option shall have a new exercise price, in which case, the date of grant shall
be the date the Committee makes the determination to grant the substituted
Option.
12. Stock Appreciation Rights. An award of a Stock Appreciation Right
shall entitle the Holder, subject to terms and conditions determined by the
Committee, to receive upon exercise of the Stock Appreciation Right all or a
portion of the excess of (i) the Fair Market Value of a specified number of
Shares as of the date of exercise of the Stock Appreciation Right over (ii) a
specified price which shall not be less than 100% of the Fair Market Value of
such Shares as of the date of grant of the Stock Appreciation Right. A Stock
Appreciation Right may be granted in connection with a previously or
contemporaneously granted Option, or independent of any Option. If issued in
connection with an Option, the Committee may impose a condition that exercise of
a Stock Appreciation Right cancels the Option with which it is connection and
exercise of the connected Option cancels the Stock Appreciation Right. Each
Stock Appreciation Right may be exercisable in whole or in part on the terms
provided in the Option agreement. Notwithstanding anything to the contrary
stated in this Plan, no Stock Appreciation Right shall be exercisable prior to
six months from the date of grant except in the event of the death or Disability
of the Holder. No Stock Appreciation Right shall be exercisable at any time
after its term. When a Stock Appreciation Right is no longer exercisable, it
shall be deemed to have lapsed or terminated. Except as otherwise provided in
the applicable Option agreement, upon exercise of a Stock Appreciation Right,
payment to the Holder (or to his or her Successor) shall be made in the form of
cash, Stock or a combination of cash and Stock as promptly as practicable after
such exercise. The Option agreement may provide for a limitation upon the amount
or percentage of the total appreciation on which payment (whether in cash and/or
Stock) may be made in the event of the exercise of a Stock Appreciation Right.
Any election by a Holder to receive cash in full or partial
settlement of a Stock Appreciation Right, and any exercise of a Stock
Appreciation Right for cash, may be made only by a request filed with the
Corporate Secretary of the Company during the period beginning on the third
business day following the date of release for publication by the Company of
quarterly or annual summary statements of earnings and ending on the twelfth
business day following such date. Within thirty (30) days after the receipt by
the Company of a request to receive cash in full or partial settlement of a
Stock Appreciation Right or to exercise such Stock Appreciation Right for cash,
the Committee shall, in its sole discretion, either consent to or disapprove, in
whole or in part, such request.
If the Committee disapproves in whole or in part any election
by a Holder to receive cash in full or partial settlement of a Stock
Appreciation Right or to exercise such Stock Appreciation Right for cash, such
disapproval shall not affect such Holder's right to exercise such Stock
Appreciation Right at a later date, to the extent that such Stock Appreciation
Right shall be otherwise exercisable, or to elect the form of payment at a later
date, provided that an election to receive cash upon such later exercise shall
be subject to the approval of the Committee. Additionally, such disapproval
shall not affect such Holder's right to exercise any related Option or Options
granted to such Holder Under the Plan.
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In no event will a Holder of a Stock Appreciation Right who is
subject to the reporting requirements of Section 16(a) of the Exchange Act be
entitled to make such a request or receive cash in full or partial payment of
such Stock Appreciation Right until the Company shall have satisfied the
applicable requirements of Rule 16(b)-3 promulgated under the Exchange Act for
the specified periods.
13. Amendment and Termination of Plan.
(a) Amendment and Termination. The Board or the Committee may
amend, waive or terminate this Plan, including any express provision contained
herein, from time to time in such respects as it shall deem advisable; provided
that, to the extent necessary to comply with Rule 16b-3 or with Section 422 of
the Code (or any other successor or applicable law or regulation), the Company
shall obtain stockholder approval of any Plan amendment in such a manner and to
such a degree as is required by the applicable law, rule or regulation.
(b) Effect of Amendment or Termination. Any such amendment or
termination of this Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Committee, which agreement must be in writing and signed by the Optionee and
the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act, and the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Restrictions on Shares. Shares of Common Stock issued upon exercise
of an Option shall be subject to the terms and conditions specified herein and
to such other terms, conditions and restrictions as the Committee in its
discretion may determine or provide in the grant. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock, cash
or other property prior to (a) the listing of such shares on any stock exchange
(or other public market) on which the Common Stock may then be listed (or
regularly traded), (b) the completion of any registration or qualification of
such shares under federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable, and
(c) the satisfaction of any applicable withholding obligation in order for the
Company or an affiliate to obtain a deduction with respect to the exercise of an
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Option. The Company may cause any certificate for any share of Common Stock to
be delivered to be properly marked with a legend or other notation reflecting
the limitations on transfer of such Common Stock as provided in this Plan or as
the Committee may otherwise require. The Committee may require any person
exercising an Option to make such representations and furnish such information
as it may consider appropriate in connection with the issuance or delivery of
the shares of Common Stock in compliance with applicable law or otherwise.
Fractional shares shall not be delivered, but shall be rounded to the next lower
whole number of shares.
16. Stockholder Rights. No person shall have any rights of a
stockholder as to shares of Common Stock subject to an Option until, after
proper exercise of the Option or other action required, such shares shall have
been recorded on the Company's official stockholder records as having been
issued or transferred. Subject to the preceding Section and upon exercise of the
Option or any portion thereof, the Company will have thirty (30) days in which
to issue the shares, and the Optionee will not be treated as a stockholder for
any purpose whatsoever prior to such issuance. No adjustment shall be made for
cash dividends or other rights for which the record date is prior to the date
such shares are recorded as issued or transferred in the Company's official
stockholder records, except as provided herein or in an agreement.
17. Best Efforts To Register. If there has been a public offering, the
Company may register under the Securities Act the Common Stock delivered or
deliverable pursuant to Options on Commission Form S-8 if available to the
Company for this purpose (or any successor or alternate form that is
substantially similar to that form to the extent available to effect such
registration), in accordance with the rules and regulations governing such
forms, as soon as such forms are available for registration to the Company for
this purpose. The Company will, if it so determines, use its good faith efforts
to cause the registration statement to become effective as soon as possible and
will file such supplements and amendments to the registration statement as may
be necessary to keep the registration statement in effect until the earliest of
(a) one year following the expiration of the option period of the last Option
outstanding, (b) the date the Company is no longer a reporting company under the
Exchange Act and (c) the date all Optionees have disposed of all shares
delivered pursuant to any Option. The Company may delay the foregoing actions at
any time and from time to time if the Committee determines in its discretion
that any such registration would materially and adversely affect the Company's
interests or if there is no material benefit to Optionees.
18. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to permit the exercise of all Options outstanding under this Plan.
The inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained for any
reason.
19. Option Agreements. Options shall be evidenced by written
Option agreements in such form as the Committee (or the Board) shall approve.
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20. Information to Optionees. To the extent required by applicable law,
the Company shall provide to each Optionee, during the period for which such
Optionee has one or more Options outstanding, copies of all annual reports and
other information which are provided to all stockholders of the Company. Except
as otherwise noted in the foregoing sentence, the Company shall have no
obligation or duty to affirmatively disclose to any Optionee, and no Optionee
shall have any right to be advised of, any material information regarding the
Company or any Parent or Subsidiary at any time prior to, upon or otherwise in
connection with, the exercise of an Option.
21. Funding. Benefits payable under this Plan to any person shall be
paid directly by the Company. The Company shall not be required to fund or
otherwise segregate assets to be used for payment of benefits under this Plan.
22. Indemnification. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with this
Plan or any option granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding; provided that within 60 days after
institution of any such action, suit or proceeding a Committee member shall in
writing offer the Company the opportunity, at its own expense, to handle and
defend the same. The foregoing right of indemnification shall not be exclusive
and shall be independent of any other rights of indemnification to which such
persons may be entitled under the Company's Certificate of Incorporation or
by-laws, by contract, as a matter of law, or otherwise.
23. Controlling Law. This Plan shall be governed by the laws of the
State of New York applicable to contracts made and performed wholly in New York
between New York residents.
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