STORAGE TECHNOLOGY CORPORATION
1995 EQUITY PARTICIPATION PLAN
(As amended by the Board of Directors on February 20, 1997*)
SECTION 1
INTRODUCTION
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1.1 ESTABLISHMENT. Effective as provided in Section 22, the
Company hereby establishes a plan of long-term stock-based compensation
incentives for selected employees, directors and consultants of the Company
and its affiliated corporations. The plan shall be known as the Storage
Technology Corporation 1995 Equity Participation Plan (the '1995 Plan').
1.2 PURPOSE. The purpose of the 1995 Plan is to provide
employees, directors and consultants selected for participation in the 1995
Plan with added incentives to continue in the service of the Company and its
affiliates and to create in such employees, directors and consultants a more
direct interest in the future success of the operations of the Company and
its affiliated corporations by relating incentive compensation to the
achievement of long-term corporate economic objectives. The 1995 Plan is
also designed to attract key employees, directors and consultants and to
retain and motivate participating employees, directors and consultants by
providing an opportunity for equity investment in the Company.
1.3 NO EFFECT ON 1987 PLAN OPTIONS. Options granted pursuant to
the Storage Technology Corporation 1987 Equity Participation Plan (the '1987
Plan') shall be governed by the terms and provisions of the option agreements
covering such grants and by the provisions of the 1987 Plan.
SECTION 2
DEFINITIONS
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2.1 DEFINITIONS. The following terms shall have the meanings set
forth below:
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(a) 'Affiliated Corporation' means any corporation that is either
a parent corporation with respect to the Company or a subsidiary corporation
with respect to the Company (within the meaning of Sections 424(e) and (f),
respectively, of the Internal Revenue Code).
(b) 'Board' means the Board of Directors of the Company.
(c) 'Cause' means performance or conduct problems resulting in
discharge, as determined by the Company or Affiliated Company, which
determination will be conclusive.
(d) 'Committee' means a committee designated by the Board to
administer the Plan or, if no committee is so designated, the Board.
(e) 'Common Stock' means the Company's $.10 par value voting
common stock.
(f) 'Common Stock Equivalent' means a right to receive Common
Stock in the future that may be granted to a Participant pursuant to Sections
12, 13 or 15 in lieu of a current issuance of Common Stock, subject to
certain conditions and limitations imposed in accordance with such Sections.
(g) 'Consultant' means a natural person who performs services for
the Company, or any Affiliated Corporation, or any division thereof in
exchange for consideration, but who is not an Employee.
(h) 'Director' means a member of the Board.
(i) 'Effective Date' means the effective date of the 1995 Plan, as
set forth in Section 22 hereof.
(j) 'Eligible Employees' means those Employees upon whose
judgment, initiative and efforts the Company or the Affiliated Corporations
are, or are expected to become, largely dependent for the successful conduct
of their business.
(k) 'Employee' means a natural person who is deemed an employee
(including, without limitation, an officer or director who is also an
employee) of the Company, or
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any Affiliated Corporation, in accordance with the rules contained in Section
3401(c) of the Internal Revenue Code and the regulations thereunder.
(l) 'Fair Market Value' means with respect to Common Stock, as of
any date, the closing price of a share of Common Stock on the New York Stock
Exchange as reported by The Wall Street Journal for the last trading day
prior to that date. If no such prices are reported, then Fair Market Value
shall mean the average of the high and low sale prices for the Common Stock
(or if no sale prices are reported, the average of the high and low bid
prices) as reported by the principal regional stock exchange, or if not so
reported, as reported by Nasdaq or a quotation system of general circulation
to brokers and dealers.
(m) 'Incentive Stock Option' means the right to purchase Common
Stock granted to an Employee pursuant to Sections 6 and 7, which constitutes
an incentive stock option within the meaning of Section 422 of the Internal
Revenue Code, and which may or may not be issued with related Stock
Appreciation Rights.
(n) 'Internal Revenue Code' means the Internal Revenue Code of
1986, as it may be amended from time to time.
(o) 'Long-Term Employee' means a person who, as of the date he or
she ceases to be an Employee of the Company or any Affiliated Corporation,
has been an Employee of the Company or any Affiliated Corporation for six
years or more, with no break in such employment of longer than one year.
(p) 'MBO Payment' means a payment to a Participant pursuant to the
Company's MBO Plan, which payment may be made either in shares of Common
Stock, Common Stock Equivalents or in cash, or partly in Common Stock, partly
in Common Stock Equivalents and partly in cash, as determined in accordance
with the provisions of Section 13.
(q) 'MBO Equity Plan' means the Company's Management By Objective
Plan, as established by the Board or the Committee from time to time,
pursuant to which MBO Payments are made from time to time in the manner and
under the conditions established by the Board or the Committee.
(r) 'Non-Qualified Option' means a right to purchase Common Stock
granted to a Participant pursuant to Sections 6 and 8, which does not qualify
as an Incentive Stock Option or which is designated as a Non-Qualified
Option, and which may or may not be issued with related Stock Appreciation
Rights.
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(s) 'Outside Director' means a Director who is not an Employee.
(t) 'Participant' means an Eligible Employee, Director or
Consultant designated by the Committee from time to time during the term of
the 1995 Plan to receive one or more of the stock-based compensation
incentives provided under the 1995 Plan.
(u) 'Reduction in Force' means any termination of employment that,
in the sole judgment of the Company, is (i) made at the request of the
Company or an Affiliated Corporation and is due to the elimination of the
Employee's position, or (ii) a reduction in the number of persons employed by
the Company, either overall or in the Employee's function, department,
division or other relevant workplace unit.
(v) 'Restricted Stock Award' means an award of Common Stock
granted to a Participant pursuant to Section 10 that is subject to certain
restrictions imposed in accordance with the provisions of such Section.
(w) 'Retire' means any termination of employment that is deemed to
be a 'Retirement' by a resolution of the Board of Directors, or any
termination of employment made at the request of the Employee if, as of the
date of such termination, such Employee (a) is age 62 or older and (b) has,
at the time of such termination, been employed by the Company or any
Affiliated Corporation for six years or more, with no break in such
employment of longer than one year.
(x) 'Retired' means the status of any former Employee after he or
she Retires.
(y) 'Stock Appreciation Right' means a right granted to a
Participant pursuant to Section 9 to receive a payment from the Company equal
to the difference between the Fair Market Value of one or more shares of
Common Stock subject to a Non-Qualified Option or an Incentive Stock Option
and the exercise price of such shares under the terms of such Stock Option.
(z) 'Stock Option' means an Incentive Stock Option or a Non-
Qualified Option.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the
context, the masculine gender shall also include the feminine gender, and the
definition of any term herein in the singular shall also include the plural.
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SECTION 3
PLAN ADMINISTRATION
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3.1 ADMINISTRATION GENERALLY. The 1995 Plan shall be administered
by the Board or Committee. In accordance with the provisions of the 1995
Plan, the Committee, in its sole discretion:
(i) shall select the Participants from Eligible
Employees, Directors and Consultants;
(ii) shall determine the number of shares of Common Stock
to be subject to Incentive Stock Options, Non-Qualified Options, Stock
Appreciation Rights, Restricted Stock Awards and other Common Stock or Common
Stock Equivalent awards granted pursuant to the 1995 Plan;
(iii) shall determine the number of shares of Common Stock
or Common Stock Equivalents to be issued as MBO Payments;
(iv) shall determine the time at which such options,
rights, awards and payments are to be granted;
(v) shall fix the exercise price, period and the manner
in which a Stock Option becomes exercisable;
(vi) shall establish the duration and nature of
Restricted Stock Award restrictions;
(vii) shall determine the Fair Market Value of the Common
Stock, in accordance with Section 2.1(l) of the 1995 Plan;
(viii) shall determine whether and under what
circumstances, if any, a Stock Option or Stock Appreciation Right may be
settled in cash or Common Stock Equivalents instead of Common Stock;
(ix) may reduce the exercise price of any Stock Option or
Stock Appreciation Right to the then current Fair Market Value if the Fair
Market Value of the Common Stock covered by such option or right shall have
declined since the date the Stock Option was granted;
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(x) may modify or amend the terms and conditions of any
Stock Option, Stock Appreciation Right, Restricted Stock Award or other
Common Stock award, subject to Section 19 of the Plan (including, but not
limited to, accelerating vesting or waiving forfeiture restrictions);
(xi) may institute an option exchange program;
(xii) may authorize any person to execute on behalf of the
Company any instrument required to effect the grant of a Stock Option, Stock
Appreciation Right, Restricted Stock Award or other Common Stock or Common
Stock Equivalent award previously granted by the Committee; and
(xiii) shall establish such other terms and requirements of
the various compensation incentives under the 1995 Plan as the Committee may
deem necessary or desirable and consistent with the terms of the 1995 Plan.
The Committee shall determine the form or forms of the agreements with
Participants, which shall evidence the particular provisions, terms,
conditions, rights and duties of the Company and the Participants with
respect to Incentive Stock Options, Non-Qualified Options, Stock Appreciation
Rights, Common Stock Equivalent and Restricted Stock Awards granted pursuant
to the 1995 Plan, which provisions need not be identical except as may be
provided herein. The Committee may from time to time adopt such rules and
regulations for carrying out the purposes of the 1995 Plan as it may deem
proper and in the best interests of the Company. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in the 1995
Plan or in any agreement entered into hereunder in the manner and to the
extent it shall deem expedient to carry the 1995 Plan into effect, and it
shall be the sole and final judge of such expediency. No member of the
Committee shall be liable for any action or determination made in good faith.
The determinations, interpretations and other actions of the Committee
pursuant to the provisions of the 1995 Plan shall be binding and conclusive
for all purposes and on all persons, subject only to the review and control
of the Board on all Plan matters except selection of Participants.
3.2 MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3,
the 1995 Plan may be administered by different bodies with respect to
Directors who are Employees, Outside Directors, officers (within the meaning
of Rule 16a-1(f)) who are not Directors, and Employees who are neither
Directors nor officers.
3.3 ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS. With
respect to grants of Stock Options, Stock Appreciation Rights, Restricted
Stock Awards or other
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Common Stock or Common Stock Equivalent awards under the 1995 Plan to Employees
who are also officers or Directors, the 1995 Plan shall be administered by:
(a) the Board, if the Board may administer the 1995 Plan and still
have transactions under the 1995 Plan qualify for exemption under Rule 16b-3,
or
(b) a Committee designated by the Board to administer the 1995
Plan, which Committee shall be constituted (i) in such a manner as to permit
awards granted under the 1995 Plan to qualify for exemption under Rule 16b-3
and (ii) in such a manner as to satisfy applicable laws.
3.4 ADMINISTRATION WITH RESPECT TO OTHER PERSONS. With respect to
grants of Stock Options, Stock Appreciation Rights, Restricted Stock Awards
or other Common Stock or Common Stock Equivalent awards to Employees who are
neither Directors nor officers, the 1995 Plan shall be administered by:
(a) the Board or
(b) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy applicable laws.
3.5 COMMITTEE COMPOSITION. Once a Committee has been appointed
pursuant to Section 3.3 or 3.4, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of any Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies (however caused) or remove
all members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by applicable laws and, in the case of a Committee
appointed under Section 3.3, to the extent permitted by Rule 16b-3 as it
applies to transactions intended to qualify thereunder as exempt
transactions.
SECTION 4
STOCK SUBJECT TO THE PLAN
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4.1 NUMBER OF SHARES. Four million four hundred thousand
(4,400,000) shares of Common Stock are authorized for issuance under the 1995
Plan in accordance with the provisions of the 1995 Plan and subject to such
restrictions or other provisions as the
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Committee may from time to time deem necessary. This authorization may be
increased from time to time by approval of the Board and the stockholders of
the Company. Shares of Common Stock that are issued upon exercise of Incentive
Stock Options, Non-Qualified Options, or Stock Appreciation Rights or pursuant
to MBO Payments, shares of Common Stock that are issued as Restricted Stock
Awards, shares of Common Stock that are issued in connection with Common Stock
Equivalents, and shares of Common Stock that are issued pursuant to a plan
adopted pursuant to Section 15, shall be applied to reduce the number of shares
of Common Stock remaining available for future issuance under the 1995 Plan.
4.2 UNUSED AND FORFEITED STOCK. Any shares of Common Stock that
are subject to an Incentive Stock Option or a Non-Qualified Option that
expires or for any reason is terminated unexercised, and with respect to
which no related Stock Appreciation Right has been exercised, any shares of
Common Stock that are subject to Common Stock Equivalents or to a Restricted
Stock Award and that are forfeited (the 'Forfeited Restricted Stock'), and
any shares of Common Stock that for any other reason are not issued to a
Participant (not including shares withheld pursuant to Section 20.2) or are
forfeited (if forfeited, the 'Other Forfeited Stock'), shall automatically
become available for use under the 1995 Plan; provided, however, that (i) no
shares of Forfeited Restricted Stock or Other Forfeited Stock may be subject
to Incentive Stock Options and (ii) such shares shall not be returned to the
1995 Plan if prohibited by Rule 16b-3.
4.3 CAPITAL ADJUSTMENTS.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Stock Option, Stock Appreciation Right and Common Stock
Equivalent ('Rights'), and the number of shares of Common Stock that have
been authorized for issuance under the Plan but as to which no Stock Options,
Stock Appreciation Rights or Common Stock Equivalents have yet been granted
or that have been returned to the Plan upon cancellation or expiration of a
Stock Option, Stock Appreciation Right or Common Stock Equivalents (the
'Shares Available for Future Grant'), as well as the price per share of
Common Stock covered by each outstanding Stock Option or Stock Appreciation
Right, shall be proportionately adjusted for any increase or decrease in the
number of issued and outstanding shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in
the number of issued and outstanding shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion
of any convertible securities of the Company shall not be deemed to have been
'effected without receipt of consideration.' Such proportionate adjustment
shall be made by the Committee,
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whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into or exercisable for shares of
stock of any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number of Shares Available for Future Grant or the
number or price of shares of Common Stock subject to outstanding Stock Options
or Stock Appreciation Rights.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that a Stock Option
or Stock Appreciation Right has not been previously exercised, it will
terminate immediately prior to the consummation of such proposed action. The
Committee may, in the exercise of its sole discretion in such instances,
declare that any Stock Option or Stock Appreciation Right shall terminate as
of a date fixed by the Committee and give each Participant the right to
exercise his or her Stock Option or Stock Appreciation Right in whole or in
part, including with respect to shares as to which the Stock Option or Stock
Appreciation Right would not otherwise be exercisable. Unless determined
otherwise by the Committee, Common Stock Equivalents shall convert into
shares of Common Stock immediately prior to the consummation of any such
dissolution or liquidation.
(c) Merger or Asset Sale. In the event of a merger or
consolidation of the Company with or into another corporation, or the sale of
all or substantially all of the assets of the Company, each outstanding Stock
Option, Stock Appreciation Right and Common Stock Equivalent may be assumed
or an equivalent Stock Option, Stock Appreciation Right or Common Stock
Equivalent may be substituted by the successor corporation or a parent or
subsidiary of the successor corporation. The Committee may, in lieu of such
assumption or substitution of Stock Options and Stock Appreciation Rights,
provide for Optionees to have the right to exercise his or her Stock Option
or Stock Appreciation Right in whole or in part, including with respect to
shares as to which it would not otherwise be exercisable. If the Committee
makes a Common Stock Equivalent convertible into shares of Common Stock or
makes a Stock Option or Stock Appreciation Right exercisable in lieu of
assumption or substitution in the event of a merger, consolidation or sale of
assets, the Committee shall notify the Participants and, in the case of a
Stock Option or Stock Appreciation Right, shall notify the Optionee that the
Stock Option or Stock Appreciation Right shall be fully exercisable for a
period of thirty (30) days from the date of such notice, and the Stock Option
or Stock Appreciation Right shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Stock Option, Stock
Appreciation Right or Common Stock Equivalent shall be considered assumed if,
following the merger, consolidation or sale of assets, the Stock Option,
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Stock Appreciation Right or Common Stock Equivalent confers the right to
purchase or receive, for each share of Common Stock subject to the Stock
Option, Stock Appreciation Right or Common Stock Equivalent immediately prior
to the merger, consolidation or sale of assets, the consideration (whether
stock, cash or other securities or property) received in the merger,
consolidation or sale of assets by holders of Common Stock for each share
held on the effective date of the transaction (and, if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares); provided, however, that if such
consideration received in the merger, consolidation or sale of assets was not
solely common stock of the successor corporation or its parent, the Committee
may, with the consent of the successor corporation, provide for the
consideration to be received upon conversion of a Common Stock Equivalent or
upon the exercise of the Stock Option or Stock Appreciation Right, for each
share of Common Stock subject to the Stock Option, Stock Appreciation Right
or Common Stock Equivalent to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger,
consolidation or sale of assets.
SECTION 5
PARTICIPATION
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5.1 ELIGIBILITY. Participants in the 1995 Plan shall be those
Eligible Employees, Directors and Consultants who, in the judgment of the
Committee, are performing, or during the term of their service to the Company
are expected to perform, vital services in the management, operation and
development of the Company or an Affiliated Corporation, and significantly
contribute or are expected to significantly contribute to the achievement of
long-term corporate economic objectives. Participants who are Employees may
be granted from time to time one or more Incentive Stock Options (with or
without Stock Appreciation Rights), and Participants (whether or not they are
Employees) may be granted one or more Non-Qualified Options (with or without
Stock Appreciation Rights), one or more Restricted Stock Awards, one or more
MBO Payments in Common Stock Equivalents or in shares of Common Stock, Common
Stock equivalents pursuant to Section 12, and one or more other Common Stock
or Common Stock Equivalent awards pursuant to Section 15; provided, however,
that the grant of each such option, right, award or payment shall be
separately approved by the Committee, and receipt of one such option, right,
award or payment shall not result in automatic receipt of any other option,
right, award or payment. Upon determination by the Committee that a Stock
Option, Stock Appreciation Right, Restricted Stock Award, MBO Payment or
other Common Stock or Common Stock Equivalent award is to be granted to a
Participant, written notice shall be given to such person, specifying the
terms, conditions, rights and duties related thereto. Each Participant
shall, if required by the
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Committee, enter into an agreement with the Company, in such form as the
Committee shall determine and as is consistent with the provisions of the 1995
Plan, specifying such terms, conditions, rights and duties. Stock Options,
Stock Appreciation Rights, Restricted Stock Awards, MBO Payments and other
Common Stock or Common Stock Equivalent awards shall be deemed to be granted as
of the date specified in the grant resolution of the Committee, which date
shall be the date of any related agreement with the Participant. In the event
of any inconsistency between the provisions of the 1995 Plan and any such
agreement entered into hereunder, the provisions of the 1995 Plan shall govern.
5.2 LIMITATIONS. The following limitations shall apply to grants
of Stock Options and Stock Appreciation Rights to Participants:
(a) No Participant shall be granted, in any fiscal year of the
Company, Stock Options and Stock Appreciation Rights to purchase more than
500,000 shares.
(b) The foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 4.3.
(c) If a Stock Option or Stock Appreciation Right is canceled in
the same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 4.3), the canceled Stock
Option or Stock Appreciation Right shall be counted against the limit set
forth in Section 5.2(a). For this purpose, if the exercise price of a Stock
Option or Stock Appreciation Right is reduced, the transaction will be
treated as a cancellation of the Stock Option or Stock Appreciation Right and
the grant of a new Stock Option or Stock Appreciation Right.
(d) Incentive Stock Options may not be granted to Outside
Directors or to Consultants.
5.3 RULE 16B-3. Stock Options, Stock Appreciation Rights,
Restricted Stock Awards, MBO Payments and other Common Stock or Common Stock
Equivalent awards granted to Participants who are subject to Section 16 of
the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), must
comply with the applicable provisions of Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to 1995 Plan transactions.
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SECTION 6
STOCK OPTIONS
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6.1 GRANT OF STOCK OPTIONS. Coincident with or following
designation for participation in the 1995 Plan, a Participant may be granted
one or more Stock Options. The Committee in its sole discretion may
designate whether a Stock Option granted to an Employee is to be considered
an Incentive Stock Option or a Non-Qualified Option. The Committee may grant
both an Incentive Stock Option and a Non-Qualified Option to the same
Employee at the same time or at different times. Incentive Stock Options and
Non-Qualified Options, whether granted at the same or different times, shall
be deemed to have been awarded in separate grants, shall be clearly
identified, and in no event will the exercise of one Stock Option affect the
right to exercise any other Stock Option or affect the number of shares of
Common Stock for which any other Stock Option may be exercised. All Stock
Options granted to Participants who are not Employees shall be Non-Qualified
Options.
6.2 MANNER OF STOCK OPTION EXERCISE. A Stock Option may be
exercised by a Participant in whole or in part from time to time, subject to
the conditions contained herein, (i) by delivery of written notice of
exercise to the Company at its principal office in Louisville, Colorado
(Attention: Corporate Secretary), in person or through mail, facsimile or
electronic mail, or by delivery of notice of exercise in such other method as
has been approved by the Committee, and (ii) by paying in full, with the
written notice of exercise or at such other time as the Committee may
establish, the total exercise price under the Stock Option for the shares
being purchased. Such notice shall be in a form satisfactory to the
Committee and shall specify the particular Stock Option (or portion thereof)
that is being exercised and the number of shares with respect to which the
Stock Option is being exercised. The exercise of the Stock Option shall be
deemed effective upon receipt of such notice by the Corporate Secretary and
payment to the Company. As soon as practicable after the effective exercise
of the Stock Option, and upon satisfaction of all applicable withholding
requirements pursuant to Section 20, the Participant shall be recorded on the
stock transfer books of the Company as the owner of the shares purchased and
the Company shall deliver to the Participant one or more duly issued and
executed stock certificates evidencing such ownership.
6.3 PAYMENT OF STOCK OPTION EXERCISE PRICE. At the time of the
exercise of a Stock Option, payment of the total Stock Option exercise price
for the shares to be purchased shall be made in the manner specified in the
option agreement relating to such Stock Option, which may include any or all
of the following methods of payment:
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(i) in cash or by check;
(ii) by transfer from the Participant to the Company of
shares of Common Stock (other than shares of Common Stock that the Committee
determines by rule may not be used to exercise Stock Options) with a then
current aggregate Fair Market Value equal to the total Stock Option exercise
price;
(iii) delivery to the Company of (A) a properly executed
exercise notice, (B) irrevocable instructions to a broker to sell a suffi-
cient number of the shares being exercised to cover the exercise price and to
promptly deliver to the Company the amount of sale proceeds required to pay
the exercise price and any required tax withholding relating to the exercise,
and (C) such other documentation as the Committee and the broker shall
require to effect a same-day exercise and sale;
(iv) delivery to the Company of (A) a properly executed
exercise notice, (B) irrevocable instructions to a broker or other third
party acceptable to the Company to hold the shares being exercised as
collateral for a loan to the Optionee of an amount sufficient to cover the
exercise price and to promptly deliver to the Company the amount of loan
proceeds required to pay the exercise price and any required tax withholding
relating to the exercise and (C) such other documentation as the Committee
and the broker or other third party shall require to effect the transaction;
(v) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vi) any combination of the foregoing methods of payment;
or
(vii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by applicable laws, rules and
regulations and by the agreement relating to the Stock Option being
exercised.
In the event that the option agreement does not specify the acceptable
methods of payment of the exercise price, payment may be made by any of the
methods specified in clauses (i) through (iii), inclusive, of this
Section 6.3, or any combination of such methods of payment.
6.4 STOCKHOLDER PRIVILEGES. No Participant shall have any rights
as a stockholder with respect to any shares of Common Stock covered by a
Stock Option until the Participant becomes the holder of record of such
Common Stock, and no adjustments shall be made for
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dividends or other distributions or other rights as to which there is a record
date preceding the date such Participant becomes the holder of record of such
Common Stock.
SECTION 7
INCENTIVE STOCK OPTIONS
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7.1 INCENTIVE STOCK OPTION EXERCISE PRICE. The per share price to
be paid by a Participant at the time an Incentive Stock Option is exercised
shall be determined by the Committee at the time an Incentive Stock Option is
granted (or deemed to have been granted under applicable tax rules), but in
no event shall such exercise price be less than:
(a) one hundred percent of the Fair Market Value, on the date the
Incentive Stock Option is granted (or deemed to have been granted under
applicable tax rules), of one share of the stock to which such Stock Option
relates; or
(b) one hundred and ten percent of the Fair Market Value, on the
date the Incentive Stock Option is granted (or deemed to have been granted
under applicable tax rules), of one share of the stock to which such Stock
Option relates if, at the time the Incentive Stock Option is granted, the
Participant owns, directly or indirectly (as determined pursuant to
Section 424(d) of the Internal Revenue Code), ten percent or more of the
total combined voting power of all classes of stock of the Company or of any
Affiliated Corporation (such a Participant is referred to as a '10% Holder').
7.2 NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to an Incentive Stock Option shall be designated by the Committee at
the time the Committee decides to grant an Incentive Stock Option.
7.3 AGGREGATE LIMITATION OF STOCK EXERCISABLE UNDER OPTIONS. To
the extent the aggregate Fair Market Value, determined as of the time an
Incentive Stock Option is granted, of the shares of Common Stock with respect
to which Incentive Stock Options are exercisable for the first time by an
Option Holder in any calendar year under the 1995 Plan or otherwise, granted
by the Company and Affiliated Corporations, exceeds $100,000, such excess
shall be treated as a Non-Qualified Option.
7.4 DURATION OF INCENTIVE STOCK OPTIONS. The period during which
an Incentive Stock Option may be exercised shall be fixed by the Committee,
but in no event shall such period be more than ten years from the date the
Stock Option is granted, or, in the case of
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Participants who are 10% Holders as described in Section 7.1(b), five years
from the date the Stock Option is granted. No Incentive Stock Option with
respect to which Stock Appreciation Rights have been granted may be exercised
during the six-month period following the date on which such Stock Option was
granted. Upon the expiration of such exercise period, the Incentive Stock
Option, to the extent not then exercised, shall terminate. Except as otherwise
provided in Section 11, all Incentive Stock Options granted to a Participant
hereunder shall terminate and may no longer be exercised if the Participant
ceases to be an Employee.
7.5 RESTRICTIONS ON EXERCISE OF INCENTIVE STOCK OPTIONS.
Incentive Stock Options may be granted subject to such restrictions as to the
timing of exercise of all or various portions thereof as the Committee may
determine at the time it grants Incentive Stock Options to Participants.
7.6 DISPOSITION OF STOCK ACQUIRED PURSUANT TO THE EXERCISE OF
INCENTIVE STOCK OPTIONS -- WITHHOLDING. In the event that a Participant
makes a disposition (as defined in Section 424(c) of the Internal Revenue
Code) of any Common Stock acquired pursuant to the exercise of an Incentive
Stock Option prior to the expiration of two years from the date on which the
Incentive Stock Option was granted or prior to the expiration of one year
from the date on which the Stock Option was exercised, the Participant shall
send written notice to the Company at its principal office in Louisville,
Colorado (Attention: Corporate Secretary) of the date of such disposition,
the number of shares disposed of, the amount of proceeds received from such
disposition and any other information relating to such disposition as the
Company may reasonably request. The Participant shall, in the event of such
a disposition, make appropriate arrangements with the Company to provide for
the amount of additional withholding required by federal, state and local
income and other tax laws.
SECTION 8
NON-QUALIFIED OPTIONS
---------------------
8.1 OPTION EXERCISE PRICE. The per share price to be paid by the
Participant at the time a Non-Qualified Option is exercised shall be
determined by the Committee at the time the Stock Option is granted or
amended, but in no event shall such exercise price per share be less than
eighty-five percent of the Fair Market Value of one share of Common Stock on
the date the Stock Option is granted or amended.
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8.2 NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to a Non-Qualified Option shall be designated by the Committee at the
time the Committee decides to grant a Non-Qualified Option.
8.3 DURATION OF NON-QUALIFIED OPTIONS; RESTRICTIONS ON EXERCISE.
The period during which a Non-Qualified Option may be exercised, and the
installment restrictions on option exercise during such period, if any, shall
be fixed by the Committee, but in no event shall such period be more than ten
years from the date the Stock Option is granted, and no Non-Qualified Option
with respect to which Stock Appreciation Rights have been granted may be
exercised during the six-month period immediately following the date on which
such Stock Option was granted. Upon the expiration of such exercise period,
the Non-Qualified Option, to the extent not then exercised, shall terminate.
Except as otherwise provided in Section 11, all Non-Qualified Options granted
to a Participant hereunder shall terminate and may no longer be exercised if
the Participant ceases to be an Employee, Director or Consultant.
SECTION 9
STOCK APPRECIATION RIGHTS
-------------------------
9.1 GRANT OF RIGHTS. A Stock Appreciation Right may be granted to
a Participant in conjunction with any Incentive Stock Option or Non-Qualified
Option granted to such Participant, as determined by the Committee, (i) at
the time of the grant of such Stock Option in the case of an Incentive Stock
Option or (ii) at the time of grant, or at any subsequent time during the
term of the Stock Option, in the case of a Non-Qualified Option. Once
granted, the term of a Stock Appreciation Right shall be equal to the term of
its related Stock Option. Upon exercise of a Stock Appreciation Right by a
Participant for a share of Common Stock, the related Stock Option shall be
terminated with respect to such share. Incentive Stock Options and Non-
Qualified Options shall not be exercisable with respect to shares of Common
Stock for which Stock Appreciation Rights have been exercised. Upon such
Stock Appreciation Right exercise, the Participant shall be entitled to
receive the economic value of such Stock Appreciation Right determined in the
manner prescribed in Section 9.2.
9.2 EXERCISE OF STOCK APPRECIATION RIGHTS. Stock Appreciation
Rights shall be subject to such terms and conditions consistent with other
provisions of the 1995 Plan as may be determined from time to time by the
Committee and shall include the following:
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(a) A Stock Appreciation Right shall be exercisable, in whole or
in part, at such time or times and only to the extent that the Stock Option
to which it relates shall be exercisable; provided, however, that, except as
otherwise provided in Section 11, no Stock Appreciation Right shall be
exercisable during the six-month period following the date of its grant. A
Stock Appreciation Right shall be exercised by the giving of notice in the
same manner as the Stock Option to which it relates may be exercised.
(b) Upon the exercise of a Stock Appreciation Right, a Participant
shall be entitled to receive the economic value thereof, which shall be equal
to (i) the excess of the then Fair Market Value of one share of Common Stock
over the exercise price per share specified in the related Stock Option,
multiplied by (ii) the number of shares in respect of which the Stock
Appreciation Right is being exercised.
(c) The Committee shall, in the agreement relating to the Stock
Appreciation Right, either (i) specify the form in which payment of the
economic value of exercised Stock Appreciation Rights will be made to the
Participant upon exercise thereof (i.e., cash, Common Stock, or a specified
combination thereof) or (ii) grant the Participant the right to elect to
receive cash in full or partial payment of such economic value, at the
Participant's discretion. If the agreement relating to the Stock
Appreciation Right does not so specify, then the Participant shall have the
right to elect cash or Common Stock, Common Stock Equivalents or any
combination thereof. If the Participant is not an 'officer' or 'director' of
the Company, as those terms are defined in the rules under Section 16 of the
Exchange Act, at the time of grant or exercise of the Stock Appreciation
Right, then the Committee may retain the right to either consent to or
disapprove of Participant's elected method of payment.
9.3 STOCKHOLDER PRIVILEGES. No Participant shall have any rights
as a stockholder with respect to any shares of Common Stock covered by a
Stock Appreciation Right until the Participant becomes the holder of record
of such Common Stock, and no adjustments shall be made for dividends or other
distributions or other rights as to which there is a record date preceding
the date such Participant becomes the holder of record of such Common Stock.
SECTION 10
RESTRICTED STOCK AWARDS
-----------------------
10.1 AWARDS GRANTED BY COMMITTEE. Coincident with or following
designation for participation in the 1995 Plan, a Participant may be granted
one or more Restricted Stock
-17-
Awards consisting of shares of Common Stock. The number of shares granted as a
Restricted Stock Award shall be determined by the Committee. The Committee
may, in its discretion, require the payment by the Participant of cash in an
amount equal to the par value of the Common Stock subject to the Restricted
Stock Award as a condition precedent to the issuance of Common Stock to the
Participant.
10.2 RESTRICTIONS. A Participant's right to retain a Restricted
Stock Award granted to him or her under Section 10.1 shall be subject to such
restrictions, including but not limited to the Participant's continuous
status as an Employee, Director or Consultant for a restriction period
specified by the Committee, or the attainment of specified performance goals
and objectives, as may be established by the Committee with respect to such
award. The Committee may in its sole discretion require different periods of
employment, director service or consulting service or different performance
goals and objectives with respect to different Participants, to different
Restricted Stock Awards or to separate, designated portions of the Common
Stock shares constituting a Restricted Stock Award. Subject to the
provisions of Sections 11 and 14, if a Participant's continuous status as an
Employee, Director or Consultant terminates prior to the end of such
restriction period or the attainment of such goals and objectives as may be
specified by the Committee, the Restricted Stock Award shall be forfeited and
all shares of Common Stock related thereto shall be immediately returned to
the Company.
10.3 PRIVILEGES OF A STOCKHOLDER; TRANSFERABILITY. A Participant
shall have all voting, dividend, liquidation and other rights with respect to
Common Stock in accordance with its terms received by him or her as a
Restricted Stock Award under this Section 10 upon becoming the holder of
record of such Common Stock; provided, however, that the Participant's right
to sell, encumber, or otherwise transfer such Common Stock (and any other
securities issued in respect of such shares of Common Stock as a stock
dividend, stock split or the like) shall be subject to the limitations of
Section 16.2 hereof.
10.4 ENFORCEMENT OF RESTRICTIONS. The Committee may in its sole
discretion require one or more of the following methods of enforcing the
restrictions referred to in Section 10.2 and 10.3:
(a) Placing a legend on the stock certificates referring to the
restrictions;
(b) Requiring the Participant to keep the stock certificates, duly
endorsed, in the custody of the Company while the restrictions remain in
effect; or
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(c) Requiring that the stock certificates, duly endorsed, be held
in the custody of a third party while the restrictions remain in effect.
SECTION 11
EFFECT OF TERMINATION OF SERVICE ON STOCK OPTIONS,
STOCK APPRECIATION RIGHTS AND RESTRICTED STOCK AWARDS
-----------------------------------------------------
11.1 EFFECT OF TERMINATION OF SERVICE ON STOCK OPTIONS AND STOCK
APPRECIATION RIGHTS. No Stock Option or Stock Appreciation Right may be
exercised unless, at the time of such exercise, the Participant is an
Employee, Director or Consultant, except as follows:
(a) The Stock Option or Stock Appreciation Right may be exercised
within such period of time after termination of service as is specified in
the Stock Option or Stock Appreciation Right agreement or instrument, but
(i) in no event may such post-termination period extend beyond the original
expiration date of the Stock Option or Stock Appreciation Right and (ii) only
to the extent that the Participant was entitled to exercise it at the date of
termination of service. In the absence of a specified time in the Stock
Option or Stock Appreciation Right agreement or instrument, the Stock Option
or Stock Appreciation Right shall remain exercisable for the applicable
period and to the extent specified in Section 11.5 below following the
Participant's termination of service as an Employee, Director or Consultant.
In the case of an Incentive Stock Option, such period of time shall not
exceed 90 days from the date of termination of status as an Employee;
provided, however, that the agreement may specify a longer period, in which
case Stock Option shall convert to a Non-Qualified Option on the 91st day
following termination of employment.
(b) If the Participant dies while serving as an Employee, Director
or Consultant, or within three months after the Participant ceases such
service, the Stock Option or Stock Appreciation Right may be exercised by the
person to whom it is transferred by will or the laws of descent and
distribution within such period of time after death as is specified in the
Stock Option or Stock Appreciation Right agreement or instrument, but in no
event may such post-death period extend beyond the original expiration date
of the Stock Option or Stock Appreciation Right. In the absence of a
specified time in the Stock Option or Stock Appreciation Right agreement or
instrument, the Stock Option or Stock Appreciation Right shall remain
exercisable for the applicable period and to the extent specified in
Section 11.5 below.
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(c) If the Participant becomes disabled (within the meaning of
Section 22(e)(3) of the Internal Revenue Code) while serving as an Employee,
Director or Consultant, the Stock Option or Stock Appreciation Right may be
exercised within such period of time after termination of service as is
specified in the Stock Option or Stock Appreciation Right agreement or
instrument, but in no event may such post-termination period extend beyond
the original expiration date of the Stock Option or Stock Appreciation Right.
In the absence of a specified time in the Stock Option or Stock Appreciation
Right agreement or instrument, the Stock Option or Stock Appreciation Right
shall remain exercisable for the applicable period and to the extent
specified in Section 11.5 below.
11.2 EFFECT OF TERMINATION OF SERVICE ON RESTRICTED STOCK AWARDS.
In the event of the death or disability (as defined in Section 11.1(c)) of a
Participant, all period of service and other restrictions applicable to
Restricted Stock Awards then held by such Participant shall lapse, and such
awards shall become fully vested and nonforfeitable. In the event of a
Participant's termination of service for any other reason, any Restricted
Stock Awards as to which the employment period or other restrictions have not
been satisfied shall be forfeited.
11.3 MEANING OF EMPLOYMENT. For all purposes of the 1995 Plan and
any Stock Option or Stock Appreciation Right granted hereunder, 'employment'
shall be defined in accordance with the provisions of Section 3401(c) of the
Internal Revenue Code and the regulations thereunder.
11.4 MEANING OF CONTINUOUS STATUS. Unless otherwise specified in
the Stock Option or Stock Appreciation Right agreement or instrument, so long
as a Participant is either an Employee or a Director or a Consultant, he or
she shall be considered to be in continuous status as an Employee, Director
or Consultant, even if the person is serving in one capacity when the award
is granted and subsequently changes to service in a different capacity, such
as terminating employment but continuing to serve as a Consultant.
11.5 DEFAULT PROVISIONS FOR TERMINATION OF SERVICE. In the event
that the Stock Option or Stock Appreciation Right agreement or instrument do
not specify the post-termination period of exercisability, the following
provisions shall apply:
(a) Subject to 11.5(f), if such termination is due to the death of
the Participant, or the Participant dies within three months after such
termination, or if such termination occurs after the Participant becomes
disabled (within the meaning of Section 22(e)(3) of the Internal Revenue
Code), the Stock Option or Stock Appreciation Right may be exercised by the
Participant (or, in the case of death, by the person to whom
-20-
it is transferred by will of the laws of descent and distribution): (i) for
all Incentive Stock Option grants, or for Non-Qualified Stock Option grants or
Stock Appreciation Right grants made before May 22, 1997, or for Non-
Qualified Stock Option grants or Stock Appreciation Right grants made on or
after May 22, 1997, if, at the time of the Participant's termination, such
Participant was not a Long-Term Employee, then within a period of one year
after the date of death (but in no event longer than the term of the Stock
Option or Stock Appreciation Right); and (ii) for grants made on or after May
22, 1997, if the Participant was a Long-Term Employee at the time of the
Participant's termination, the Non-Qualified Stock Option or Stock
Appreciation Right may be exercised, to the extent it is vested as of the
date of the Participant's termination, for the entire remaining term of such
Stock Option or Stock Appreciation Right.
(b) Subject to 11.5(f), if such termination occurs after the
Participant becomes disabled (within the meaning of Section 22(e)(3) of the
Internal Revenue Code), the Stock Option or Stock Appreciation Right may be
exercised: (i) for all Incentive Stock Option grants, or for Non-Qualified
Stock Option or Stock Appreciation Right grants made before May 22, 1997, or
for Non-Qualified Stock Option grants or Stock Appreciation Right grants made
on or after May 22, 1997, if, at the time of the Participant's termination,
such Participant was not a Long-Term Employee, then within a period of one
year after the date of such termination (but in no event longer than the term
of the Stock Option or Stock Appreciation Right); and (ii) for grants made on
or after May 22, 1997, if the Participant is a Long-Term Employee, a Non-
Qualified Stock Option or Stock Appreciation Right may be exercised to the
extent it is vested as of the date of the Participant's termination for the
entire remaining term of such Stock Option or Stock Appreciation Right.
(c) Subjection to 11.5(f), if such termination is due to a
Reduction in Force, then, for grants on or after May 22, 1997, the Stock
Option or Stock Appreciation Right shall be exercisable, to the extent vested
at the time of such termination, for a period of six months from the date of
such termination.
(d) Subject to 11.5(f), if the Participant Retires, then, for
grants on or after May 22, 1997, the Stock Option or Stock Appreciation Right
shall be exercisable, to the extent vested at the time the Participant
Retires, for the entire remaining term of such Stock Option or Stock
Appreciation Right.
(e) Subject to 11.5(f), if the Participant's employment is
terminated for any reason other than those reasons covered by subsections
(a) through (d) of this Section 11.5, then the Stock Option or Stock
Appreciation Right shall be exercisable, to the extent vested
-21-
at the time of such termination, for a period of ninety (90) days after the
date of such termination.
(f) Notwithstanding the provisions of Section 11.5(a) through (e)
above, with respect to all grants of Stock Options or Stock Appreciation
Rights occurring on or after May 22, 1997, no such grants shall be
exercisable after the date of termination of employment if either the
termination was for Cause, or if the former Employee, Consultant or Director
is then, in the sole judgment of the Company, in material breach of any
contractual, statutory, fiduciary or other legal obligation to the Company.
SECTION 12
DIRECTOR STOCK AND STOCK EQUIVALENTS
------------------------------------
12.1 DIRECTOR STOCK AND STOCK EQUIVALENTS. Effective with the
beginning of the Company's fiscal year beginning December 28, 1996, each
Outside Director may receive all or a portion of his or her annual retainer
and any meeting fees (which shall include any additional annual retainer or
fees paid to a committee chair) in shares of Common Stock or, if elected by
the Director, in Common Stock Equivalents. An election pursuant to this
Section 12 must be made in writing on or before the first day of the
beginning of the Outside Director's annual retainer period and shall entitle
the Outside Director to a number of shares of Common Stock or Common Stock
Equivalents determined by dividing (i) the dollar amount of the portion of
the retainer for the fiscal period that is to be paid in shares of Common
Stock or Common Stock Equivalents by (ii) the Fair Market Value of one share
of Common Stock as of the last day of each such fiscal period, rounded up to
the next full number of shares. In the event any person becomes an Outside
Director other than at the beginning of an annual retainer period, such
person may elect, within thirty (30) days of the date on which such person
becomes an Outside Director, to receive his or her retainer and any meeting
fees in shares of Common Stock or Common Stock Equivalents as described above
for the balance of such annual retainer period in accordance with the formula
set forth in the preceding sentence.
For purposes of this Section 12, an annual retainer period shall begin
on the date of an Annual Meeting of the Stockholders of the Company and shall
end on the day immediately preceding the next following Annual Meeting.
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12.2 STOCK EQUIVALENTS. The number of Common Stock Equivalents
determined under Section 12.1 for each Outside Director shall be credited to
a bookkeeping account established in the name of that Director subject to the
following terms and conditions:
(i) If the Company pays a cash dividend with respect to the Common
Stock at any time while Common Stock Equivalents are credited to an Outside
Director's account, there shall be credited to the Outside Director's account
additional Common Stock Equivalents equal to (a) the dollar amount of the
cash dividend the Director would have received had he or she been the actual
owner of the Common Stock to which the Common Stock Equivalents then credited
to the Director's account relate, divided by (b) the Fair Market Value of one
share of the Company's Common Stock on the dividend payment date. The
Company will pay the Director a cash payment in lieu of fractional stock
equivalents on the date of such dividend payment.
(ii) Upon the death or other termination of the Outside Director's
service on the Board, or, if authorized by the Committee, such other time or
times as specified by the Outside Director at the time of his or her annual
election(s), the Company shall deliver to the Outside Director (or his or her
designated beneficiary or estate) a number of shares of Common Stock equal to
the whole number of Common Stock Equivalents then credited to the Director's
account, together with a cash payment equal to the Fair Market Value of any
fractional Common Stock Equivalent.
(iii) The Company's obligation with respect to Common Stock
Equivalents shall not be funded or secured in any manner, nor shall an
Outside Director's right to receive Common Stock equivalents be assigned or
transferable, voluntarily or involuntarily, except as expressly provided
herein.
(iv) An Outside Director shall not be entitled to any voting or
other stockholder rights as a result of the credit of Common Stock
Equivalents to the Director's account until certificates representing shares
of Common Stock are delivered to the Director (or his or her designated
beneficiary or estate) hereunder.
12.3 ELECTIONS. The Committee shall determine the form of Outside
Director's elections pursuant to this Section 12, which form shall evidence
the particular provisions, terms, conditions, rights and duties of the
Company and the Outside Directors with respect to Common Stock and Common
Stock Equivalents paid with respect to the Director's annual retainer and any
meeting fees.
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SECTION 13
MBO PAYMENTS
------------
13.1 PARTICIPANT ELECTION AS TO MBO PAYMENT. At such time as the
Committee determines that a Participant has or may become eligible for an MBO
Payment pursuant to the MBO Plan, the Committee may notify the Participant as
to whether or not the Participant will be required by the Committee to, or
will be given the right to elect to, accept all or a part of such MBO Payment
in the form of shares of Common Stock or Common Stock Equivalents. If the
Committee grants the Participant the right to elect whether to accept the MBO
Payment in Common Stock or Common Stock Equivalents, then the Participant
shall have ten (10) business days after the receipt of such notice from the
Committee to make such election. The Participant shall notify the Committee
with respect to his or her election on such form as may be provided for this
purpose by the Committee, setting forth thereon the dollar value of the
portion of the MBO Payment which he or she desires to receive in shares of
Common Stock or Common Stock Equivalents. If a Participant fails to make an
election pursuant to this Section with respect to the mode of payment of an
MBO Payment, the entire MBO Payment shall be made in cash.
13.2 DETERMINATION OF NUMBER OF SHARES. The number of shares of
Common Stock or Common Stock Equivalents that shall be issued or credited as
an MBO Payment shall be determined by dividing the dollar value of the
portion of the MBO Payment that is to be paid in shares of Common Stock or
Common Stock Equivalents (whether as elected above or as adjusted by the
Committee pursuant to Section 13.3) by the Fair Market Value of the Common
Stock on the date the shares are issued or credited with respect to such
Payment. No fractional shares of Common Stock or Common Stock Equivalent
shall be issued or credited as a part of an MBO Payment and the value of any
such fractional share that would otherwise be issued pursuant to the
Participant's election shall be paid in cash.
13.3 DECISION OF COMMITTEE. The Committee shall have the sole
discretion to either accept the Participant's election with respect to the
payment of an MBO Payment, in whole or in part, in shares of Common Stock or
Common Stock Equivalents or to determine that a lesser portion, or none, of
the MBO Payment will be made in shares of Common Stock or Common Stock
Equivalents, and the Committee's determination in this regard shall be final
and binding on the Participant.
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SECTION 14
TENDER OFFERS AND ACQUISITIONS
------------------------------
If any person or entity (other than the Company or any person or entity
that is controlled by the Company) shall make a tender offer or exchange
offer for all or any part of the Common Stock or other capital shares of the
Company and shall purchase any part of the Common Stock or other capital
shares tendered to it, and the Board opposes or does not affirmatively
recommend acceptance of such tender offer or exchange offer, then:
(a) all Stock Options with respect to which no Stock Appreciation
Rights have been granted, and all Stock Options with respect to which Stock
Appreciation Rights have been issued (and all such related Stock Appreciation
Rights) that have been outstanding for at least six months, shall become
immediately exercisable in full during the remaining term thereof, whether or
not the Participants to whom such options and rights have been granted remain
Employees, Directors or Consultants of the Company; provided, however, that
Stock Appreciation Rights shall remain subject to the requirements of
Section 9.2(a) with respect to the exercise thereof only within prescribed
periods after public release of Company financial information;
(b) all restrictions with respect to outstanding Restricted Stock
Awards shall immediately lapses; and
(c) all Common Stock Equivalents shall convert into shares of
Common Stock as of the date determined by the Committee.
SECTION 15
OTHER COMMON STOCK PROGRAMS
---------------------------
From time to time during the duration of the 1995 Plan, the Board may,
in its sole discretion, adopt one or more incentive compensation arrangements
for Eligible Employees, Directors or Consultants pursuant to which such
Eligible Employees, Directors or Consultants may acquire shares of Common
Stock or Common Stock Equivalents, whether by purchase, outright grant or
otherwise. Any such arrangements shall be subject to the general provisions
of the 1995 Plan and all shares of Common Stock or Common Stock Equivalents
issued or credited pursuant to such arrangements shall be issued under the
1995 Plan if so designated by the Committee.
-25-
SECTION 16
RIGHTS OF PARTICIPANTS
----------------------
16.1 EMPLOYMENT, DIRECTORSHIP OR CONSULTING RELATIONSHIP. Nothing
contained in the 1995 Plan or in any Stock Option, Stock Appreciation Right,
Restricted Stock Award or other Common Stock or Common Stock Equivalent award
granted under the 1995 Plan shall confer upon any Participant any right with
respect to the continuation of his or her employment, service as a director
or consulting relationship with the Company or any Affiliated Corporation, or
interfere in any way with the right of the Company or any Affiliated
Corporation, subject to the terms of any separate agreement to the contrary,
at any time to terminate such service or to increase or decrease the
compensation of the Participant from the rate in existence at the time of the
grant of a Stock Option, Stock Appreciation Right, Restricted Stock Award or
other Common Stock or Common Stock Equivalent award. Whether an authorized
leave of absence, or absence in military or government service, shall
constitute termination of service shall be determined by the Committee at the
time.
16.2 NONTRANSFERABILITY. Except as otherwise approved by the
Committee and set forth in the agreement between the Company and the
Participant, no right or interest of any Participant in a Stock Option, a
Stock Appreciation Right, a Restricted Stock Award prior to the completion of
the restriction period applicable thereto, or other Common Stock or Common
Stock Equivalent award granted pursuant to the 1995 Plan shall be assignable
or transferable during the lifetime of the Participant, either voluntarily or
involuntarily, or subjected to any lien, directly or indirectly, by operation
of law, or otherwise, including execution, levy, garnishment, attachment,
pledge or bankruptcy. If permitted by applicable law (including Rule 16b-3,
as amended from time to time), the Committee may (but need not) permit the
transfer of Stock Options, Stock Appreciation Rights, Restricted Stock Awards
and/or other Common Stock or Common Stock Equivalent awards either generally,
to a limited class of persons or on a case-by-case basis. In the event of a
Participant's death, a Participant's rights and interest in Stock Options,
Stock Appreciation Rights, Restricted Stock Awards and other Common Stock or
Common Stock Equivalent awards shall be transferable by testamentary will or
the laws of descent and distribution, and payment of any amounts due under
the 1995 Plan shall be made to, and exercise of any Stock Options or Stock
Appreciation Rights may be made by, the Participant's legal representatives,
heirs or legatees. If in the opinion of the Committee a person entitled to
payments or to exercise rights with respect to the 1995 Plan is disabled from
caring for his or her affairs because of mental condition, physical
condition, or age, payment due such person may be made to, and such rights
shall be exercised by, such person's guardian, conservator or other legal
personal
-26-
representative upon furnishing the Committee with evidence satisfactory to the
Committee of such status.
SECTION 17
GENERAL RESTRICTIONS
--------------------
17.1 INVESTMENT REPRESENTATIONS. The Company may require any
person to whom a Stock Option, Stock Appreciation Right, Restricted Stock
Award, MBO Payment or other Common Stock or Common Stock Equivalent award is
granted, as a condition of exercising such Stock Option or Stock Appreciation
Right, or receiving such Restricted Stock Award, MBO Payment or other Common
Stock award or Common Stock Equivalent award, to give written assurances in
substance and form satisfactory to the Company and its counsel to the effect
that such person is acquiring the Common Stock subject to the Stock Option,
Stock Appreciation Right, Restricted Stock Award, MBO Payment or Common Stock
or Common Stock Equivalent award for his or her own account for investment
and not with any present intention of selling or otherwise distributing the
same, and to such other effects as the Company deems necessary or appropriate
in order to comply with federal and applicable state securities laws.
17.2 COMPLIANCE WITH SECURITIES LAWS. Each Stock Option, Stock
Appreciation Right and Common Stock Equivalent shall be subject to the
requirement that, if at any time counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such
Stock Option, Stock Appreciation Right or Common Stock Equivalent upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of shares thereunder,
such Stock Option, Stock Appreciation Right or Common Stock Equivalent may
not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Committee. Nothing herein shall be
deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
17.3 CHANGES IN ACCOUNTING RULES. Notwithstanding any other
provision of the 1995 Plan to the contrary, if, during the term of the 1995
Plan, any changes in the financial or tax accounting rules applicable to
Stock Options, Stock Appreciation Rights, Restricted Stock Awards, MBO
Payments or other Common Stock or Common Stock Equivalent awards shall occur
that, in the sole judgment of the Committee, may have a material adverse
effect on the reported earnings, assets or liabilities of the Company, the
Committee shall have
-27-
the right and power to modify as necessary, or cancel, any then outstanding and
unexercised Stock Options or Stock Appreciation Rights, any then outstanding
Restricted Stock Awards as to which the applicable restriction has not been
satisfied and any other Common Stock awards or Common Stock Equivalent.
SECTION 18
OTHER BENEFITS
--------------
The amount of any compensation deemed to be received by an Employee,
Director or Consultant as a result of the exercise of a Stock Option, a Stock
Appreciation Right or the sale of shares received upon such exercise or the
vesting of any Restricted Stock Awards or the receipt of any other Common
Stock or Common Stock Equivalent award will not constitute 'earnings' with
respect to which any other benefits provided by the Company or an Affiliated
Corporation to such person are determined, including without limitation
benefits under any pension, profit sharing, life insurance or salary
continuation plan.
SECTION 19
PLAN AMENDMENT, MODIFICATION AND TERMINATION
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19.1 AMENDMENT OR TERMINATION. The Board, upon recommendation of
the Committee or at its own initiative, at any time may terminate and at any
time and from time to time and in any respect, may amend or modify the 1995
Plan. The Company shall obtain stockholder approval of any amendment to the
extent necessary and desirable to comply with Applicable Laws. 'Applicable
Laws' means the requirements relating to the administration of stock option
plans under U. S. state corporate laws, U.S. federal and state securities
laws, the Code, any stock exchange or quotation system on which the Common
Stock is listed or quoted and the applicable laws of any foreign country or
jurisdiction where Stock Options, Stock Appreciation Rights, Restricted Stock
Awards or other Common Stock or Common Stock Equivalent awards are, or will
be, granted under the 1995 Plan.
19.2 EFFECT OF AMENDMENT. Any Stock Option, Stock Appreciation
Right, Restricted Stock Award or other Common Stock or Common Stock
Equivalent award granted to a Participant prior to the date the 1995 Plan is
amended, modified or terminated will remain in effect according to its terms
unless otherwise agreed upon by the Participant; provided, however, that this
sentence shall not impair the right of the Committee to take
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whatever action it deems appropriate under Section 4.3, Section 14 or Section
17.3. The termination or any modification or amendment of the 1995 Plan shall
not, without the consent of a Participant, affect his or her rights under a
Stock Option, Stock Appreciation Right, Restricted Stock Award or other Common
Stock or Common Stock Equivalent award previously granted to him or her.
With the consent of the Participant affected, the Committee may amend
outstanding option agreements in a manner not inconsistent with the 1995
Plan.
19.3 PRESERVATION OF INCENTIVE STOCK OPTIONS. The Board shall have
the right to amend or modify the terms and provisions of the 1995 Plan and of
any outstanding Incentive Stock Options granted under the 1995 Plan to the
extent necessary to qualify any or all such Stock Options for such favorable
treatment as may be afforded Incentive Stock Options under Section 422 of the
Internal Revenue Code.
SECTION 20
WITHHOLDING
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20.1 WITHHOLDING REQUIREMENT. The Company's obligations to deliver
shares of Common Stock upon the exercise of any Stock Option or Stock
Appreciation Right granted under the 1995 Plan or upon any MBO Payment under
the 1995 Plan or pursuant to any other Common Stock or Common Stock
Equivalent award, shall be subject to the Participant's satisfaction of all
applicable federal, state and local income and other tax withholding
requirements.
20.2 WITHHOLDING WITH COMMON STOCK. At the time the Committee
grants a Stock Option, Stock Appreciation Right, MBO Payment or any other
Common Stock or Common Stock Equivalent award, it may, in its sole
discretion, grant the Participant an election to pay all such amounts of tax
withholding, or any part thereof, by electing to transfer to the Company, or
to have the Company withhold from shares otherwise issuable to the
Participant, shares of Common Stock having a value equal to the amount
required to be withheld or such lesser amount as may be elected by the
Participant. All elections shall be subject to the approval or disapproval
of the Committee. The value of shares of Common Stock to be withheld shall
be based on the Fair Market Value of the Common Stock on the date that the
amount of tax to be withheld is to be determined (the 'Tax Date'). Any such
elections by Participants to have shares of Common Stock withheld for this
purpose will be subject to the following conditions:
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(a) All elections must be made prior to the Tax Date;
(b) All elections shall be irrevocable; and
(c) If the Participant is an officer or director of the Company
within the meaning of Section 16 of the Exchange Act, then the approval by
the Committee of the grant of the award shall be deemed to include approval
by the Committee of the election by such Participant to utilize this
withholding provision, unless otherwise specified in the agreement relating
to the award.
SECTION 21
REQUIREMENTS OF LAW
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21.1 REQUIREMENTS OF LAW. The issuance of stock and the payment of
cash pursuant to the 1995 Plan shall be subject to all applicable laws, rules
and regulations.
21.2 GOVERNING LAW. The 1995 Plan and all agreements hereunder
shall be construed in accordance with and governed by the laws of the State
of Colorado.
SECTION 22
EFFECTIVE DATE OF THE 1995 PLAN
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22.1 EFFECTIVE DATE. The 1995 Plan is effective as of March 8,
1995, the date it was adopted by the Board of Directors of the Company,
subject to the approval of the stockholders of the Company prior to the one-
year anniversary of such date. Stock Options, Stock Appreciation Rights,
Restricted Stock Awards and other Common Stock awards may be granted prior to
stockholder approval if made subject to stockholder approval.
22.2 DURATION OF THE 1995 PLAN. The 1995 Plan shall terminate at
midnight on March 7, 2005, which is the day before the tenth anniversary of
the Effective Date, and may be terminated prior thereto by Board action; and
no Stock Option, Stock Appreciation Right, Restricted Stock Award or other
Common Stock or Common Stock Equivalent award shall be granted after such
termination. Stock Options, Stock Appreciation Rights, Restricted Stock
Awards and other Common Stock Common Stock Equivalent awards outstanding at
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the time of the 1995 Plan termination may continue to be exercised, or become
free of restrictions, in accordance with their terms.
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1995 Equity Participation Plan - Storage Technology Corp.
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