Incentive Stock Option Plan - Koss Corp.
KOSS CORPORATION
1983
INCENTIVE STOCK OPTION PLAN
1. Purpose. The purpose of this Plan is to promote the growth and
development of Koss Corporation (the "Company") by providing increased
incentives for key salaried employees of the Company and its Subsidiaries and by
facilitating the efforts of the Company and its Subsidiaries to obtain and
retain employees of outstanding ability. This Plan provides for the granting of
incentive stock options ("ISOs") intended to qualify as such within the meaning
of Section 422A of the Internal Revenue Code (the "Code") as added by the
Economic Recovery Act of 1981.
2. Administration.
(a) The Plan shall be administered by a Stock Option Committee (the
"Committee") of the Board of Directors of the Company, consisting of those
members of the Compensation Committee of the Board who are not eligible to
receive ISOs under this Plan. A majority of the members of the Committee
shall constitute a quorum. The approval of such a quorum, expressed by
vote at a meeting, or in writing without a meeting, shall constitute the
action of the Committee and shall be valid and effective for all purposes
of the Plan.
(b) The Committee is authorized, subject to the provisions of the
Plan, to adopt, amend and rescind such rules and regulations as it may deem
appropriate for the administration of the Plan, and to make determinations
and interpretations which it deems consistent with the Plan's provisions.
The Committee's determinations and interpretations shall be final and
conclusive.
3. Eligibility. Only salaried employees, including officers, of the
Company and of its Subsidiaries shall be eligible to receive ISOs under the
Plan.
4. Shares Subject to ISOs.
(a) The stock to be subject to ISOs under the Plan shall be shares
of the Company's common stock, $.01 par value, subject to adjustment under
paragraph 13 hereof, and may be authorized but unissued stock or stock
issued and reacquired by the Company.
(b) The aggregate number of shares for which ISOs may be granted
under the Plan shall not exceed Two Hundred Thousand (200,000) shares,
subject to adjustment under paragraph 13 hereof.
(c) Shares subject to and not issued under an ISO which expires or
terminates or is canceled for any reason during the term of the Plan shall
again be available for the granting of ISOs under the Plan.
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5. Granting of ISOs.
(a) The Committee may from time to time at its discretion, subject
to the provisions of the Plan, determine when ISOs shall be granted from
time to time and at the time of each grant determine those eligible
employees to who ISOs shall be granted, the number of shares subject to
such ISOS, the date or dates on which the ISOs become exercisable, either
wholly or in part, and the expiration date of the ISOS.
(b) Each ISO shall be evidenced by a written agreement containing
terms and conditions established by the Committee consistent with the
provisions of the Plan, including such terms as the Committee shall deem
advisable in order that such ISO shall constitute an "incentive stock
option" within the meaning of Section 422A of the Code as the same may from
time to time be amended.
6. Term of Plan. ISOs may be granted under the Plan at any time up to
July 26, 1993, on which date the Plan shall expire except as to ISOs
outstanding, which ISOs shall remain in effect until they have been exercised or
have expired.
7. ISO Price.
(a) The ISO price at which shares may be purchased under each ISO
shall be not less than 100 percent of the Fair Market Value of the shares
on the date on which the ISO is granted; provided, however, that the ISO
price of ISOs granted to any person owning more than ten (10%) of the
Company's voting stock shall be one hundred ten percent (110%) of the Fair
Market Value of the stock at the time of the granting of the ISO. For all
purposes of this Plan, the term "Fair Market Value" shall be the average of
the highest bid and the lowest asked quotations for the stock at the close
of business on the date of grant, as reported by NASDAQ (The National
Association of Securities Dealers, Inc. Automated Quotation System).
However, if at any time the "common stock" is listed on any exchange, the
"Fair Market Value" shall be the average of the reported highest and lowest
prices at which shares are sold on such exchange on the date the ISO is
granted, or in the absence of reported sales on such exchange on said date,
the average of the reported closing bid and asked prices for the shares on
such exchange on the date the ISO is granted.
(b) The cash proceeds of the sale of stock subject to an ISO are to
be added to the general funds of the Company available for its corporate
purposes.
8. Special Calendar Year Limitations on Number of Shares Subject to ISO.
No eligible employee may be granted ISOs in any calendar year covering shares
having an aggregate Fair Market Value Determined as of the time of the grant of
the ISOS) in excess of $100,000 plus any "unused limit carryover" within the
meaning of Section 422A(b)(8) of the Code which may be available for such
calendar year.
9. Exercise of ISOs.
(a) ISOs granted under the Plan may be exercised only in accordance
with the terms established by the Committee, including the initial exercise
date or dates determined by the Committee when ISOs shall first become
exercisable in whole or part. All rights to exercise an ISO shall expire
on the expiration date designated by the Committee at the time the ISO was
granted, but in any event not later than ten years from the date on which
the ISO is granted; provided, however that ISOs granted to any person
owning more than ten percent of the
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Company's voting stock shall expire not later than five years from the date
on which the ISO is granted.
(b) An ISO by its terms shall not be exercisable while there is
"outstanding" (as hereinafter defined) any ISO previously granted to the
same employee to purchase stock in the Company or in a corporation which
(at the time of the granting of the new ISO) was a parent or subsidiary of
the Company or a predecessor of any of such corporations. For purposes
hereof, any such previously granted ISO shall be treated as "outstanding"
until such ISO is either exercised in full or expires by reason of lapse of
time.
(c) If the exercise of an ISO would otherwise result in the
violation by the Company of any provision of the Securities Act of 1933 or
of any state securities law the Company may require that such exercise be
deferred until the Company has taken appropriate action to avoid any such
violation.
(d) The ISO price for shares purchased shall be paid in full at the
time of exercise and no shares shall be issued until full payment therefor
is made. Such payment may be made either (1) in cash or (2) at the
discretion of the Committee, by delivering shares of the Company's common
stock (the "Delivered Stock") or a combination of cash and Delivered Stock.
Delivered Stock shall be valued at its Fair Market Value determined as of
the date of exercise of the ISO.
(e) An employee to whom an ISO is granted shall not be deemed holder
of any shares subject to the ISO until the shares are fully paid and issued
to him upon exercise of such ISO.
10. Transferability of ISOS. An ISO granted under the Plan may not be
transferred except by will or the laws of descent and distribution and may be
exercised during the lifetime of an employee (to the extent exercisable) only by
him. The ISO and any rights and privileges pertaining thereto shall not be
transferred, assigned, pledged or hypothecated by him in any way whether by
operation of law or otherwise and shall not be subject to execution, attachment
or similar process.
11. Termination of Employment.
(a) Upon termination of employment with the Company or Subsidiary
for any reason except death and permanent and total disability, an employee
to whom an ISO is granted may, at any time within three months after the
date of such termination (but such period of three months shall not extend
the stated date of expiration of the ISO), exercise the ISO to the extent
He was entitled to do so on the date of such termination provided, any ISOs
or portions of ISOs of terminated employees not so exercised shall
terminate.
(b) Upon termination of employment with the Company or a Subsidiary
by reason of the permanent and total disability of the employee, such
employee may exercise the ISO at any time within twelve (12) months after
the date of such termination, to the extent he was entitled to do so on
the date of such termination. The period of exercise shall not extend
beyond the stated date of expiration of the ISO. Permanent and total
disability shall be determined in accordance with Section 105(d) of the
Code.
(c) The Committee may determine that, for the purpose of the Plan,
an employee who is on a leave of absence (to the extent that his
employment is not determined to be interrupted for purposes of Section
422A of the Code) will be considered as a full-time salaried employee of
the Company or a Subsidiary.
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(d) Transfer of an employee from the Company to a Subsidiary or from
a Subsidiary to the Company or another Subsidiary shall not be a
termination of employment or an interruption of continuous employment for
the purposes of the Plan.
(e) Nothing in the Plan or in any ISO granted under the Plan shall
confer on any employee any right to continue in the employ of the Company
or its Subsidiaries, or affect the right of the Company or its Subsidiaries
to terminate his employment at any time.
12. Death. If an employee to whom an ISO is granted dies while in the
employ of the Company or a Subsidiary or within three months after termination
of such employment, the person or persons to whom the ISO is transferred by will
or the laws of descent and distribution may, at any time within one year after
the date of death but not later than the date of expiration of the ISO, exercise
the ISO to the extent the employee was entitled to do so on the date of death or
termination of employment, whichever was earlier. Any ISOs or portions of ISOs
of deceased employees not so exercised shall terminate.
13. Changes in the Number of Available Shares. In the event of any
recapitalization, stock split or reverse split, combination or exchange of
shares, stock dividend, merger in which the Company is the surviving
corporation, combination or exchange of shares, or other capital change
affecting the common stock of the Company, the Committee shall make, subject to
the approval of the Board of Directors of the Company, equitable and appropriate
changes in the aggregate number and kind of shares available for which ISOs may
be granted under the Plan and in the number, price and kind of shares covered by
ISOs granted or to be granted under the Plan, provided that no changes shall be
made which would cause an ISO to fail to continue to qualify as an incentive
stock option within the meaning of Section 422A of the Code.
14. Investment Representation; Legend on Certificates. Each grant of an
ISO shall be conditioned upon the optionee delivering to the Company at the time
of exercise a written representation that the stock to be acquired upon such
exercise is to be acquired for investment and not for resale or with a view to
its distribution, and upon the right of the Company to place a legend upon the
stock certificate or certificates issued upon exercise of the ISO, restricting
the transferability thereof in a manner which will make available the exemption
provided by Section 4(2) of the Securities Act of 1933. Compliance with these
conditions may be waived by the Committee if the stock to be acquired upon such
exercise is registered under the Act.
15. Amendment or Discontinuance. The Board of Directors may, at any time,
without the approval of the Stockholders of the Company, alter, amend, modify,
suspend or discontinue the Plan, but may not, without the consent of the holder
of an ISO make any alteration which would adversely affect an ISO previously
granted unlet the Plan or, without the approval of the Stockholders of the
Company, make any alteration which would (a) increase the aggregate number of
shares subject to ISOs under the Plan, except for adjustments pursuant to
paragraph 13; (b) decrease the minimum ISO price; (c) permit any member of the
Committee to become eligible for ISOs under the Plan; (d) extend the term of the
Plan or the maximum period during which Any ISO may be exercised; or (e) so
alter the Plan that it fails to meet the requirements for incentive stock
options of Section 422A of the Code.
16. Liability. No member of the Board of Directors, the Committee or
officers or employees of the Company or its Subsidiaries shall be personally
liable for any action, omission or determination made in good faith in
connection with the Plan.
17. Effective Date. The Plan shall be effective on July 27, 1983 but
shall be submitted for approval by the Stockholders of the Company at the next
meeting thereof following such adoption. No
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ISOs granted under the Plan shall
become exercisable unless and until the Plan has been approved by the
Stockholders of the Company within 12 months after its adoption by the Board of
Directors. If not so approved by the Stockholders, the Plan and any ISOs
granted thereunder shall terminate and be of no further force or effect, and
the Company shall have no liability or other obligation to any optionee or
eligible employee by reason of such termination.
18. Miscellaneous.
(a) The term "Board of Directors" used herein shall mean the Board
of Directors of the Company and, to the extent that any powers and
discretion vested in the Board of Directors are delegated to any
committee of the Board, the term "Board of Directors" shall also mean
such committee.
(b) The term "Subsidiary" used herein shall be defined in accordance
with Section 425 of the Code.