Document:

Exhibit

10.2

 

ENDOCARDIAL SOLUTIONS, INC.

AMENDED AND RESTATED

1993 LONG-TERM INCENTIVE

AND

STOCK OPTION PLAN

(AS AMENDED MAY 14, 2002)

 

 

Section 1.  Purpose of Plan.

 

Purpose.  This Plan shall be known as the “ENDOCARDIAL

SOLUTIONS, INC. AMENDED AND RESTATED 1993 LONG-TERM INCENTIVE AND STOCK OPTION

PLAN” and is hereinafter referred to as the “Plan.”  The purpose of the Plan is to aid in maintaining and developing

personnel capable of assuring the future success of Endocardial Solutions,

Inc., a Delaware corporation (the “Company”), to offer such personnel

additional incentives to put forth maximum efforts for the success of the

business, and to afford them an opportunity to acquire a proprietary interest

in the Company through stock options and other long-term incentive awards as

provided herein.  Options granted under

this Plan may be either incentive stock options (Incentive Stock Options”)

within the meaning of Section 422 of the Internal Revenue Code of 1986

(the “Code”), or options that do not qualify as Incentive Stock Options.  Awards granted under this Plan shall be

SARs, restricted stock or performance awards as hereinafter described.  With respect to outstanding Incentive Stock

Options at the time of amendment of this Plan, such options shall continue to

be governed by the terms of the Plan prior to this amendment.

 

Section 2.  Stock Subject to

Plan.

 

Subject to the provisions of Section 15 hereof,

the stock to be subject to options or other awards under the Plan shall be the

Company’s authorized but unissued shares of Common Stock, $.01 par value (the

“Common Shares”).  Such shares shall be

authorized but unissued shares.  Subject

to adjustment as provided in Section 15 hereof, the maximum number of

shares on which options may be exercised or other awards issued under this Plan

shall be 3,300,000 shares.  If an option

or award under the Plan expires, or for any reason is terminated or unexercised

with respect to any shares, such shares shall again be available for options or

awards thereafter granted during the term of the Plan.

 

Section 3.  Administration of

Plan.

 

(a)           The

Plan shall be administered by the Board of Directors of the Company or a

committee thereof.  The members of any

such committee shall be appointed by and serve at the pleasure of the Board of

Directors.  (The group administering the

Plan shall hereinafter be referred to as the “Committee.”)

 

(b)           The

Committee shall have plenary authority in its discretion, but subject to the

express provisions of the Plan: (i) to determine the purchase price of the

Common Shares covered by each option or award, (ii) to determine the

employees to whom and the time or times at which such options and awards shall

be granted and the number of shares to be subject to each, (iii) to

determine the form of payment to be made upon the exercise of an SAR or in

connection with performance awards, either cash, Common Shares of the Company

or a combination thereof, (iv) to determine the terms of exercise of each

option and award, (v) to accelerate the time at which all or any part of an

option or award may be exercised, (vi) to amend or modify the terms of any

option or award with the consent of the optionee, (vii) to interpret the

Plan, (viii) to prescribe, amend and rescind rules and regulations relating

to the Plan, (ix) to determine the terms and provisions of each option and

award agreement under the Plan (which agreements need not be identical),

including the designation of those options intended to be Incentive Stock

Options, and (x) to make all other determinations necessary or advisable

for the administration of the Plan, subject to the exclusive authority of the

Board of Directors under Section 16 herein to amend or terminate the

Plan.  The Committee’s determinations on

the foregoing matters, unless otherwise disapproved by the Board of Directors

of the Company, shall be final and conclusive.

 

(c)           The

Committee shall select one of its members as its Chair and shall hold its

meetings at such times and places as it may determine.  A majority of its members shall constitute a

quorum.  All

 

 

determintations of the Committee shall be made by not less than a

majority of its members.  Any decision

or determination reduced to writing and signed by all of the members of the

Committee shall be fully effective as if it had been made by a majority vote at

a meeting duly called and held.  The

grant of an option or award shall be effective only if a written agreement

shall have been duly executed and delivered by and on behalf of the Company

following such grant.  The Committee may

appoint a Secretary and may make such rules and regulations for the conduct of

its business as it shall deem advisable.

 

Section 4.  Eligibility and

Grant.

 

(a)           Eligibility.  Incentive Stock Options may only be granted

under this Plan to any full or part-time employee (which term as used herein

includes, but is not limited to, officers and directors who are also employees)

of the Company and of its present and future subsidiary corporations within the

meaning of Section 424(f) of the Code (herein called “subsidiaries”).  Full or part-time employees, officers,

consultants, directors (including directors who are not employees of the

Company) or independent contractors of the Company or one of its subsidiaries

shall be eligible to receive options which do not qualify as Incentive Stock

Options and awards.  In determining the

persons to whom options and awards shall be granted and the number of shares

subject to each, the Committee may take into account the nature of services

rendered by the respective employees or consultants, their present and

potential contributions to the success of the Company and such other factors as

the Committee in its discretion shall deem relevant.

 

(b)           Grant

of Additional Options.  A person who

has been granted an option or award under this Plan may be granted additional

options or awards under the Plan if the Committee shall so determine; provided,

however, that for Incentive Stock Options to the extent the aggregate fair

market value (determined at the time the Incentive Stock Option is granted) of

the Common Shares with respect to which all Incentive Stock Options are

exercisable for the first time by an employee during any calendar year (under

all plans described in subsection (d) of Section 422 of the Code of his or

her employer corporation and its parent and subsidiary corporations) exceeds

$100,000, such options shall be treated as options that do not qualify as

Incentive Stock Options.  Nothing in the

Plan or in any agreement thereunder shall confer on any employee any right to

continue in the employ of the Company or any of its subsidiaries or affect, in

any way, the right of the Company or any of its subsidiaries to terminate his

or her employment at any time.

 

Section 5.  Price.

 

The option price for all Incentive Stock Options

granted under the Plan shall be determined by the Committee but shall not be

less than 100% of the fair market value of the Common Shares at the date of

grant of such option.  The option price

for options granted under the Plan that do not qualify as Incentive Stock

Options and, if applicable, the price for all awards shall also be determined

by the Committee.  For purposes of the

preceding sentence and for all other valuation purposes under the Plan, the fair

market value of the Common Shares shall be as reasonably determined by the

Committee.  If on the date of grant of

any option or award hereunder the Common Shares are not traded on an

established securities market, the Committee shall make a good faith attempt to

satisfy the requirements of this Section 5 and in connection therewith

shall take such action as it deems necessary or advisable.

 

Section 6.  Term.

 

Each option and award and all rights and obligations

thereunder shall expire on the date determined by the Committee and specified

in the option or award agreement.  The

Committee shall be under no duty to provide terms of like duration for options

or awards granted under the Plan, but the term of an Incentive Stock Option may

not extend more than ten (10) years form the date of grant of such option and

the term of options granted under the Plan which do not qualify as Incentive

Stock Options may not extend more than fifteen (15) years from the date of

granting of such option.

 

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Section 7.  Exercise of

Option or Award.

 

(a)           Exercisability.  The Committee shall have full and complete

authority to determine whether an option or award will be exercisable in full

at any time or from time to time during the term thereof, or to provide for the

exercise thereof in such installments, upon the occurrence of such events (such

as termination of employment for any reason) and at such times during the term

of the option as the Committee may determine and specify in the option or award

agreement.

 

(b)           No

Violation of State or Federal Laws. 

The exercise of any option or award granted hereunder shall only be

effective at such time that the sale of Common Shares pursuant to such exercise

will not violate any state or federal securities or other laws.

 

(c)           Method

of Exercise.  An optionee or grantee

electing to exercise an option or award shall give written notice to the

Company of such election and of the number of shares subject to such

exercise.  The full purchase price of

such shares shall be tendered with such notice of exercise.  Payment shall be made to the Company in cash

(including bank check, certified check, personal check, or money order), or, at

the discretion of the Committee and as specified by the Committee, (i) by

delivering certificates for the Company’s Common Shares already owned by the

optionee or grantee having a fair market value as of the date of grant equal to

the full purchase price of the shares, or (ii) by delivering the

optionee’s or grantee’s promissory note, which shall provide for interest at a

rate not less than the minimum rate required to avoid the imputation of income,

original issue discount or a below-market-rate loan pursuant to

Sections 483, 1274 or 7872 of the Code or any successor provisions

thereof, or (iii) a combination of cash, the optionee’s or grantee

promissory note and such shares.  The

fair market value of such tendered shares shall be determined as provided in

Section 5 herein.  The optionee’s

or grantee’s promissory note shall be a full recourse liability of the optionee

and may, at the discretion of the Committee, be secured by a pledge of the

shares being purchased.  Until such

person has been issued the shares subject to such exercise, he or she shall

possess no rights as a shareholder with respect to such shares.

 

Section 8.  Stock

Appreciation Rights.

 

(a)           Grant.  At the time of grant of an option or award

under the Plan (or at any other time), the Committee, in its discretion, may

grant a Stock Appreciation Right (“SAR”) evidenced by an agreement in such form

as the Committee shall from time to time approve.  Any such SAR may be subject to restrictions on the exercise

thereof as may be set forth in the agreement representing such SAR, which

agreement shall comply with and be subject to the following terms and

conditions and any additional terms and conditions established by the Committee

that are consistent with the terms of the Plan.

 

(b)           Exercise.  An SAR shall be exercised by the delivery to

the Company of a written notice which shall state that the holder thereof

elects to exercise his or her SAR as to the number of shares specified in the

notice and which shall further state what portion, if any, of the SAR exercise

amount (hereinafter defined) the holder thereof requests is to be paid in cash

and what portion, if any, is to be paid in Common Shares of the Company.  The Committee promptly shall cause to be

paid to such holder the SAR exercise amount either in cash, in Common Shares of

the Company, or any combination of cash and shares as the Committee may

determine.  Such determination may be

either in accordance with the request made by the holder of the SAR or in the

sole and absolute discretion of the Committee. 

The SAR exercise amount is the excess of the fair market value of one

share of the Company’s Common Shares on the date of exercise over the per share

exercise price in respect of which the SAR was granted, multiplied by the

number of shares as to which the SAR is exercised.  For the purposes hereof, the fair market value of the Company’s

shares shall be determined as provided in Section 5 herein.

 

Section 9.  Restricted Stock

Awards.

 

Awards of Common Shares subject to forfeiture and

transfer restrictions may be granted by the Committee.  Any restricted stock award shall be

evidenced by an agreement in such form as the Committee shall from time to time

approve, which agreement shall comply with and be subject to the following

terms and conditions and any additional terms and conditions established by the

Committee that are consistent with the terms of the Plan:

 

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(a)           Grant of Restricted Stock Awards.  Each restricted stock award made under the

Plan shall be for such number of Common Shares as shall be determined by the

Committee and set forth in the agreement containing the terms of such

restricted stock award.  Such agreement

shall set forth a period of time during which the grantee must remain in the

continuous employment of the Company in order for the forfeiture and transfer

restrictions to lapse.  If the Committee

so determines, the restrictions may lapse during such restricted period in

installments with respect to specified portions of the shares covered by the

restricted stock award.  The agreement

may also, in the discretion of the Committee, set forth performance or other

conditions that will subject the Common Shares to forfeiture and transfer

restrictions.  The Committee may, at its

discretion, waive all or any part of the restrictions applicable to any or all

outstanding restricted stock awards.

 

(b)           Delivery of Common Shares and

Restrictions.  At the time of a

restricted stock award, a certificate representing the number of Common Shares

awarded thereunder shall be registered in the name of the grantee.  Such certificate shall be held by the

Company or any custodian appointed by the Company for the account of the

grantee subject to the terms and conditions of the Plan, and shall bear such a

legend setting forth the restrictions imposed thereon as the Committee, in its

discretion, may determine.  The grantee

shall have all rights of a shareholder with respect to the Common Shares,

including the right to receive dividends and the right to vote such shares,

subject to the following restrictions: (i) the grantee shall not be

entitled to delivery of the stock certificate until the expiration of the

restricted period and the fulfillment of any other restrictive conditions set

forth in the restricted stock agreement with respect to such Common Shares;

(ii) none of the Common Shares may be sold, assigned, transferred,

pledged, hypothecated or otherwise encumbered or disposed of during such

restricted period or until after the fulfillment of any such other restrictive

conditions; and (iii) except as otherwise determined by the Committee, all

of the Common Shares shall be forfeited and all rights of the grantee to such

Common Shares shall terminate, without further obligation on the part of the

Company, unless the grantee remains in the continuous employment of the Company

for the entire restricted period in relation to which such Common Shares were

granted and unless any other restrictive conditions relating to the restricted

stock award are met.  Any Common Shares,

any other securities of the Company and any other property (except for cash

dividends) distributed with respect to the Common Shares subject to restricted

stock awards shall be subject to the same restrictions, terms and conditions as

such restricted Common Shares.

 

(c)           Termination of Restrictions.  At the end of the restricted period and

provided that any other restrictive conditions of the restricted stock award

are met, or at such earlier time as otherwise determined by the Committee, all

restrictions set forth in the agreement relating to the restricted stock award

or in the Plan shall lapse as to the restricted Common Shares subject thereto,

and a stock certificate for the appropriate number of Common Shares, free of

the restrictions and the restricted stock legend, shall be delivered to the

grantee or his or her beneficiary or estate, as the case may be.

 

Section 10.  Performance

Awards.

 

The Committee is further authorized to grant

performance awards.  Subject to the

terms of this Plan and any applicable award agreement, a performance award

granted under the Plan (i) may be denominated or payable in cash, Common

Shares (including, without limitation, restricted stock), other securities,

other awards, or other property and (ii) shall confer on the holder

thereof rights valued as determined by the Committee, in its discretion, and

payable to, or exercisable by, the holder of the performance awards, in whole

or in part, upon the achievement of such performance goals during such

performance periods as the Committee, in its discretion, shall establish.  Subject to the terms of this Plan and any

applicable award agreement, the performance goals to be achieved during any

performance period, the length of any performance period, the amount of any

performance award granted, and the amount of any payment or transfer to be made

by the grantee and by the Company under any performance award shall be

determined by the Committee.

 

Section 11.  Income Tax

Withholding and Tax Bonuses.

 

(a)           Withholding

of Taxes.  In order to comply with

all applicable federal or state income tax laws or regulations, the Company may

take such action as it deems appropriate to ensure that all applicable federal

or state payroll, withholding, income or other taxes, which are the sole and

absolute responsibility of an optionee or grantee under the Plan, are withheld

or collected from such optionee or

 

4

 

grantee.  In order to assist an

optionee or grantee in paying all federal and state taxes to be withheld or

collected upon exercise of an option or award which does not qualify as an

Incentive Stock Option hereunder, the Committee, in its absolute discretion and

subject to such additional terms and conditions as it may adopt, shall permit

the optionee or grantee to satisfy such tax obligation by (i) electing to

have the Company withhold a portion of the shares otherwise to be delivered

upon exercise of such option or award with a fair market value, determined in

accordance with Section 5 herein, equal to such taxes or

(ii) delivering to the Company Common Shares other than the shares

issuable upon exercise of such option or award with a fair market value,

determined in accordance with Section 5, equal to such taxes.

 

(b)           Tax

Bonus.  The Committee shall have the

authority, at the time of grant of an option under the Plan or at any time

thereafter, to approve tax bonuses to designated optionees or grantees to be

paid upon their exercise of options or awards granted hereunder.  The amount of any such payments shall be

determined by the Committee.  The

Committee shall have full authority in its absolute discretion to determine the

amount of any such tax bonus and the terms and conditions affecting the vesting

and payment thereafter.

 

Section 12.  Additional

Restrictions.

 

The Committee shall have full and complete authority

to determine whether all or any part of the Common Shares of the Company

acquired upon exercise of any of the options or awards granted under the Plan

shall be subject to restrictions on the transferability thereof or any other

restrictions affecting in any manner the optionee’s or grantee’s rights with

respect thereto, but any such restriction shall be contained in the agreement

relating to such options or awards.

 

Section 13.  Ten Percent

Shareholder Rule.

 

Notwithstanding any other provision in the Plan, if at

the time an option is otherwise to be granted pursuant to the Plan the optionee

owns directly or indirectly (within the meaning of Section 424(d) of the

Code) Common Shares of the Company possessing more than ten percent (10%) of

the total combined voting power of all classes of stock of the Company or its

parent or subsidiary corporations, if any (within the meaning of

Section 422(b)(6) of the Code), then any Incentive Stock Option to be

granted to such optionee pursuant to the Plan shall satisfy the requirements of

Section 422(c)(5) of the Code, and the option price shall be not less than

110% of the fair market value of the Common Shares of the Company determined as

described herein, and such option by its terms shall not be exercisable after

the expiration of five (5) years from the date such option is granted.

 

Section 14.  Non-Transferability.

 

No option or award granted under the Plan shall be

transferable by an optionee or grantee, otherwise than by will or the laws of

descent or distribution.  Except as otherwise

provided in an option or award agreement, during the lifetime of an optionee or

grantee, the option shall be exercisable only by such optionee or grantee.

 

Section 15.  Dilution or

Other Adjustments.

 

If there shall be any change in the Common Shares

through merger, consolidation, reorganization, recapitalization, dividend in

the form of stock (of whatever amount), stock split or other change in the

corporate structure, appropriate adjustments in the Plan and outstanding

options and awards shall be made by the Committee.  In the event of any such changes, adjustments shall include,

where appropriate, changes in the aggregate number of shares subject to the

Plan, the number of shares and the price per share subject to outstanding

options and awards and the amount payable upon exercise of outstanding awards,

in order to prevent dilution or enlargement of option or award rights.

 

Section 16.  Amendment or

Discontinuance of Plan.

 

The Board of Directors may amend or discontinue the

Plan at any time.  Subject to the

provisions of Section 15 no amendment of the Plan, however, shall without

shareholder approval: (i) increase the maximum

 

5

 

number of shares under the Plan as provided in Section 2 herein,

(ii) decrease the minimum price provided in Section 5 herein,

(ii) extend the maximum term under Section 6, or (iv) modify the

eligibility requirements for participation in the Plan.  The Board of Directors shall not alter or

impair any option or award theretofore granted under the Plan without the

consent of the holder of the option.

 

Section 17.  Time of

Granting.

 

Nothing contained in the Plan or in any resolution

adopted or to be adopted by the Board of Directors or by the shareholders of

the Company, and no action taken by the Committee or the Board of Directors

(other than the execution and delivery of an option or award agreement), shall

constitute the granting of an option or award hereunder.

 

Section 18.  Termination of

Plan.

 

Unless the Plan shall have been discontinued as

provided in Section 15 hereof, the Plan shall terminate May 4,

2003.  No option or award may be granted

after such termination, but termination of the Plan shall not, without the

consent of the optionee or grantee, alter or impair any rights or obligations

under any option or award theretofore granted.

 

6Exhibit

10.3

 

ENDOCARDIAL SOLUTIONS,

INC.

AMENDED AND RESTATED

DIRECTORS’ STOCK OPTION

PLAN

(As Amended May

14, 2002)

 

1.             Purpose

of the Plan.  The purpose of this

Endocardial Solutions, Inc. Directors’ Stock Option Plan is to attract and

retain the best available individuals for service as Directors of the Company

and provide additional incentive to the Outside Directors of the Company to

serve as Directors.

 

None of the

options granted hereunder shall be “incentive stock options” within the meaning

of Section 422 of the Code (as hereinafter defined).

 

2.             Definitions.  As used herein, the following definitions

shall apply:

 

(a)           “Board” shall

mean the Board of Directors of the Company.

 

(b)           “Code” shall

mean the Internal Revenue Code of 1986, as amended.

 

(c)           “Common Stock”

shall mean the Common Stock of the Company.

 

(d)           “Company” shall

mean Endocardial Solutions, Inc., a Delaware corporation.

 

(e)           “Continuous Status

as a Director” shall mean the absence of any interruption or termination of

service as a Director.

 

(f)            “Director”

shall mean a member of the Board.

 

(g)           “Employee” shall

mean any person, including officers and Directors, employed by the Company or

any parent or Subsidiary of the Company. 

The payment of a Director’s fee by the Company shall not be sufficient

in and of itself to constitute “employment” by the Company.

 

(h)           “Exchange Act”

shall mean the Securities Exchange Act of 1934, as amended.

 

(i)            “Option” shall

mean a stock option granted pursuant to the Plan.

 

(j)            “Optioned Stock”

shall mean the Common Stock subject to an Option.

 

(k)           “Optionee” shall

mean an Outside Director who receives an Option.

 

(l)            “Outside Director”

shall mean a Director who is not an Employee.

 

(m)          “Parent” shall

mean a “parent corporation,” whether now or hereafter existing, as defined in

Section 425(e) of the Code.

(n)           “Plan” shall

mean this Directors’ Stock Option Plan.

 

(o)           “Shares” shall

mean shares of the Common Stock, as adjusted in accordance with Section 10 of

the Plan.

 

(p)           “Subsidiary”

shall mean a “subsidiary corporation,” whether now or hereafter existing, as

defined in Section 425(f) of the Code.

 

 

3.             Stock

Subject to the Plan.  Subject to the

provisions of Section 10 of the Plan, the maximum aggregate number of Shares

which may be optioned and sold under the Plan is 300,000 Shares of Common

Stock.  The Shares may be authorized,

but unissued, or reacquired Common Stock.

 

If an Option

should expire or become unexercisable for any reason without having been

exercised in full, the unpurchased Shares which were subject thereto shall,

unless the Plan shall have been terminated, become available for future grant

under the Plan.  If Shares which were

acquired upon exercise of an Option are subsequently repurchased by the Company,

such Shares shall not in any event be returned to the Plan and shall not become

available for future grant under the Plan.

 

4.             Administration

of and Grants of Options under the Plan.

 

(a)           Administrator.  Except as otherwise required herein, the

Plan shall be administered by the Board.

 

(b)           Procedure for Grants.  The provisions set forth in this Section

4(b) shall not be amended more than once every six months, other than to

comport with changes in the Code, the Employee Retirement Income Security Act

of 1974, as amended, or the rules thereunder. 

All grants of Options hereunder shall be made in accordance with the

following provisions:

 

(i)            The

Board shall have discretion to grant options to Outside Directors in addition

to the Options described in Sections 4(b)(ii) and (iii) and to determine

the number of Shares to be covered by such Options.

 

(ii)           Each

Outside Director shall be automatically granted an Option (an “Initial Grant”)

to purchase 10,000 Shares upon the date on which such person first becomes a

Director, whether through election by the shareholders of the Company or

appointment by the Board of Directors to fill a vacancy.  Options granted under this section 4(b)(ii)

shall become vested and thereby exercisable with respect to 33 1/3% on the date

of such Initial Grant, with respect to 33 1/3% of such Initial Grant on the

twelve month anniversary date of such Initial Grant and with respect to 33 1/3%

of such Initial Grant on the date of the second twelve month anniversary date;

provided, however, an unvested portion of an Initial Grant shall only vest so

long as the Outside Director remains a Director on the date such portion vests.

 

(iii)          Each Outside Director shall automatically

receive, on the date of each Annual Meeting of Shareholders, an Option to

purchase 5,000 Shares of the Company’s Common Stock, such Option to become

exercisable six months subsequent to the date of grant; provided,

however, that such Option shall only be granted to Outside Directors who have

served since the date of the last Annual Meeting of Shareholders and will

continue to serve after the date of grant of such Option.

 

(iv)          The

terms of an Option granted hereunder shall be as follows:

 

(A)                              The

term of the Option shall be seven (7) years.

 

(B)                                The

Option shall be exercisable only while the Outside Director remains a Director

of the Company, except as set forth in Section 8 hereof.

 

(C)                                The

exercise price per Share shall be 100% of the fair market value per Share on

the date of grant of the Option.

 

(D)                               To

the extent necessary to comply with the applicable provisions of Rule 16b-3

promulgated under the Exchange Act (“Rule 16b-3”), no Option will be

exercisable until a date more than six months subsequent to the date of the

grant of that Option.

 

2

 

(E)                                 A

Director shall be entitled to receive Options to purchase a total of no more

than 100,000 Shares of the Company’s Common Stock pursuant to the terms of this

Plan.

 

(c)           Powers of the Board.  Subject to the provisions and restrictions

of the Plan, the Board shall have the authority, in its discretion:  (i) to determine, upon review of relevant

information and in accordance with Section 7(b) of the Plan, the fair market

value of the Common Stock; (ii) to determine the exercise price per share of

Options to be granted, which exercise price shall be determined in accordance

with Section 7(a) of the Plan; (iii) to interpret the Plan; (iv) to prescribe,

amend and rescind rules and regulations relating to the Plan; (v) to authorize

any person to execute on behalf of the Company any instrument required to

effectuate the grant of an Option previously granted hereunder; and (vi) to

make all other determinations deemed necessary or advisable for the

administration of the Plan.

 

(d)           Effect of Board’s

Decision.  All decisions,

determinations and interpretations of the Board shall be final and binding on

all Optionees and any other holders of any Options granted under the Plan.

 

5.             Eligibility.  Options may be granted only to Outside

Directors.  All Options shall be

automatically granted in accordance with the terms set forth in Section 4(b)

hereof.

 

The Plan shall not

confer upon any Optionee any right with respect to continuation of service as a

Director or nomination to serve as a Director, nor shall it interfere in any

way with any rights which the Director or the Company may have to terminate his

directorship at any time.

 

6.             Term

of Plan.  The Plan shall become

effective upon the earlier of (i) its adoption by the Board or (ii) its

approval by the shareholders of the Company as described in Section 16 of the

Plan.  It shall continue in effect for a

term of ten (10) years unless sooner terminated under Section 12 of the Plan.

 

7.             Exercise

Price and Consideration.

 

(a)           Exercise Price.  The per Share exercise price for the Shares

to be issued pursuant to exercise of an Option shall be 100% of the fair market

value per Share on the date of grant of the Option.

 

(b)           Fair Market Value.  The fair market value (“Fair Market Value”)

of a Share shall be determined by the Board in its discretion; provided,

however, that where there is a public market for the Common Stock, the fair

market value per Share shall be the closing price of the Common Stock in the

over-the-counter market on the date of grant, as reported in The Wall Street

Journal (or, if not so reported, as otherwise reported by the National

Association of Securities Dealers Automated Quotation (“NASDAQ”) System) or, in

the event the Common Stock is traded on the NASDAQ National Market System or

listed on a stock exchange, the fair market value per Share shall be the

closing price on such system or exchange on the date of grant of the Option, as

reported in The Wall Street Journal.

 

(c)           Form of

Consideration.  Subject to

compliance with applicable provisions of Section 16(b) of the Exchange Act, (or

other applicable law), the consideration to be paid for the Shares to be issued

upon exercise of an Option, including the method of payment, shall be

determined by the Board and may consist entirely of (i) cash, (ii) check, (iii)

other Shares which (X) in the case of Shares acquired upon exercise of an

Option, have been owned by the Optionee for more than six months on the date of

surrender, and (Y) have a Fair Market Value on the date of exercise equal to

the aggregate exercise price of the Shares as to which said Option shall be

exercised, (iv) authorization for the Company to retain from the total number

of Shares as to which the Option is exercised that number of Shares having a

Fair Market Value on the date of exercise equal to the exercise price for the

total number of Shares as to which the Option is exercised, (v) delivery of a

properly executed exercise notice together with irrevocable instructions to a

broker to promptly deliver to the Company the amount of sale or loan proceeds required

to pay the exercise price, (vi) delivery of an irrevocable subscription

agreement for the Shares which irrevocably obligates the option holder to take

and pay for the Shares not more than twelve months after the date of delivery

of the subscription agreement, (vii) any combination of the foregoing methods

of payment or (viii) such other consideration and method of payment for the

issuance of Shares as may be permitted under applicable laws.  In

 

3

 

making its determination as to the type of

consideration to accept, the Board shall consider whether acceptance of such

consideration may be reasonably expected to benefit the Company.

 

8.             Exercise

of Option.

 

(a)           Procedure for

Exercise; Rights as a Shareholder. 

Any Option granted hereunder shall be exercisable at such times as are

set forth in Section 4(b) hereof; provided however, that no Options

shall be exercisable until shareholder approval of the Plan in accordance with

Section 16 hereof has been obtained.

 

An Option may not

be exercised for a fraction of a Share.

 

An Option shall be

deemed to be exercised when written notice of such exercise has been given to

the Company in accordance with the terms of the Option by the person entitled

to exercise the Option and full payment for the Shares with respect to which

the Option is exercised has been received by the Company.  Full payment may consist of any

consideration and method of payment allowable under Section 7(c) of the

Plan.  Until the issuance (as evidenced

by the appropriate entry on the books of the Company or of a duly authorized

transfer agent of the Company) of the stock certificate evidencing such Shares,

no right to vote or receive dividends or any other rights as a shareholder

shall exist with respect to the Optioned Stock, notwithstanding the exercise of

the Option.  A share certificate for the

number of Shares so acquired shall be issued to the Optionee as soon as

practicable after exercise of the Option. 

No adjustment will be made for a dividend or other right for which the

record date is prior to the date the stock certificate is issued, except as

provided in Section 10 of the Plan.

 

Exercise of an

Option in any manner shall result in a decrease in the number of Shares which

thereafter may be available, both for purposes of the Plan and for sale under

the Option, by the number of Shares as to which the Option is exercised.

 

(b)           Termination of

Status as a Director.  If an Outside

Director ceases to serve as a Director, he may, but only within seven (7)  years after the date he ceases to be a

Director of the Company, or by the date of termination of the Option, whichever

is earlier, exercise his Option to the extent that he was entitled to exercise

it at the date of such termination.  To

the extent that he was not entitled to exercise an Option at the date of such

termination, or if he does not exercise such Option (which he was entitled to

exercise) within the time specified herein, the Option shall terminate.

 

(c)           Disability of

Optionee.  Notwithstanding the

provisions of Section 8(b) above, in the event an Optionee is unable to

continue his service as a Director with the Company as a result of his total

and permanent disability (as defined in Section 22(e)(3) of the Code) he may,

but only within seven (7) months from the date of termination, exercise his

Option to the extent he was entitled to exercise it at the date of such

termination.  To the extent that he was

not entitled to exercise the Option at the date of termination, or if he does

not exercise such Option (which he was entitled to exercise) within the time

specified herein, the Option shall terminate.

 

(d)           Death of Optionee.  Notwithstanding the provisions of Section

8(b) above, in the event of the death of an Optionee:

 

(i)            during

the term of the Option who is at the time of his death a Director of the

Company and who has been in Continuous Status as a Director since the date of

grant of the Option, the Option may be exercised, at any time within seven (7)

months following the date of death, by the Optionee’s estate or by a person who

acquired the right to exercise the Option by bequest or inheritance, but only

to the extent of the right to exercise that would have accrued had the Optionee

continued living and remained in Continuous Status as a Director for six (6)

months after the date of death; or

 

(ii)           within

thirty (30) days after the termination of Continuous Status as a Director, the

Option may be exercised, at any time within seven (7) months following the date

of death, by the Optionee’s estate or by a person who acquired the right to

exercise the Option by bequest or inheritance, but only to the extent of the

right to exercise that had accrued at the date of termination.

 

9.             Non-Transferability

of Options.  The Option may not be sold,

pledged, assigned, hypothecated, transferred, or disposed of in any manner

other than by will or by the laws of descent or distribution and may be

exercised, during the lifetime of the Optionee, only by the Optionee.

 

4

 

10.           Adjustments

Upon Changes in Capitalization, Dissolution or Merger.

 

(a)           In the event that the

number of outstanding shares of Common Stock of the Company is changed by a

stock dividend, stock split, reverse stock split, combination, reclassification

or similar change in the capital structure of the Company without

consideration, the number of Shares available under this Plan and the number of

Shares subject to outstanding Options and the exercise price per share of such

Options shall be proportionately adjusted, subject to any required action by

the Board or shareholders of the Company and compliance with applicable

securities laws; provided however, that no certificate or scrip

representing fractional shares shall be issued upon exercise of any Option and

any resulting fractions of a Share shall be ignored.  Such adjustment shall be made by the Board, whose determination

in that respect shall be final, binding and conclusive.

 

(b)           In the event of a

dissolution or liquidation of the Company, a merger in which the Company is not

the surviving corporation, a transaction or series of related transactions in

which 100% of the then outstanding voting stock is sold or otherwise

transferred, or the sale of substantially all of the assets of the Company, any

or all outstanding Options shall, notwithstanding any contrary terms of the

written agreement governing such Option, accelerate and become exercisable in

full at least ten days prior to (and shall expire on) the consummation of such

dissolution, liquidation, merger or sale of stock or sale of assets on such

conditions as the Board shall determine unless the successor corporation

assumes the outstanding Options or substitutes substantially equivalent

options.

 

11.           Time

of Granting Options.  The date of

grant of an Option shall, for all purposes, be the date determined in

accordance with Section 4(b) hereof. 

Notice of the determination shall be given to each Outside Director to

whom an Option is so granted within a reasonable time after the date of such

grant.

 

12.           Amendment

and Termination of the Plan.

 

(a)           Amendment and

Termination.  The Board may at any

time amend, alter, suspend, or discontinue the Plan, but no amendment,

alteration, suspension, or discontinuance shall be made which would impair the

rights of any Optionee under any grant theretofore made, without his or her

consent.  In addition, to the extent

necessary and desirable to comply with Rule 16b-3 under the Exchange Act (or

any other applicable law or regulation), the Company shall obtain shareholder

approval of any Plan amendment in such a manner and to such a degree as

required.

 

(b)           Effect of Amendment

or Termination.  Any such amendment

or termination of the Plan shall not affect Options already granted and such

Options shall remain in full force and effect as if this Plan had not been

amended or terminated, unless mutually agreed otherwise between the Optionee

and the Board, which agreement must be in writing and signed by the Optionee

and the Company.

 

13.           Conditions

Upon Issuance of Shares.  Shares

shall not be issued pursuant to the exercise of an Option unless the exercise

of such Option and the issuance and delivery of such Shares pursuant thereto

shall comply with all relevant provisions of law, including, without limitation,

the Securities Act of 1933, as amended, the Exchange Act, the rules and

regulations promulgated thereunder, state securities laws, and the requirements

of any stock exchange upon which the Shares may then be listed, and shall be

further subject to the approval of counsel for the Company with respect to such

compliance.

 

As a condition to

the exercise of an Option, the Company may require the person exercising such

Option to represent and warrant at the time of any such exercise that the

Shares are being purchased only for investment and without any present

intention to sell or distribute such Shares, if, in the opinion of counsel for

the Company, such a representation is required by any of the aforementioned

relevant provisions of law.

 

Inability of the Company

to obtain authority from any regulatory body having jurisdiction, which

authority is deemed by the Company’s counsel to be necessary to the lawful

issuance and sale of any Shares hereunder, shall relieve the Company of any

liability in respect of the failure to issue or sell such Shares as to which

such requisite authority shall not have been obtained.

 

5

 

14.           Reservation

of Shares.  The Company, during the

term of this Plan, will at all times reserve and keep available such number of

the Shares available for issuance pursuant to this Plan as shall be sufficient

to satisfy the requirements of the Plan.

 

15.           Option

Agreement.  Options shall be

evidenced by written option agreements in such form as the Board shall approve.

 

16.           Shareholder

Approval.

 

(a)           The Plan shall be

subject to approval by the shareholders of the Company within twelve (12)

months of its adoption by the Board.  If

such shareholder approval is obtained at a duly held shareholders’ meeting, it

may be obtained by the affirmative vote of the holders of a majority of the

outstanding shares of the Company present or represented and entitled to vote

thereon.  If such shareholder approval

is obtained by written consent, it may be obtained by the written consent of

the holders of a majority of the outstanding shares of the Company.

 

(b)           Any required approval

of the shareholders of the Company shall be solicited substantially in

accordance with Section 14(a) of the Exchange Act and the rules and regulations

promulgated thereunder.

 

17.           Information

to Optionees.  The Company shall

provide to each Optionee, during the period for which such Optionee has one or

more Options outstanding, copies of all annual reports to shareholders, proxy

statements and other information provided to all shareholders of the Company.

 

6

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