1999 Stock Plan - AOL Time Warner Inc.
As amended through
January 18, 2001
AOL TIME WARNER INC.
1999 STOCK PLAN
1. PURPOSES OF THE PLAN.
The Plan is intended to encourage ownership of Shares by Key Employees and
directors of and certain consultants to the Company or its Affiliates in order
to attract and retain such people, to motivate them to work for the benefit of
the Company or an Affiliate, and to provide an additional incentive for them to
promote the success of the Company or of an Affiliate. The Plan provides for the
granting of ISOs and Non-Qualified Options and awards of Stock Purchase Rights.
2. DEFINITIONS.
Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in this AOL Time Warner Inc. 1999 Stock Plan, have
the following meanings:
Administrator means the Board of Directors, unless it has delegated
power to act on its behalf to the Committee, in which case the
Administrator means the Committee.
Affiliate, with respect to ISOs, means a corporation which, for
purposes of Section 424 of the Code, is a parent or subsidiary of the
Company, direct or indirect, and, with respect to Non-Qualified
Options, means any corporation, company or other entity whose financial
results are consolidated with those of the Company in accordance with
U.S. generally accepted accounting principles, all as determined by the
Administrator.
Board of Directors means the Board of Directors of the Company.
Change in Control means either a Corporate Change in Control or a
Transactional Change in Control.
Code means the United States Internal Revenue Code of 1986, as amended.
Committee means the Compensation Committee of the Board of Directors,
or its successor, or such other committee of the Board of Directors to
which the Board
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of Directors has delegated power to act under or pursuant to the
provisions of the Plan or a subcommittee of the Compensation Committee
established by the Compensation Committee.
Common Stock means shares of the Company's common stock, $.01 par value
per share.
Company means (i) with respect to the periods prior to January 11,
2001, America Online, Inc., a Delaware corporation and (ii) with
respect to periods on and after January 11, 2001, AOL Time Warner Inc.,
a Delaware corporation.
Corporate Change in Control means the happening of any of the following
events:
(1) the acquisition by any individual, entity or group (an "Entity"),
including any "person" within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or
more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding securities of the Company entitled
to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); excluding, however, the following: (A) any
acquisition directly from the Company (excluding any acquisition by
virtue of the exercise of an exercise, conversion or exchange privilege
unless the security being so exercised, converted or exchanged was
itself acquired directly from the Company), (B) any acquisition by the
Company, or (C) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or by any corporation
controlled by the Company; or
(2) a change in the composition of the Board of Directors since October
28, 1999, such that the individuals who, as of such date, constituted
the Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board; provided that any
individual who becomes a director of the Company subsequent to October
28, 1999 whose election, or nomination for election by the Company's
stockholders, was approved by the vote of at least a majority of the
directors then comprising the Incumbent Board shall be deemed a member
of the Incumbent Board; and provided further, that any individual who
was initially elected as a director of the Company as a result of an
actual or threatened election contest, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act, or any
other actual or threatened solicitation of proxies or consents by or on
behalf of any person or Entity other than the Board shall not be deemed
a member of the Incumbent Board.
Disability or Disabled means permanent and total disability as defined
in Section 22(e)(3) of the Code.
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Fair Market Value of a Share of Common Stock means:
(1) If the Common Stock is listed on a national securities exchange or
traded in the over-the-counter market and sales prices are regularly
reported for the Common Stock, the average of the high and low sales
prices of a share of the Common Stock on the New York Stock Exchange or
other comparable reporting system for the applicable date, or if the
applicable date is not a trading day, the trading day immediately
preceding the applicable date;
(2) If the Common Stock is not traded on a national securities exchange
but is traded on the over-the-counter market, if sales prices are not
regularly reported for the Common Stock for the trading day referred to
in clause (1), and if bid and asked prices for the Common Stock are
regularly reported, the mean between the bid and the asked price for
the Common Stock at the close of trading in the over-the-counter market
on the applicable date, or if the applicable date is not a trading day,
on the trading day immediately preceding the applicable date; and
(3) If the Common Stock is neither listed on a national securities
exchange nor traded in the over-the-counter market, such value as the
Administrator, in good faith, shall determine.
Involuntary Employment Action shall mean any change in the terms and
conditions of the Participant's employment with the Company or any
successor, without cause (as defined herein), to such extent that:
(1) the Participant shall fail to be vested with power, authority and
resources analogous to the Participant's title and/or office prior to
the Change in Control, or
(2) the Participant shall lose any significant duties or
responsibilities attending such office, or
(3) there shall occur a reduction in the Participant's base
compensation, or
(4) the Participant's employment with the Company, or its successor, is
terminated without cause (as defined herein).
ISO means an option meant to qualify as an incentive stock option under
Section 422 of the Code.
Key Employee means an employee of the Company or of an Affiliate
(including, without limitation, an employee who is also serving as an
officer or director of the Company or of an Affiliate), designated by
the Administrator to be eligible to be granted one or more Options or
Stock Purchase Rights under the Plan; provided however, that Key
Employee shall not include any person who: (i) is not on the payroll of
the Company or an Affiliate as a full-time or part-time employee or
(ii)
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directly or indirectly provides services to the Company or an Affiliate
pursuant to a contractual or other arrangement, written or otherwise
between the Company or an Affiliate and either that person or a third
party, which does not designate such person as an employee (regardless
of whether a government agency, court or other entity subsequently
determines that such person is an employee of the Company or an
Affiliate for purposes of employment taxes or for any other purpose).
Anything in the prior sentence to the contrary notwithstanding, a
person who is providing services pursuant to a contractual or other
arrangement may be eligible for participation in the Plan as a
consultant who is designated by the Administrator in accordance with
Paragraph 5 of the Plan.
Non-Qualified Option means an option which is not intended to qualify
as an ISO.
Option means an ISO or Non-Qualified Option granted under the Plan.
Option Agreement means an agreement between the Company and a
Participant delivered pursuant to the Plan, in such form as the
Administrator shall approve.
Participant means a Key Employee, director or consultant of the Company
or of an Affiliate to whom one or more Options are granted under the
Plan. As used herein, "Participant" shall include "Participant's
Survivors" where the context requires.
Plan means this AOL Time Warner Inc. 1999 Stock Plan.
Restricted Stock means shares of Common Stock acquired pursuant to a
grant of Stock Purchase Rights under Paragraph 14 below.
Restricted Stock Purchase Agreement means a written agreement between
the Company and a Participant evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right, in such form
as the Administrator shall approve.
Shares means shares of the Common Stock as to which Options or Stock
Purchase Rights have been or may be granted under the Plan or any
shares of capital stock into which the Shares are changed or for which
they are exchanged within the provisions of Paragraph 3 of the Plan.
The Shares issued upon exercise of Options or Stock Purchase Rights
granted under the Plan may be authorized and unissued shares or shares
held by the Company in its treasury, or both.
Stock Purchase Right means the right to purchase Common Stock pursuant
to Paragraph 14 of the Plan, as evidenced by a Restricted Stock
Purchase Agreement.
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Survivors means a deceased Participant's legal representatives and/or
any person or persons who acquired the Participant's rights to an
Option or Stock Purchase Right by will or by the laws of descent and
distribution.
Transactional Change in Control shall mean any of the following
transactions to which the Company is a party:
(1) a reorganization, recapitalization, merger or consolidation (a
"Corporate Transaction") of the Company, unless securities representing
60% or more of either the outstanding shares of common stock or the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the Company
or the corporation resulting from such Corporate Transaction (or the
parent of such corporation) are held subsequent to such transaction by
the person or persons who were the beneficial holders of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Corporate Transaction, in
substantially the same proportions as their ownership immediately prior
to such Corporate Transaction; or
(2) the sale, transfer or other disposition of all or substantially all
of the assets of the Company.
To Vest means that you have obtained a contingent right to exercise or
purchase a defined number of your stock options, as defined by and
subject to the terms and conditions set forth in the pertinent Option
Agreement and this Plan. Unless and until your stock options Vest
pursuant to the terms of the pertinent Option Agreement and this Plan,
as well as the vesting schedule included in your notice of grant, you
have not obtained any such right to exercise or purchase any of your
unvested stock options (except as may be provided in Paragraphs 12 and
13 of this Plan and in the pertinent Option Agreement in the event of
Participant's Disability or death, respectively).
3. SHARES SUBJECT TO THE PLAN.
The number of Shares which may be issued from time to time pursuant to this
Plan shall be 100,000,000 or the equivalent of such number of Shares after the
effect of any stock split, stock dividend, combination, recapitalization or
similar transaction in accordance with Paragraph 17 of the Plan. No more than 5%
of such number of Shares may be issued in connection with grants of Stock
Purchase Rights.
If an Option ceases to be "outstanding", in whole or in part, the Shares
which were subject to such Option shall be available for the granting of other
Options under the Plan. Any Option shall be treated as "outstanding" until such
Option is exercised in full, or terminates or expires under the provisions of
the Plan, or by agreement of the parties to the pertinent Option Agreement.
Shares that have actually been issued under the Plan upon exercise of a Stock
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Purchase Right shall not be returned to the Plan and shall not become available
for the granting of other Options or Stock Purchase Rights under the Plan.
4. ADMINISTRATION OF THE PLAN.
Subject to the provisions of the Plan, the Administrator is authorized to:
a. Interpret the provisions of the Plan or of any Option, Option
Agreement, Stock Purchase Right, or Restricted Stock Purchase Agreement
and to make all rules and determinations which it deems necessary or
advisable for the administration of the Plan;
b. Determine which employees of the Company or of an Affiliate shall be
designated as Key Employees and which of the Key Employees, directors
and consultants shall be granted Options or Stock Purchase Rights;
c. Determine the number of Shares for which an Option, Options or Stock
Purchase Rights shall be granted, provided, however, that in no event
shall Options or Stock Purchase Rights to purchase more than 4,000,000
Shares be granted to any Participant in any fiscal year;
d. Specify the terms and conditions upon which an Option, Options or Stock
Purchase Rights may be granted; and
e. Award Options or Stock Purchase Rights to Participants who are foreign
nationals or employed or located outside the United States, or both, on
such terms and conditions, including imposing conditions on the
exercise or Vesting of Options or Stock Purchase Rights, different from
those applicable to Options or Stock Purchase Rights granted to
Participants employed or located in the United States as may, in the
judgment of the Administrator, be necessary or desirable in order to
recognize differences in local law, tax policy or customs;
provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Section 422 of the Code of those Options which are designated as
ISOs. Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Option or Stock Purchase
Right granted under it shall be final, unless otherwise determined by the Board
of Directors, if the Administrator is the Committee. The Administrator's
determinations under the Plan need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Options or
Stock Purchase Rights under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Administrator
shall be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Option Agreements or
Restricted Stock Purchase Agreements as to (a) the persons to receive Options or
Stock Purchase Rights under the Plan, (b) the terms and
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provisions of Options or Stock Purchase Rights under the Plan, and (c) whether a
termination of service with the Company and any Affiliate has occurred.
No member of the Board of Directors or the Administrator shall be liable
for any action or determination made in good faith with respect to the Plan or
any Option.
5. ELIGIBILITY FOR PARTICIPATION.
The Administrator will, in its sole discretion, name the Participants in
the Plan, provided, however, that each Participant must be a Key Employee,
director or consultant of the Company or of an Affiliate at the time an Option
or Stock Purchase Right is granted. Members of the Company's Board of Directors
who are not employees of the Company or of an Affiliate may receive Options or
Stock Purchase Rights pursuant to Paragraph 6, Subparagraph A (f), but only
pursuant thereto. Notwithstanding any of the foregoing provisions, the
Administrator may authorize the grant of an Option or Stock Purchase Right to a
person not then a Key Employee, director or consultant of the Company or of an
Affiliate. The actual grant of such Option or Stock Purchase Right, however,
shall be conditioned upon such person becoming eligible to become a Participant
at or prior to the time of the execution of the Option Agreement or Restricted
Stock Purchase Agreement evidencing such Option or Stock Purchase Right, as
applicable. ISOs may be granted only to Key Employees. Non-Qualified Options may
be granted to any Key Employee, director or consultant of the Company or an
Affiliate. Stock Purchase Rights shall be granted only in connection with the
hiring or retention of a Key Employee. The granting of any Option or Stock
Purchase Right to any individual shall neither entitle that individual to, nor
disqualify him or her from, participation in any other grant of Options or Stock
Purchase Rights.
6. TERMS AND CONDITIONS OF OPTIONS.
Each Option shall be set forth in writing in an Option Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant. The Administrator may provide that Options be
granted subject to such terms and conditions as the Administrator may deem
appropriate including, without limitation, subsequent approval by the
stockholders of the Company of this Plan or any amendments thereto. The Option
Agreements shall be subject to at least the following terms and conditions:
A. Non-Qualified Options: Each Option intended to be a Non-Qualified
Option shall be subject to the terms and conditions which the
Administrator determines to be appropriate and in the best interest of
the Company, subject to the following minimum standards for any such
Non-Qualified Option:
a. Option Price: The option price (per share) of the Shares covered by
each Option shall be determined by the Administrator but shall not
be less than one hundred percent (100%) of the Fair Market Value
(per share) of the Shares on the date of grant of the Option.
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b. Each Option Agreement shall state the number of Shares to which it
pertains;
c. Each Option Agreement shall state the date or dates on which it
first is exercisable and the date after which it may no longer be
exercised, and may provide that the Option rights Vest or become
exercisable in installments over a period of months or years, or
upon the occurrence of certain conditions or the attainment of
stated goals or events; and
d. Exercise of any Option may be conditioned upon the Participant's
execution of a stock purchase agreement in form satisfactory to the
Administrator providing for certain protections for the Company and
its other stockholders, including requirements that:
i. The Participant's or the Participant's Survivors' right to sell
or transfer the Shares may be restricted; and
ii. The Participant or the Participant's Survivors may be required
to execute letters of investment intent and must also
acknowledge that the Shares will bear legends noting any
applicable restrictions.
e. Limitation on Grant of Non-Qualified Options: No Non-Qualified
Option shall be granted after the date provided in Paragraph 23 of
this Plan.
f. Directors' Options: Each director of the Company who is not an
employee of the Company or any Affiliate, upon first being elected
or appointed to the Board of Directors, shall be granted a
Non-Qualified Option to purchase 40,000 Shares; provided, however,
that the Administrator shall be entitled to grant an Option for
such higher number of Shares as may be appropriate (as determined
by the Board of Directors) for recruitment purposes. Each director
of the Company who is not an employee of the Company or any
Affiliate on January 18, 2001, shall be granted on such date a
Non-Qualified Option to purchase 52,000 Shares as an initial grant
for joining the Board of Directors. Beginning with the annual
meeting of stockholders in 2002, on the date following the annual
meeting of stockholders of the Company each year, giving effect to
the election of any director or directors at such annual meeting of
stockholders, each director who is not an employee of the Company
or any Affiliate and who has served at least six months as a
director shall be granted a Non-Qualified Option to purchase 40,000
Shares. Each Option granted pursuant to this Paragraph 6(A)(f)
shall (i) have an exercise price equal to the Fair Market Value
(per share) of the Shares on the date of grant of the Option, (ii)
have a term of ten (10) years, and (iii) Vest in installments of
25% annually over a four-year period and on the date of a meeting
of
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stockholders at which directors are elected if the director does
not stand for re-election or is not re-elected at such meeting,
unless a different vesting schedule is established by the
Administrator in the applicable Option Agreement. The Board of
Directors may amend this Paragraph 6(A)(f) to increase, reduce,
eliminate, or institute option grants for Board, Committee or other
individual or collective service under this Plan.
B. ISOs: Each Option intended to be an ISO shall so state and shall be
issued only to a Key Employee and be subject to at least the following
terms and conditions, with such additional restrictions or changes as
the Administrator determines are appropriate but not in conflict with
Section 422 of the Code and relevant regulations and rulings of the
Internal Revenue Service:
a. Minimum standards: The ISO shall meet the minimum standards
required of Non-Qualified Options, as described in Paragraph 6(A)
above, except clauses (a) and (f) thereunder.
b. Option Price: Immediately before the Option is granted, if the
Participant owns, directly or by reason of the applicable
attribution rules in Section 424(d) of the Code:
i. Ten percent (10%) or less of the total combined voting power of
all classes of stock of the Company or an Affiliate, the Option
price per share of the Shares covered by each Option shall not
be less than one hundred percent (100%) of the Fair Market
Value per share of the Shares on the date of the grant of the
Option.
ii. More than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or an Affiliate, the
Option price per share of the Shares covered by each Option
shall not be less than one hundred ten percent (110%) of the
Fair Market Value on the date of grant.
c. Term of Option: For Participants who own
i. Ten percent (10%) or less of the total combined voting power of
all classes of stock of the Company or an Affiliate, each
Option shall terminate ten (10) years from the date of the
grant or at such earlier time as the Option Agreement may
provide.
ii. More than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or an Affiliate, each
Option shall terminate five (5) years from the date of the
grant or at such earlier time as the Option Agreement may
provide.
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d. Limitation on Yearly Exercise: The Option Agreements shall restrict
the amount of Options which may be exercisable in any calendar year
(under this or any other ISO plan of the Company or an Affiliate)
so that the aggregate Fair Market Value (determined at the time
each ISO is granted) of the stock with respect to which ISOs are
exercisable for the first time by the Participant in any calendar
year does not exceed one hundred thousand dollars ($100,000),
provided that this subparagraph (d) shall have no force or effect
if its inclusion in the Plan is not necessary for Options issued as
ISOs to qualify as ISOs pursuant to Section 422(d) of the Code.
e. Limitation on Grant of ISOs: No ISOs shall be granted after the
date provided in Paragraph 23 of this Plan.
f. To the extent that an Option which is intended to be an ISO fails
to so qualify, it shall be treated as a Non-Qualified Option.
7. EXERCISE OF OPTIONS AND ISSUANCE OF SHARES.
An Option (or any part or installment thereof) shall be exercised in
accordance with procedures established by the Company by giving written notice
to the Company at its principal executive office address, or such other address
as the Company shall determine, together with provision for payment of the full
purchase price in accordance with this Paragraph for the Shares as to which the
Option is being exercised, and upon compliance with any other condition(s) set
forth in the Option Agreement. Such written notice shall be signed by the person
exercising the Option, shall state the number of Shares with respect to which
the Option is being exercised and shall contain any representation required by
the Plan or the Option Agreement. Payment of the purchase price for the Shares
as to which such Option is being exercised shall be made (a) in United States
dollars in cash or by check, or (b) at the discretion of the Administrator,
through delivery of shares of Common Stock having a Fair Market Value equal as
of the date of the exercise to the cash exercise price of the Option, or (c) at
the discretion of the Administrator, by delivery of the grantee's personal
recourse note bearing interest payable not less than annually at no less than
100% of the applicable Federal rate, as defined in Section 1274(d) of the Code,
or (d) at the discretion of the Administrator, in accordance with a cashless
exercise program established with a securities brokerage firm, and approved by
the Administrator, or (e) at the discretion of the Administrator, through such
other method of payment approved by the Administrator, or (f) at the discretion
of the Administrator, by any combination of (a), (b), (c), (d) and (e) above.
Notwithstanding the foregoing, the Administrator shall accept only such payment
on exercise of an ISO as is permitted by Section 422 of the Code.
The Company shall then reasonably promptly deliver the Shares as to which
such Option was exercised to the Participant (or to the Participant's Survivors,
as the case may be). In determining what constitutes "reasonably promptly," it
is expressly understood that the delivery of the Shares may be delayed by the
Company in order to comply with any law or regulation (including, without
limitation, state securities or "blue sky" laws) which requires the Company to
take any action with respect to the Shares prior to their issuance. The Shares
shall, upon
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delivery, be evidenced by an appropriate certificate or certificates
for fully paid, non-assessable Shares.
The Administrator shall have the right to accelerate the date of exercise
of any installment of any Option; provided that the Administrator shall not
accelerate the exercise date of any installment of any Option granted to any Key
Employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Paragraph 20) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in Paragraph
6(B)(d).
The Administrator may, in its discretion, amend any term or condition of an
outstanding Option provided (i) such term or condition as amended is permitted
by the Plan, (ii) if any amendment is materially adverse to the Participant, any
such amendment shall be made only with the consent of the Participant to whom
the Option was granted, or in the event of the death of the Participant, the
Participant's Survivors, and (iii) any such amendment of any ISO shall be made
only after the Administrator, after consulting with counsel for the Company,
determines whether such amendment would constitute a "modification" of any
Option which is an ISO (as that term is defined in Section 424(h) of the Code)
or would cause any adverse tax consequences for the holder of such ISO.
8. RIGHTS AS A STOCKHOLDER.
No Participant to whom an Option has been granted shall have rights as a
stockholder with respect to any Shares covered by such Option, except after due
exercise of the Option and tender of the full purchase price for the Shares
being purchased pursuant to such exercise (and satisfaction of such other
conditions for the transfer of Shares as may be required pursuant to the Option)
and registration of the Shares in the Company's share register in the name of
the Participant. No Participant to whom a Stock Purchase Right has been granted
shall have rights as a stockholder with respect to any Shares covered by such
Stock Purchase Right, except after tender of the full purchase price for the
Shares being purchased (and satisfaction of such other conditions for the
transfer of Shares as may be required pursuant to the Stock Purchase Right) and
registration of the Shares in the Company's share register in the name of the
purchaser. Once the Stock Purchase Right is exercised, the purchaser shall have
the rights equivalent to those of a stockholder, and shall be a stockholder when
his or her purchase is entered upon the records of the duly authorized transfer
agent of the Company. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Stock Purchase Right is
exercised, except as provided in Paragraph 17 of this Plan.
9. ASSIGNABILITY AND TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS.
By its terms, an Option or Stock Purchase Right granted to a Participant
shall not be transferable by the Participant other than (i) by will or by the
laws of descent and distribution, or (ii) as otherwise determined by the
Administrator and set forth in the applicable Option Agreement or Restricted
Stock Purchase Agreement. The designation of a beneficiary of an
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Option by a Participant shall not be deemed a transfer prohibited by this
Paragraph. Except as provided above, an Option or Stock Purchase Right shall be
exercisable, during the Participant's lifetime, only by such Participant (or by
his or her legal representative) and shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process. Any attempted transfer,
assignment, pledge, hypothecation or other disposition of any Option or Stock
Purchase Right or of any rights granted thereunder contrary to the provisions of
this Plan, or the levy of any attachment or similar process upon an Option or
Stock Purchase Right, shall be null and void.
10. EFFECT OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE" OR DEATH
OR DISABILITY.
Except as otherwise provided in the pertinent Option Agreement, in the
event of a termination of service (whether as an employee, director or
consultant) with the Company or an Affiliate before the Participant has
exercised all Options, the following rules apply:
a. A Participant who ceases to be an employee, director or consultant of
the Company or of an Affiliate (for any reason other than termination
"for cause", Disability, or death for which events there are special
rules in Paragraphs 11, 12, and 13, respectively), may exercise any
Option granted to him or her to the extent that the Option is
exercisable on the date of such termination of service, but only within
such term as the Administrator has designated in the pertinent Option
Agreement. An Option that is not exercisable on the date of termination
of service is canceled on such date and may not be exercised. An Option
that is exercisable on the date of termination of service, but not
exercised within the term as the Administrator has designated in the
pertinent Option Agreement is canceled and may not be exercised
thereafter.
b. Except as provided in Paragraph 12, in no event may an Option Agreement
provide, if the Option is intended to be an ISO, that the time for
exercise be later than three (3) months after the Participant's
termination of employment.
c. The provisions of this Paragraph, and not the provisions of Paragraph
12 or 13, shall apply to a Participant who subsequently becomes
Disabled or dies after the termination of employment, director status
or consultancy, provided, however, in the case of a Participant's
Disability or death within three (3) months after the termination of
employment, director status or consultancy, the Participant or the
Participant's Survivors may exercise the Option within one (1) year
after the date of the Participant's termination of employment, but in
no event after the date of expiration of the term of the Option.
d. Notwithstanding anything herein to the contrary, if subsequent to a
Participant's termination of employment, termination of director status
or termination of consultancy, but prior to the exercise of an Option,
the Board of Directors
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determines that, either prior or subsequent to the Participant's
termination, the Participant engaged in conduct which would constitute
"cause" (as defined in Paragraph 11 below), then such Participant shall
forthwith cease to have any right to exercise any Option, whether or
not such Option was previously exercisable.
e. A Participant to whom an Option has been granted under the Plan who is
absent from work with the Company or with an Affiliate because of
temporary disability (any disability other than a permanent and total
Disability as defined in Paragraph 2 hereof), or who is on leave of
absence for any purpose, shall not, during the period of any such
absence, be deemed, by virtue of such absence alone, to have terminated
such Participant's employment, director status or consultancy with the
Company or with an Affiliate, except to the extent that the
Administrator so determines as Company policy or to the extent that the
Option Agreement may otherwise expressly provide.
f. Except as required by law or as set forth in the pertinent Option
Agreement, Options granted under the Plan shall not be affected by any
change of a Participant's status within or among the Company and any
Affiliates, so long as the Participant continues to be a Key Employee,
director or consultant of the Company or any Affiliate.
11. EFFECT OF TERMINATION OF SERVICE "FOR CAUSE".
Except as otherwise provided in the pertinent Option Agreement, the
following rules apply if the Participant's service (whether as an employee,
director or consultant) with the Company or an Affiliate is terminated for
"cause" prior to the time that all his or her outstanding Options have been
exercised:
a. All outstanding and unexercised Options as of the time the Participant
is notified his or her service is terminated for "cause" will
immediately be forfeited.
b. For purposes of this Plan, except as otherwise provided in the
pertinent Option Agreement or Restricted Stock Purchase Agreement,
"cause" shall include (and is not limited to) dishonesty with respect
to the Company or any Affiliate, insubordination, substantial
malfeasance or non-feasance of duty, unauthorized disclosure of
confidential information, and conduct substantially prejudicial to the
business of the Company or any Affiliate. The determination of the
Administrator as to the existence of "cause" will be conclusive on the
Participant and the Company.
c. "Cause" is not limited to events which have occurred prior to a
Participant's termination of service, nor is it necessary that the
Administrator's finding of "cause" occur prior to termination. If the
Administrator determines, subsequent to a Participant's termination of
service but prior to the exercise of an Option, that
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either prior or subsequent to the Participant's termination the
Participant engaged in conduct which would constitute "cause," then the
right to exercise any Option is forfeited.
d. Any definition in an agreement between the Participant and the Company
or an Affiliate, which contains a conflicting definition of "cause" for
termination and which is in effect at the time of such termination,
shall supersede the definition in this Plan with respect to such
Participant.
12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY.
Except as otherwise provided in the pertinent Option Agreement, a
Participant who terminates his or her employment, directorship or consultancy
with the Company or an Affiliate by reason of Disability may exercise any Option
granted to such Participant:
a. To the extent exercisable but not exercised on the date of such
cessation; and
b. In the event rights to exercise the Option Vest periodically, to the
extent of a pro rata portion of any additional rights as would have
Vested had the Participant not terminated his or her employment,
directorship or consultancy by reason of such Disability, prior to the
end of the Vesting period which next ends following the date of such
termination. The proration shall be based upon the number of days of
such Vesting period prior to the date of such termination.
Except as otherwise provided in the pertinent Option Agreement, a Disabled
Participant may exercise such rights only within the period ending one (1) year
after the date of the Participant's termination of employment, directorship or
consultancy, as the case may be, notwithstanding that the Participant might have
been able to exercise the Option as to some or all of the Shares on a later date
if the Participant had not become disabled and had continued to be an employee,
director or consultant or, if earlier, within the originally prescribed term of
the Option.
The Company shall make the determination both of whether Disability has
occurred and the date of its occurrence (unless a procedure for such
determination is set forth in another agreement between the Company and such
Participant, in which case such procedure shall be used for such determination).
If requested, the Participant shall be examined by a physician selected or
approved by the Company, the cost of which examination shall be paid for by the
Company.
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13. EFFECT OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.
Except as otherwise provided in the pertinent Option Agreement, in the
event of the death of a Participant while the Participant is an employee,
director or consultant of the Company or of an Affiliate, such Option may be
exercised by the Participant's Survivors:
a. To the extent exercisable but not exercised on the date of death; and
b. In the event rights to exercise the Option Vest periodically, to the
extent of a pro rata portion of any additional rights which would have
Vested had the Participant not died prior to the end of the Vesting
period which next ends following the date of death. The proration shall
be based upon the number of days of such Vesting period prior to the
Participant's death.
Except as otherwise provided in the pertinent Option Agreement, if the
Participant's Survivors wish to exercise the Option, they must take all
necessary steps to exercise the Option within one (1) year after the date of
Participant's termination of employment, directorship or consultancy, as the
case may be, notwithstanding that the decedent might have been able to exercise
the Option as to some or all of the Shares on a later date if he or she had not
died and had continued to be an employee, director or consultant or, if earlier,
within the originally prescribed term of the Option.
14. STOCK PURCHASE RIGHTS.
a. Rights to Purchase. Stock Purchase Rights may be issued either alone, in
addition to, or in tandem with other awards granted under the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing, by means of an Agreement, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid
(which shall not be less than the par value of the Shares), and the time within
which the offeree must accept such offer, which shall in no event exceed six (6)
months from the date upon which the Administrator made the determination to
grant the Stock Purchase Right. The offer shall be accepted by execution of a
Restricted Stock Purchase Agreement in the form determined by the Administrator.
b. Repurchase Option. Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or Disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock Purchase
Agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at a rate determined by the Administrator.
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c. Other Provisions. The Restricted Stock Purchase Agreement shall contain
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion. In addition, the
provisions of Restricted Stock Purchase Agreements need not be the same with
respect to each purchaser.
15. PURCHASE FOR INVESTMENT.
Unless the offering and sale of the Shares to be issued upon the particular
exercise of an Option or Stock Purchase Right shall have been effectively
registered under the Securities Act of 1933, as now in force or hereafter
amended (the "1933 Act"), the Company shall be under no obligation to issue the
Shares covered by such exercise unless and until the following conditions have
been fulfilled:
a. The person(s) who exercise(s) such Option or Stock Purchase Right shall
warrant to the Company, prior to the receipt of such Shares, that such
person(s) are acquiring such Shares for their own respective accounts,
for investment, and not with a view to, or for sale in connection with,
the distribution of any such Shares, in which event the person(s)
acquiring such Shares shall be bound by the provisions of the following
legend which shall be endorsed upon the certificate(s) evidencing their
Shares issued pursuant to such exercise of such grant:
"The shares represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by any
person, including a pledgee, unless (1) either (a) a Registration
Statement with respect to such shares shall be effective under the
Securities Act of 1933, as amended, or (b) the Company shall have
received an opinion of counsel satisfactory to it that an exemption
from registration under such Act is then available, and (2) there
shall have been compliance with all applicable state securities
laws."
b. At the discretion of the Administrator, the Company shall have received
an opinion of its counsel that the Shares may be issued upon such
particular exercise in compliance with the 1933 Act without
registration thereunder.
The Company may delay issuance of the Shares until completion of any action
or obtaining of any consent which the Company deems necessary under any
applicable law (including, without limitation, state securities or "blue sky"
laws.)
16. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
Upon the dissolution or liquidation of the Company, all Options or Stock
Purchase Rights granted under this Plan which as of such date shall not have
been exercised will terminate and become null and void; provided, however, that
if the rights of a Participant or a Participant's Survivors have not otherwise
terminated and expired, (i) the Participant or the Participant's Survivors will
have the right immediately prior to such dissolution or liquidation to exercise
any
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Option or Stock Purchase Right to the extent that the Option or Stock Purchase
Right is exercisable as of the date immediately prior to such dissolution or
liquidation; and (ii) if a Change in Control shall have occurred within the
twelve months immediately prior to the date of such dissolution or liquidation,
such Participant or such Participant's Survivors will have the right immediately
prior to such dissolution or liquidation to exercise any Option or Stock
Purchase Right then outstanding whether or not such Option or Stock Purchase
Right is exercisable as of such date.
17. ADJUSTMENTS.
Upon the occurrence of any of the following events, the adjustments as
hereinafter provided shall be made, unless otherwise specifically provided in a
pertinent Option Agreement or Restricted Stock Purchase Agreement:
A. Stock Dividends and Stock Splits. If (i) the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, or (ii) additional shares or new or different shares
or other securities of the Company or other non-cash assets are distributed with
respect to such shares of Common Stock, the number of shares of Common Stock
deliverable upon the exercise of an Option or Stock Purchase Right may be
appropriately increased or decreased proportionately, and appropriate
adjustments may be made in the purchase price per share to reflect such
subdivision, combination or stock dividend. The number of Shares subject to
options to be granted (i) pursuant to Paragraph 3 or to directors pursuant to
Paragraph 6(A)(f) shall also be proportionately adjusted upon the occurrence of
such events, except as the Administrator shall otherwise determine in its sole
discretion or (ii) pursuant to Paragraph 4(c) shall also be proportionately
adjusted upon the occurrence of such events.
B. Corporate Changes in Control. In the event of a Corporate Change in
Control,
(i) Each Option or Stock Purchase Right outstanding as of the date such
Corporate Change in Control is determined to have occurred, and which is not
then exercisable by reason of Vesting requirements, shall automatically
accelerate the Vesting so that the Option or Stock Purchase Right shall become
fully exercisable and Vested on the first to occur of (x) the date the Option or
Stock Purchase Right becomes Vested and exercisable under its original terms
(with respect only to such Options or Stock Purchase Rights as otherwise would
Vest during such one-year period under their terms), (y) the first anniversary
of the date such Corporate Change in Control is determined to have occurred, and
(z) the occurrence of an Involuntary Employment Action; and
(ii) The Options or Stock Purchase Rights so accelerated shall remain so
exercisable until the earlier of the original expiration date of the Option or
Stock Purchase Right and the earlier termination of the Option or Stock Purchase
Right in accordance with the Plan and the Agreement.
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C. Transactional Changes in Control. In the event of a Transactional Change
in Control,
(i) Each Option or Stock Purchase Right outstanding as of the date such
Transactional Change in Control is determined to have occurred shall be: (a)
assumed by the successor corporation (or its parent) or replaced with a
comparable option or stock purchase right to purchase shares of the capital
stock of the successor corporation (or its parent) on an equitable basis, (b)
terminated upon written notice to the Participants stating that all Options or
Stock Purchase Rights (for purposes of this Subparagraph all Options or Stock
Purchase Rights then outstanding shall be deemed to be exercisable) must be
exercised within a specified number of days (which shall not be less than 15
days) from the date such notice is given, at the end of which period the Options
or Stock Purchase Rights shall terminate, or (c) terminated in exchange for a
cash payment equal to the excess of the Fair Market Value of the shares subject
to such Options or Stock Purchase Rights (for purposes of this Subparagraph all
Options then outstanding shall be deemed to be exercisable) over the exercise
price thereof; provided, however, that if any of the treatments of Options or
Stock Purchase Rights pursuant to this Plan set forth in clauses (a), (b) or (c)
above would make a Transactional Change in Control transaction ineligible for
pooling-of-interest accounting under APB No. 16 such that but for the nature of
such treatment such transaction would otherwise be eligible for such accounting
treatment, the Committee (or the Administrator if no Committee has been
appointed) shall have the ability to substitute for any cash or other
consideration payable under such treatment shares of Common Stock with a Fair
Market Value or other consideration with value equal to the cash or other
consideration that would otherwise be payable pursuant to such treatment. The
determination of which of the treatments set forth in clauses (a), (b) and (c)
above to provide and of comparability under clause (a) above shall be made by
the Administrator and its determinations shall be final, binding and conclusive.
(ii) Each Option or Stock Purchase Right that is assumed or replaced in
connection with a Transactional Change in Control shall automatically accelerate
so that the Option or Stock Purchase Right shall become fully exercisable and
Vested on the first to occur of (x) the date the Option becomes Vested and
exercisable under its original terms (with respect only to such Options or Stock
Purchase Rights as otherwise would Vest during such one-year period under their
terms), (y) the first anniversary of the date such Transactional Change in
Control is determined to have occurred, and (z) the occurrence of an Involuntary
Employment Action. The Options or Stock Purchase Rights so accelerated shall
remain so exercisable until the earlier of the original expiration date of the
Option and the earlier termination of the Option in accordance with the Plan and
the Agreement.
D. Corporate Transaction. In the event of a Corporate Transaction that does
not constitute a Transactional Change in Control or in the event of a similar
event, pursuant to which securities of the Company or of another corporation or
entity are issued with respect to the outstanding shares of Common Stock, a
Participant upon exercising an Option or Stock Purchase Right shall be entitled
to receive for the purchase price paid upon such exercise the securities which
would have been received if such Option or Stock Purchase Right had been
exercised prior to such Corporate Transaction.
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E. Modification of ISOs. Notwithstanding the foregoing, any adjustments
made pursuant to Subparagraph A, B, C, or D with respect to ISOs shall be made
only after the Administrator, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424(h) of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Administrator
determines that such adjustments made with respect to ISOs would constitute a
"modification" of such ISOs, it may refrain from making such adjustments, unless
the holder of an ISO specifically requests in writing that such adjustment be
made and such writing indicates that the holder has full knowledge of the
consequences of such "modification" on his or her income tax treatment with
respect to the ISO.
18. ISSUANCES OF SECURITIES.
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options or Stock Purchase
Rights. Except as expressly provided herein, no adjustments shall be made for
dividends paid in cash or in property (including without limitation, securities)
of the Company. The Option Agreement may contain terms, conditions and
procedures permitting Participants to elect to defer the receipt of Shares upon
the exercise of Non-Qualified Options for a specific period or until a specified
event.
19. FRACTIONAL SHARES.
No fractional shares shall be issued under the Plan and the person
exercising such right shall receive from the Company cash in lieu of such
fractional shares equal to the Fair Market Value thereof.
20. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.
The Administrator, at the written request of any Participant, may in its
discretion take such actions as may be necessary to convert such Participant's
ISOs (or any portions thereof) that have not been exercised on the date of
conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the Participant is an employee of the Company
or an Affiliate at the time of such conversion. Such actions may include, but
not be limited to, extending the exercise period or reducing the exercise price
of the appropriate installments of such Options. At the time of such conversion,
the Administrator (with the consent of the Participant) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the
Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any Participant the right to have such Participant's ISOs converted into
Non-Qualified Options,
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and no such conversion shall occur until and unless the Administrator takes
appropriate action. The Administrator, with the consent of the Participant, may
also terminate any portion of any ISO that has not been exercised at the time of
such conversion.
21. WITHHOLDING.
In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other
amounts are required by applicable law or regulation to be withheld from the
Participant's salary, wages or other remuneration in connection with the
exercise of an Option or a Disqualifying Disposition (as defined in Paragraph
22) or the Vesting of Shares issued pursuant to Stock Purchase Rights, the
Company may deduct from any amounts due to the Participant, such as compensation
or reimbursements, or may require that the Participant advance in cash to the
Company, or to any Affiliate of the Company which employs or employed the
Participant, the amount of such withholdings unless a different withholding
arrangement, including the use of shares of the Company's Common Stock or a
promissory note, is authorized by the Administrator (and permitted by law),
provided, however, that with respect to persons subject to Section 16 of the
1934 Act, any such withholding arrangement shall be in compliance with any
applicable provisions of Rule 16b-3 promulgated under Section 16 of the 1934
Act. For purposes hereof, the fair market value of the shares withheld for
purposes of payroll withholding shall be determined in the manner provided in
Paragraph 2 above, as of the most recent practicable date prior to the date of
exercise. If the fair market value of the shares withheld is less than the
amount of payroll withholdings required, the Participant may be required to
advance the difference in cash to the Company or the Affiliate employer. The
Administrator in its discretion may condition the exercise of an Option for less
than the then Fair Market Value on the Participant's payment of such additional
withholding.
22. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
Each Key Employee who receives an ISO must agree to notify the Company in
writing immediately after the Key Employee makes a Disqualifying Disposition of
any shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired Shares by exercising the
ISO. If the Key Employee has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
23. TERMINATION OF THE PLAN.
Unless sooner terminated by the Board of Directors, the Plan shall
terminate on October 28, 2009, and no Options or Stock Purchase Rights shall
thereafter be granted under the Plan. All Options or Stock Purchase Rights
granted under the Plan prior to that date shall remain in
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effect until such Options or Stock Purchase Rights shall have been exercised or
terminated in accordance with the terms and provisions of the Plan and the
applicable Option Agreements or Restricted Stock Purchase Agreements. The Board
of Directors may terminate the Plan at any time; provided, however, that any
such termination will not materially impair any rights under any Option or Stock
Purchase Right theretofore made under the Plan without the consent of the
Participant.
24. AMENDMENT OF THE PLAN AND AGREEMENTS.
The Plan may be amended by the stockholders of the Company. The Plan may
also be amended by the Board of Directors or the Administrator, including,
without limitation, to the extent necessary to qualify any or all outstanding
Options granted under the Plan or Options to be granted under the Plan for
favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code, for as long as the Company has a class of stock registered pursuant to
Section 12 of the 1934 Act and to the extent necessary to qualify the shares
issuable upon exercise of any outstanding Options granted, or Options to be
granted, under the Plan for listing on any national securities exchange or
quotation in any national automated quotation system of securities dealers. Any
amendment approved by the Administrator which the Administrator determines is of
a scope that requires stockholder approval shall be subject to obtaining such
stockholder approval. Any modification or amendment of the Plan shall not,
without the consent of a Participant, materially adversely affect his or her
rights under an Option or Stock Purchase Right previously granted to him or her.
With the consent of the Participant affected, the Administrator may amend
outstanding Option Agreements or Restricted Stock Purchase Agreements in a
manner which may be materially adverse to the Participant but which is not
inconsistent with the Plan. In the discretion of the Administrator, outstanding
Option Agreements or Restricted Stock Purchase Agreements may be amended by the
Administrator in a manner which is not materially adverse to the Participant.
25. EMPLOYMENT OR OTHER RELATIONSHIP.
Nothing in this Plan or any Option Agreement or Restricted Stock Purchase
Agreement shall be deemed to prevent the Company or an Affiliate from
terminating the employment, consultancy or director status of a Participant, nor
to prevent a Participant from terminating his or her own employment, consultancy
or director status or to give any Participant a right to be retained in
employment or other service by the Company or any Affiliate for any period of
time.
All Options and Stock Purchase Rights shall constitute a special incentive
payment to the Participant and shall not be taken into account in computing the
amount of salary or compensation of the Participant for the purpose of
determining any benefits under any pension, retirement, profit-sharing, bonus,
life insurance or other benefit plan of the Company or under
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any agreement between the Company and the Participant, unless such plan or
agreement specifically provides otherwise.
26. GOVERNING LAW.
With respect to Options and Stock Purchase Rights granted prior to January
18, 2001, this Plan shall be governed by and construed in accordance with the
laws of the State of Delaware, the Company's state of incorporation and, except
as otherwise provided in the pertinent Option Agreement or Restricted Stock
Purchase Agreement, the United States District Court for the Eastern District of
Virginia shall have exclusive jurisdiction over any and all disputes between a
Participant and the Company related to or arising out of Options or Restricted
Stock Purchase Rights granted under this Plan. With respect to Option and Stock
Purchase Rights granted on or after January 18, 2001, this Plan shall be
governed by and construed in accordance with the laws of the State of New York
and, except as otherwise provided in the pertinent Option Agreement or
Restricted Stock Purchase Agreement, any and all disputes between a Participant
and the Company related to or arising out of Options or Stock Purchase rights
granted under this Plan shall be brought only in a state or federal court of
competent jurisdiction sitting in Manhattan, New York.
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