1994 Stock Option Plan - Chesapeake Energy Corp.
CHESAPEAKE ENERGY CORPORATION
1994 STOCK OPTION PLAN
as Amended Through October 15, 1996
Restated to Reflect Stock Splits
Through December 31, 1996
<PAGE>
CHESAPEAKE ENERGY CORPORATION
1994 STOCK OPTION PLAN
Page
ARTICLE I General Provisions . . . . . . . . . . . . 1
1.1 Purpose. . . . . . . . . . . . . . . 1
1.2 General. . . . . . . . . . . . . . . 1
1.3 Administration of the Plan . . . . . 1
1.4 Shares Subject to the Plan . . . . . 2
1.5 Participation in the Plan. . . . . . 2
1.6 Determination of Fair Market
Value. . . . . . . . . . . . . . . . 2
1.7 Grants of Options Under Stock
Option Agreement . . . . . . . . . . 3
1.8 Amendment and Termination of the
Plan . . . . . . . . . . . . . . . . 3
1.9 Effective Date . . . . . . . . . . . 3
1.10 Securities Law Requirements. . . . . 4
1.11 Stock Certificates . . . . . . . . . 4
1.12 Option Exercise and
Payment for Stock. . . . . . . . . . 4
1.13 Stock Options and ISO
Options Granted Separately . . . . . 5
1.14 Use of Proceeds. . . . . . . . . . . 5
1.15 Non-Transferability of Options . . . 5
1.16 Additional Documents on Death
of Participant . . . . . . . . . . . 5
1.17 Changes in Employment . . . . . . . 6
1.18 Stockholder Rights . . . . . . . . . 6
1.19 Adjustments Upon Changes in
Capitalization . . . . . . . . . . . 6
1.20 Payment of Withholding Taxes . . . . 6
1.21 Assumption of Outstanding
Options. . . . . . . . . . . . . . . 7
1.22 Retirement and Disability. . . . . . 7
ARTICLE II Stock Options. . . . . . . . . . . . . . . 7
2.1 General Terms. . . . . . . . . . . . 7
2.2 Grant and Terms for Stock Options. . 7
ARTICLE III ISO Options. . . . . . . . . . . . . . . . 9
3.1 General Terms. . . . . . . . . . . . 9
3.2 Grant and Terms of ISO Options . . . 9
ARTICLE IV Acceleration of Options Upon Corporate
Event . . . . . . . . . . . . . . . . . . 10
4.1 Acceleration of Options . . . . . . 10
4.2 Procedures for Acceleration and
Exercise . . . . . . . . . . . . . . 11
4.3 Certain Additional Payments by the
Company . . . . . . . . . . . . . . . 11
ARTICLE V Options Not Qualifying as Incentive Stock
Options. . . . . . . . . . . . . . . . . . 12
<PAGE>
CHESAPEAKE ENERGY CORPORATION
1994 STOCK OPTION PLAN
ARTICLE I
General Provisions
1.1 Purpose. The purpose of CHESAPEAKE ENERGY CORPORA-
TION 1994 STOCK OPTION PLAN (the "Plan") shall be to attract,
retain and motivate employees (the "Participants") of Chesapeake
Energy Corporation (the "Company") and of any parent or subsidiary
of the Company by way of granting (i) nonqualified stock options
("Stock Options") and (ii) incentive stock options ("ISO Options").
For purposes of this Plan, Stock Options and ISO Options are
sometimes collectively herein called "Options." The ISO Options to
be granted under the Plan are intended to be qualified pursuant to
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Stock Options to be granted are intended to be
"nonqualified stock options" as described in Sections 83 and 421 of
the Code. Further, under the Plan, the terms "parent" and
"subsidiary" shall have the same meaning as set forth in
Subsections (e), (f) and (g) of Section 424 of the Code unless the
context clearly indicates to the contrary.
1.2 General. The terms and provisions of this Article
I shall be applicable to both Stock Options and ISO Options unless
the context clearly indicates to the contrary.
1.3 Administration of the Plan.
(a) Deemed Separate Plans. For purposes of
administration, the Plan shall be deemed to consist of two separate
stock option plans, a "Non-Director Plan" which is limited to
Participants who are employees of the Company or any parent or sub-
sidiary of the Company but are not directors of the Company ("Non-
Director Participants") and a "Director Plan" which is limited to
Participants who are employees of the Company or any parent or sub-
sidiary of the Company and also directors of the Company ("Director
Participants"). Except for administration and the category of
Participants eligible to receive Options, the terms of the Non-
Director Plan and the Director Plan are identical.
(b) Committee Membership. The Non-Director Plan
shall be administered by a committee, designated the Regular Option
Committee (the "Regular Committee"), of two or more directors of
the Company, and the Director Plan shall be administered by a
committee, designated the Special Option Committee (the "Special
Committee"), of two or more directors of the Company. It is
intended that, unless otherwise determined by the Board of
Directors of the Company (the "Board"), the members of the Special
Committee shall be directors who are not Director Participants.
Accordingly, with respect to all decisions relating to Non-Director
Participants, including the grant of Options, the term "Committee"
shall apply only to the Regular Committee; and, with respect to all
decisions relating to Director Participants, including the grant of
Options, the term "Committee" shall apply only to the Special
Committee.
(c) Appointment. The members of the Committee
shall be appointed by the Board and shall serve at the pleasure of
the Board.
(d) Authority of Committee. The Committee shall
have the power where consistent with the general purpose and intent
of the Plan to (i) modify the requirements of the Plan to conform
with the law or to meet special circumstances not anticipated or
covered in the Plan, (ii) suspend or discontinue the Plan, (iii)
establish policies and (iv) adopt rules and regulations and
prescribe forms for carrying out the purposes and provisions of the
Plan including the form of any stock option agreement between the
Company and any Participant with respect to any Option granted
under the Plan (a "Stock Option Agreement"). Unless otherwise
provided in the Plan, the Committee shall have the authority to
interpret and construe the Plan, and determine all questions
arising under the Plan and any Stock Option Agreement made pursuant
to the Plan. Any interpretation, decision or determination made by
the Committee shall be final, binding and conclusive. A majority
of the Committee shall constitute a quorum, and an act of the
majority of the members present at any meeting at which a quorum is
present shall be the act of the Committee.
1.4 Shares Subject to the Plan. Shares of stock
("Stock") covered by Stock Options and ISO Options shall consist of
Four Million Eight Hundred Eighty-Six Nine Hundred Ten (4,886,910)
shares of the voting common stock, par value $.01, of the Company.
Either authorized and unissued shares or treasury shares may be
delivered pursuant to the Plan. If any Option for shares of Stock
granted to a Participant lapses, or is otherwise terminated, the
Committee may grant Stock Options or ISO Options for such shares of
Stock to other Participants.
1.5 Participation in the Plan. The Committee shall
determine from time to time those Participants who are to be
granted Stock Options and ISO Options and the number of shares of
Stock covered thereby. Provided, in no event may any Participant
be granted more than One Million One Hundred Twenty-Five Thousand
(1,125,000) Options during any consecutive three calendar year
period under the Plan.
1.6 Determination of Fair Market Value. As used in the
Plan, "fair market value" shall have the following meaning: (i) if
the common stock of the Company is listed for trading on one or
more national securities exchanges or the Nasdaq National Market
System (the "NMS"), the reported last sales price on such principal
exchange or the NMS as of the granting date, or other relevant
date, or if such common stock shall not have been traded on such
date, the reported last sales price on such principal exchange or
the NMS on the first day prior thereto on which such common stock
was so traded; or (ii) if the common stock of the Company is not
listed for trading on a national securities exchange or the NMS but
is traded in the over-the-counter market, the mean of the highest
and lowest bid prices for such common stock as of the granting
date, or other relevant date, or if there are no such bid prices
for such common stock on such date, the mean of the highest and
lowest bid prices on the first day prior thereto on which such
prices existed. Provided, if the price of such common stock is not
reported or listed as aforesaid, then the "fair market value" of
such common stock shall be determined by the Committee as of the
relevant date, and the Committee shall utilize any reasonable and
prudent method in determining such fair market value, including,
without limitation, the obtaining of opinions of independent and
well-qualified experts.
1.7 Grants of Options Under Stock Option Agreement.
Each Stock Option or ISO Option granted under this Plan shall be
evidenced by the minutes of a meeting of the Committee or by the
written consent of the Committee and by a written Stock Option
Agreement effective on the date of grant and executed by the
Company and the Participant. Each Option granted hereunder shall
contain such terms, restrictions and conditions as the Committee
may determine, which terms, restrictions and conditions may or may
not be the same in each case.
1.8 Amendment and Termination of the Plan. The Plan
shall terminate at midnight, October 17, 2004, but prior thereto
may be altered, changed, modified, amended or terminated by written
amendment approved by the Board. Provided, that no action of the
Board may, without the approval of the holders of a majority of the
Company's securities present in person or represented by proxy at
a meeting of stockholders entitled to vote thereon, increase the
aggregate number of shares of Stock which may be purchased under
Stock Options or ISO Options granted under the Plan; materially
increase the benefits accruing to Participants under the Plan; or
materially modify the requirements as to eligibility for participa-
tion in the Plan. Except as provided in this Article I, no
amendment, modification or termination of the Plan shall in any
manner adversely affect any Stock Option or ISO Option theretofore
granted under the Plan without the consent of the affected
Participant.
1.9 Effective Date. The Plan was approved by the Board
on October 18, 1994, subject to approval of the holders of a
majority of the Company's securities present in person or repre-
sented by proxy at a meeting of stockholders entitled to vote
thereon, which meeting must occur within twelve (12) months of
October 18, 1994. Hereafter, any reference to the effective date
of the Plan shall mean the date of approval by the Board.
1.10 Securities Law Requirements. The Company shall
have no obligation to issue any Stock hereunder unless the issuance
of such shares would comply with any applicable federal or state
securities laws or any other applicable law or regulations
thereunder. The Company may legend any stock certificate issued
hereunder to reflect any restrictions under federal or state
securities laws.
1.11 Stock Certificates. Upon the exercise of any Stock
Option or ISO Option, a Participant shall be issued one or more
certificates, as requested by the Participant, representing the
Stock purchased pursuant to the exercised Option.
1.12 Option Exercise and Payment for Stock. To exercise
an Option, a Participant shall give written notice of exercise to
the person designated by the Committee at the Company's principal
office. Payment in full for shares of Stock purchased under this
Plan shall accompany a Participant's notice of exercise of an
Option, together with payment for any applicable withholding taxes
as provided in Section 1.20. Payment shall be made in cash or by
check, Stock of the Company or a combination thereof, and no loan
or advance shall be made by the Company for the purpose of
financing, in whole or in part, the purchase of Stock unless such
loan or advance has been approved by the Board. In the event that
common stock of the Company is utilized as consideration for the
purchase of Stock upon the exercise of a Stock Option or an ISO
Option, then, such common stock shall be valued at the "fair market
value," as defined in Section 1.6 of the Plan, as of the date of
exercise. In addition to the foregoing procedure which may be
available for the exercise of any Stock Option or ISO Option, the
Participant may deliver to the Company a notice of exercise which
includes, in lieu of any other payment, an irrevocable instruction
to the Company to deliver the stock certificate representing the
shares of Stock being purchased, issued in the name of the
Participant, to a broker approved by the Company and authorized to
trade in the common stock of the Company. Upon receipt of such
notice, the Company shall acknowledge receipt of the executed
notice of exercise and forward this notice to the broker. Upon
receipt of the copy of the notice which has been acknowledged by
the Company, and without waiting for issuance of the actual stock
certificate with respect to the exercise of the Option, the broker
may sell the Stock or any portion thereof. The broker shall
deliver directly to the Company that portion of the sales proceeds
sufficient to cover the Option Price and withholding taxes, if any.
Further, the broker may also facilitate a loan to the Participant
upon receipt of the notice of exercise in advance of the issuance
of the actual stock certificate as an alternative means of
financing and facilitating the exercise of any Option. For all
purposes of effecting the exercise of an Option, the date on which
the Participant delivers the notice of exercise to the Company,
together with payment for the shares of Stock being purchased as
provided in this Section 1.12 and payment for any applicable
withholding taxes as provided in Section 1.20, shall be the "date
of exercise." If a notice of exercise and payment are delivered at
different times, the date of exercise shall be the date the Company
first has in its possession both the notice and full payment as
provided herein. The Committee may adopt such other procedures
which it desires for the payment of the purchase price upon the
exercise of a Stock Option or ISO Option which are not inconsistent
with the applicable provisions of the Code which relate to Stock
Options and ISO Options. In addition to the foregoing, the
Committee may, in its sole discretion, permit payment of the
exercise price of Stock Options granted under the Plan by the
Participant directing the Company to withhold from the shares of
Stock to be delivered to the Participant upon exercise of the Stock
Option shares of Stock having a "fair market value" as defined in
Section 1.6 of the Plan on the date of payment equal to the amount
of the exercise price.
1.13 Stock Options and ISO Options Granted Separately.
Since the Committee is authorized to grant Stock Options and ISO
Options to Participants, the grants thereof and Stock Option
Agreements relating thereto will be made separately and totally
independent of each other. Except as it relates to the total
number of shares of Stock which may be issued under the Plan, the
grant or exercise of a Stock Option shall in no manner affect the
grant and exercise of any ISO Options. Similarly, the grant and
exercise of an ISO Option shall in no manner affect the grant and
exercise of any Stock Options.
1.14 Use of Proceeds. The proceeds received by the
Company from the sale of Stock pursuant to the exercise of Options
granted under the Plan shall be added to the Company's general
funds and used for general corporate purposes.
1.15 Non-Transferability of Options. Except as
otherwise herein provided, any Option granted shall not be
transferable otherwise than by will or the laws of descent and
distribution, and the Option may be exercised, during the lifetime
of the Participant, only by the Participant. More particularly
(but without limiting the generality of the foregoing), the Option
shall not be assigned, transferred (except as provided above),
pledged or hypothecated in any way whatsoever, shall not be
assignable by operation of law and shall not be subject to
execution, attachment, or similar process. Any attempted assign-
ment, transfer, pledge, hypothecation, or other disposition of the
Option contrary to the provisions hereof shall be null and void and
without effect.
1.16 Additional Documents on Death of Participant. No
transfer of an Option by the Participant by will or the laws of
descent and distribution shall be effective to bind the Company
unless the Company shall have been furnished with written notice
and an authenticated copy of the will and/or such other evidence as
the Committee may deem necessary to establish the validity of the
transfer and the acceptance by the successor to the Option of the
terms and conditions of such Option.
1.17 Changes in Employment. So long as the Participant
shall continue to be an employee of the Company or its parent or
one of its subsidiaries, any Option granted to him or her shall not
be affected by any change of duties or position. Nothing in the
Plan or in any Stock Option Agreement which relates to the Plan
shall confer upon any Participant any right to continue in the
employ of the Company or its parent or any of its subsidiaries, or
interfere in any way with the right of the Company or its parent or
any of its subsidiaries to terminate the Participant's employment
at any time.
1.18 Stockholder Rights. No Participant shall have any
rights as a stockholder with respect to any shares of Stock subject
to an Option prior to the purchase of such shares of Stock by
exercise of the Option.
1.19 Adjustments Upon Changes in Capitalization. The
aggregate number of shares of Stock available for Options to be
granted under the Plan, the Option Price and the ISO Price and the
total number of shares of Stock which may be purchased by a
Participant on exercise of a Stock Option and an ISO Option shall
be appropriately adjusted or modified by the Committee to reflect
any recapitalization, stock split, merger, consolidation, reorgani-
zation, combination, liquidation, stock dividend or similar
transaction involving the Company. Provided, any such adjustment
shall be made in such a manner as to not constitute a modification
as defined in Section 424(h) of the Code.
1.20 Payment of Withholding Taxes. No exercise of any
Option may be effected until the Company receives full payment for
the Stock purchased, as provided in Section 1.12, and for any
required state and federal withholding taxes. Payment for
withholding taxes shall be made in cash or by check unless the
Committee otherwise provides. The Committee may permit payment to
be made in the form of common stock of the Company either by the
Participant surrendering, or the Company retaining from the shares
of Stock to be issued upon exercise of the Stock Option, that
number of shares of Stock (based on fair market value) that would
be necessary to satisfy the requirements for withholding any
amounts of taxes due upon the exercise of such Stock Option. The
Committee shall also have the discretion to require that the
Company retain shares of Stock issuable upon the exercise of a
Stock Option to satisfy any Participant's tax withholding obliga-
tions. For the purpose of calculating the fair market value of
shares surrendered or retained to pay withholding taxes, the
relevant date shall be the date of exercise. In the event a
Participant uses the "cashless" exercise/same-day sale procedure
set forth in Section 1.12 hereof to pay withholding taxes, the
actual sale price of shares sold to satisfy payment shall be used
to determine the amount of withholding taxes payable. Nothing
herein, however, shall be construed as requiring payment of
withholding taxes at the time of exercise if payment of taxes is
deferred pursuant to any provision of the Code, and actions
satisfactory to the Company are taken which are designed to
reasonably insure payment of withholding taxes when due. Each
Stock Option Agreement shall provide that, in the event a Partici-
pant disposes of any Stock acquired by the exercise of an ISO
Option within the two-year period following grant, or within the
one-year period following exercise, of the ISO Option, the
Participant shall so inform the Company. In such event, the
Company shall have the right to require the Participant to remit to
the Company an amount sufficient to satisfy all federal, state and
local withholding tax requirements.
1.21 Assumption of Outstanding Options. To the extent
permitted by the then applicable provisions of the Code, any
successor to the Company succeeding to, or assigned the business
of, the Company as the result of or in connection with a merger,
consolidation, combination, reorganization, liquidation or other
similar transaction may assume Options outstanding under the Plan
or issue new Options in place of outstanding Options under the Plan
with such assumption to be made on a fair and equivalent basis in
accordance with the applicable provisions of Section 424(a) of the
Code; provided, in no event shall such assumption result in a
modification of any Option as defined in Section 424(h) of the
Code.
1.22 Retirement and Disability. For the purpose of this
Plan, "Retirement" shall mean the voluntary termination of
employment of a Participant with the Company, its parent or any of
its subsidiaries after attaining at least 55 years of age, and
"Disability" shall mean termination of employment of a Participant
after incurring a "disability" as defined in Section 22(e)(3) of
the Code.
ARTICLE II
Stock Options
2.1 General Terms. With respect to Stock Options
granted on or after the effective date of the Plan, the following
provisions of this Article II shall apply. The Stock Options
granted under this Article II are intended to be "nonqualified
stock options" as described in Sections 83 and 421 of the Code.
2.2 Grant and Terms for Stock Options. Stock Options
shall be granted on the following terms and conditions. No Stock
Option shall be exercisable more than ten (10) years from the date
of grant. Subject to such limitations, the Committee shall have
the discretion to fix the period ("Option Period") during which
Stock Options may be exercised. At all times during the period
commencing with the date a Stock Option is granted to a Participant
and ending on the earlier of the expiration of the Option Period
applicable to such Stock Option or the date which is three (3)
months prior to the date the Stock Option is exercised by such
Participant, such Participant must be an employee of either (i) the
Company, (ii) a parent or a subsidiary of the Company, or (iii) a
successor to the Company or parent or a subsidiary of such
successor issuing or assuming a Stock Option in a transaction to
which Section 424(a) of the Code applies. Provided, in the case of
a Participant who has incurred a Disability, the aforesaid three
(3) month period shall mean a one (1) year period. Provided
further, in the event a Participant's employment is terminated by
reason of death, the Participant's personal representative may
exercise any unexercised Stock Option granted to the Participant
under the Plan at any time within three (3) years after the
Participant's death but in any event not after the expiration of
the Option Period applicable to such Stock Option.
(a) Option Price. The option price ("Option
Price") for shares of Stock subject to any Stock Option shall be
determined by the Committee, but in no event shall the Option Price
be less than the par value of the Stock.
(b) Acceleration of Otherwise Unexercisable Stock
Options on Retirement, Death, Disability or Other Special Circum-
stances. The Committee, in its sole discretion, may permit (i) a
Participant who terminates employment due to Retirement, (ii) a
Participant who terminates employment due to a Disability, (iii)
the personal representative of a deceased Participant, or (iv) any
other Participant who terminates employment upon the occurrence of
special circumstances (as determined by the Committee) to purchase
(within three (3) months of such date of termination of employment
or one (1) year in the case of a Participant suffering a Disability
or three (3) years in the case of a deceased Participant) all or
any part of the shares subject to any Stock Option on the date of
the Participant's Retirement, Disability, death, or as the
Committee otherwise so determines, notwithstanding that all
installments, if any, with respect to such Stock Option, had not
yet accrued on such date.
(c) Number of Stock Options Granted. Participants
may be granted more than one Stock Option. In making any such
determination, the Committee shall obtain the advice and recommen-
dation of the officers of the Company, its parent, or a subsidiary
of the Company who have supervisory authority over such Partici-
pants. The granting of a Stock Option under the Plan shall not
affect any outstanding Stock Option previously granted to a
Participant under the Plan (or any other plans of the Company).
ARTICLE III
ISO Options
3.1 General Terms. With respect to ISO Options granted
on or after the effective date of the Plan, the following provi-
sions in this Article III shall apply to the exclusion of any
inconsistent provision in any other Article in this Plan since the
ISO Options to be granted under the Plan are intended to qualify as
"incentive stock options" as defined in Section 422 of the Code.
3.2 Grant and Terms of ISO Options. No ISO Options
shall be granted to any person who is not eligible to receive
"incentive stock options" as provided in Section 422 of the Code.
No ISO Options shall be granted to any Participant if, immediately
before the grant of an ISO Option, such employee owns more than 10%
of the total combined voting power of all classes of stock of the
Company, its parent or its subsidiaries (as determined in accor-
dance with the stock attribution rules contained in Sections 422
and 424(d) of the Code). Provided, the preceding sentence shall
not apply if, at the time the ISO Option is granted, the ISO Price
(as defined below) is at least 110% of the "fair market value" of
the Stock subject to the ISO Option, and such ISO Option by its
terms is exercisable no more than five (5) years from the date such
ISO Option is granted.
(a) ISO Option Price. The option price for shares
of Stock subject to an ISO Option ("ISO Price") shall be determined
by the Committee, but in no event shall such ISO Price be less than
the greater of (a) the "fair market value" of the Stock on the date
of grant or (b) the par value of the Stock.
(b) Annual ISO Option Limitation. With respect to
ISO Options granted, in no event during any calendar year will the
aggregate "fair market value" (determined as of the time the ISO
Option is granted) of the Stock for which the Participant may first
have the right to exercise under any "incentive stock options"
granted under the Plan and all other plans qualified under Section
422 of the Code which are sponsored by the Company, its parent and
any subsidiary exceed $100,000. ISO Options which are in excess of
the applicable $100,000 limitation will be recharacterized as Stock
Options as provided under Article V herein.
(c) Terms of ISO Options. ISO Options shall be
granted on the following terms and conditions: No ISO Option shall
be exercisable more than ten (10) years from the date of grant.
Subject to such limitation, the Committee shall have the discretion
to fix the period (the "ISO Period") during which any ISO Option
may be exercised. ISO Options granted shall not be transferable
except by will or by laws of descent and distribution. At all
times during the period commencing with the date an ISO Option is
granted to a Participant and ending on the earlier of the expira-
tion of the ISO Period applicable to such ISO Options or the date
which is three (3) months prior to the date the ISO Option is
exercised by such Participant, such Participant must be an employee
of either (i) the Company, (ii) a parent or a subsidiary of the
Company, or (iii) a successor to the Company or a parent or a
subsidiary of such successor issuing or assuming an ISO Option in
a transaction to which Section 424(a) of the Code applies.
Provided, in the case of a Participant who incurs a Disability, the
aforesaid three (3) month period shall mean a one (1) year period.
Provided further, in the event a Participant's employment is
terminated by reason of death, the Participant's personal represen-
tative may exercise any unexercised ISO Option granted to the
Participant under the Plan at any time within three (3) years after
the Participant's death but in any event not after the expiration
of the ISO Period applicable to such ISO Option.
(d) Acceleration of Otherwise Unexercisable ISO
Options on Retirement, Death, Disability or Other Special Circum-
stances. The Committee, in its sole discretion, may permit (i) a
Participant who terminates employment due to Retirement, (ii) a
Participant who terminates employment due to a Disability, (iii)
the personal representative of a deceased Participant, or (iv) any
other Participant who terminates employment upon the occurrence of
special circumstances (as determined by the Committee) to purchase
(within three (3) months of such date of termination of employment
or one (1) year in the case of a Participant suffering a Disability
or three (3) years in the case of a deceased Participant) all or
any part of the shares subject to any ISO Option on the date of the
Participant's Retirement, Disability, death, or as the Committee
otherwise so determines, notwithstanding that all installments, if
any, had not accrued on such date.
(e) Number of ISO Options Granted. Subject to the
applicable limitations contained in the Plan with respect to ISO
Options, Participants may be granted more than one ISO Option. In
making any such determination, the Committee shall obtain the
advice and recommendation of the officers of the Company, its
parent or a subsidiary of the Company who have supervisory
authority over such Participants. Further, the granting of an ISO
Option under the Plan shall not affect any outstanding ISO Option
previously granted to a Participant under the Plan.
ARTICLE IV
Acceleration of Options Upon Corporate Event
4.1 Acceleration of Options. Where dissolution or
liquidation of the Company or any merger, consolidation, combina-
tion, reorganization or similar transaction in which the Company is
not a surviving corporation is involved and no provision is made
for the assumption of outstanding Options or the substitution
therefor, consistent with Section 4.2 hereof, each outstanding
Option granted hereunder shall terminate upon the occurrence of the
transaction, but the Participant shall have the right, immediately
prior thereto, to exercise his or her Option, in whole or in part,
to the extent that it shall not have been previously exercised,
without regard to any vesting provisions.
4.2 Procedures for Acceleration and Exercise. If the
Company shall, pursuant to action by its Board, at any time propose
to dissolve or liquidate or merge into, consolidate with, or sell
or otherwise transfer all or substantially all of its assets to
another corporation and provision is not made pursuant to the terms
of such transaction for the assumption by the surviving, resulting
or acquiring corporation of outstanding Options under the Plan, or
for the substitution of new options therefor, the Committee shall
cause written notice of the proposed transaction to be given to
each Participant not less than forty (40) days prior to the
anticipated effective date of the proposed transaction, and his or
her Option shall become one hundred percent (100%) vested and,
prior to a date specified in such notice, which shall be not more
than ten (10) days prior to the anticipated effective date of the
proposed transaction, each Participant shall have the right to
exercise his or her Option to purchase any or all of the Stock then
subject to such Option. Each Participant, by so notifying the
Company in writing, may, in exercising his or her Option, condition
such exercise upon, and provide that such exercise shall become
effective at the time of, but immediately prior to, the consumma-
tion of the transaction, in which event such Participant need not
make payment for the Stock to be purchased upon exercise of such
Option until five (5) days after written notice by the Company to
such Participant that the transaction has been consummated. If the
transaction is consummated, each Option, to the extent not
previously exercised prior to the date specified in the foregoing
notice, shall terminate on the effective date of such consummation.
If the transaction is abandoned, (i) any Stock not purchased upon
exercise of such Option shall continue to be available for purchase
in accordance with the other provisions of the Plan and (ii) to the
extent that any Option not exercised prior to such abandonment
shall have vested solely by operation of this Section 4.2, such
vesting shall be deemed annulled, and the vesting schedule set
forth in the Participant's Stock Option Agreement shall be
reinstituted, as of the date of such abandonment.
4.3 Certain Additional Payments by the Company. The
Committee may, in its sole discretion, provide in any Stock Option
Agreement for certain payments by the Company in the event that
acceleration of vesting of any Option under the Plan is considered
a payment by the Company (a "Payment") subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties
with respect to such excise tax (such excise tax, interest and
penalties, collectively, the "Excise Tax"). A Stock Option
Agreement may provide that the Participant shall be entitled to
receive a payment (a "Gross-Up Payment") in an amount such that
after payment by the Participant of all taxes (including any
interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, the
Participant retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payment.
ARTICLE V
Options Not Qualifying as Incentive Stock Options
With respect to all or any portion of any Option granted
under the Plan not qualifying as an "incentive stock option" under
Section 422 of the Code, such Option shall be considered as a Stock
Option granted under this Plan for all purposes. Further, this
Plan and any ISO Options granted hereunder shall be deemed to have
incorporated by reference all the provisions and requirements of
Section 422 of the Code (and the Treasury Regulations issued
thereunder) which are required to provide that all ISO Options
granted hereunder shall be "incentive stock options" described in
Section 422 of the Code. Further, in the event that the Committee
grants ISO Options under this Plan to a Participant, and, in the
event that the applicable limitation contained in Section 3.2 (b)
herein is exceeded, then, such ISO Options in excess of such
limitation shall be treated as Stock Options under this Plan
subject to the terms and provisions of the applicable Stock Option
Agreement, except to the extent modified to reflect recharacteriza-
tion of the ISO Options as Stock Options.