j2 GLOBAL COMMUNICATIONS, INC.
SECOND AMENDED AND RESTATED
1997 STOCK OPTION PLAN
1.1. Purpose of Plan. The purposes of the j2 Global Communications, Inc.
1997 Stock Option Plan (the "Plan") are to advance the interests of j2 Global
Communications, Inc. (the "Company") and its shareholders by providing
significant incentives to selected officers, employees, and consultants of the
Company who contribute and are expected to contribute to the success of the
Company, and to enhance the interest of such officers and employees in the
Company's success and progress by providing them with an opportunity to become
shareholders of the Company. Further, the Plan is designed to enhance the
Company's ability to attract and retain qualified employees necessary for the
success and progress of the Company.
2.1. Definitions. Certain terms used herein shall have the meaning below
stated, subject to the provisions of Section 7.1 hereof.
(a) "Board" or "Board of Directors" means the Board of Directors
of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means either (i) the Board of Directors or (ii)
the Compensation Committee of the Board of Directors or such other
committee of the Board as shall be appointed by the Board to administer the
Plan pursuant to Article VII hereof.
(d) "Common Stock" means, subject to the provisions of Section
9.3, the authorized common stock of the Company, par value $.01 per share.
(e) "Company" means j2 Global Communications, Inc.
(f) "Effective Date" means the date on which the Company's 1997
Stock Option Plan is adopted by the Board or the date the Plan is approved
by the stockholders of the Company, whichever is earlier.
(g) "Employee" means (i) any individual who is a common-law
employee of the Company or of a Subsidiary, (ii) a member of the Board of
Directors, or (iii) any consultant or other persons to the extent permitted
by the instructions to Form S-8 under the Securities Act of 1933, as
amended, who performs services for the Company or a Subsidiary. Service as
a member of the Board of Directors or as a consultant shall be considered
employment for all purposes
under the Plan except the third sentence of Section 4.1.
(h) "Fair Market Value" means, in respect of a share of Common Stock
on any date, the last reported sales price regular way on such date or, in
case no such reported sale takes place on such date, the last reported
sales price regular way on the day preceding such date on which a reported
sale occurred, in either case on the New York Stock Exchange or, if at the
time the Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or, if at the time the Common Stock
is not listed or admitted to trading on any national securities exchange,
in the National Association of Securities Dealers Automated Quotations
National Market System or, if at the time the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on such
National Market System, the average of the closing bid and asked prices in
the over-the-counter market as furnished by any New York Stock Exchange
member firm selected from time to time by the Company for that purpose or,
if the Common Stock is not traded over-the-counter, as determined by the
Committee using any reasonable valuation method.
(i) "Grantee" means an Employee who receives a grant of Options or
Restricted Stock under the Plan.
(j) "Incentive Stock Option" means an Option to purchase Common Stock,
granted by the Company to an Employee pursuant to Section 5.1 hereof, which
meets the requirements of Section 422 of the Code.
(k) "Nonstatutory Stock Option" means an Option to purchase Common
Stock, granted by the Company to an Employee pursuant to Section 5.1
hereof, which does not meet the requirements of Section 422 of the Code or
which provides, as of the time the Option is granted, that it will not be
treated as an Incentive Stock Option.
(l) "Option" means an Incentive Stock Option or a Nonstatutory Stock
(m) "Option Agreement" means an agreement between the Company and a
Grantee evidencing the terms of an Option granted under the Plan.
(n) "Plan" means the j2 Global Communications, Inc. 1997 Stock Option
Plan, as set forth herein and as from time to time amended.
(o) "Restricted Stock Agreement" means an agreement between the
Company and a Grantee evidencing the terms of Restricted Stock awarded
under the Plan.
(p) "Subsidiary" means a subsidiary of the Company within the meaning
of Section 424(f) of the Code.
EFFECTIVE DATE OF THE PLAN; RESERVATION OF SHARES
3.1. Effective Date. The Plan shall become effective as of the Effective
3.2. Shares Reserved Under Plan. The aggregate number of shares of Common
Stock which may be issued upon the exercise of Options granted under the Plan
and which may be issued in the form of
Restricted Stock shall not exceed 2,000,000 of the authorized shares of Common
Stock, all or any part of which may be issued pursuant to Incentive Stock
Options, Nonstatutory Stock Options, Restricted Stock grants, or any combination
thereof. Shares of Common Stock issued as Restricted Stock or upon the exercise
of Options granted under the Plan may consist of either authorized but unissued
shares or shares which have been issued and which shall have been reacquired by
the Company. The total number of shares authorized under the Plan shall be
subject to increase or decrease in order to give effect to the provisions of
Section 9.3 and to give effect to any amendment adopted pursuant to Article
VIII. If any Option or shares of Restricted Stock granted under the Plan shall
expire, terminate or be cancelled for any reason without having been exercised
(with respect to an Option) or vested (with respect to Restricted Stock) in
full, the number of shares as to which such Option was not exercised and the
number of shares of Restricted Stock which have not vested shall again be
available for purposes of the Plan; provided, however, that, in the case of the
cancellation or forfeiture of Restricted Stock with respect to which dividends
have been paid or accrued, the number of shares with respect to such Restricted
Stock shall not be available for subsequent grants hereunder unless, in the case
of shares with respect to which dividends were accrued by unpaid, such dividends
are also canceled or forfeited. The Company shall at all times while the Plan is
in effect reserve such number of shares of Common Stock as will be sufficient to
satisfy the requirements of the Plan.
PARTICIPATION IN PLAN
4.1. Eligibility. Options or Restricted Stock under the Plan may be granted
to any key Employee of the Company or a Subsidiary who performs services for the
Company or a Subsidiary that the Committee deems to be of special importance to
the growth and success of the Company. The Committee shall determine those
Employees to whom Options or Restricted Stock shall be granted, the type of
Option to be granted to each such person, and, subject to Sections 3.2 hereof,
the number of shares of Common Stock subject to each such Option or covered by
each such Restricted Stock grant. Only individuals who are employed as common-
law employees by the Company or a Subsidiary shall be eligible for the grant of
Incentive Stock Options.
4.2. Participation Not Guarantee of Employment or Retention. Nothing in
this Plan or in any Option Agreement or any Restricted Stock Agreement shall in
any manner be construed to limit in any way the right of the Company or any
Subsidiary to terminate an Employee's employment at any time, without regard to
the effect of such termination on any rights such Employee would otherwise have
under this Plan, or give any right to an Employee to remain employed by the
Company or a Subsidiary thereof in any particular position or at any particular
rate of compensation.
GRANT AND EXERCISE OF OPTIONS; RESTRICTED STOCK
5.1. Grant of Options. The Committee may from time to time in its
discretion grant Incentive Stock Options and/or Nonstatutory Stock Options to
Employees at any time after the Effective Date. All Options under the Plan shall
be granted within ten (10) years from the date the Plan is adopted by the Board
or the date the Plan is approved by the stockholders of the Company, whichever
5.2. Option Terms. Options granted under the Plan shall be subject to the
(a) Option Price. The exercise price of each Incentive Stock
Option shall not be less than the higher of the par value or 100% of the
Fair Market Value of the shares of Common Stock
subject to the Option on the date the Option is granted. The exercise price
of each Nonstatutory Stock Option shall be the amount determined by the
Committee as set forth in the applicable Option Agreement, provided that
such amount shall not be less than the higher of the par value or 85% of
the Fair Market Value of the shares of Common Stock subject to the Option
on the date the Option is granted, provided further that options may only
be granted at less than 100% of the Fair Market Value of the shares of
Common Stock subject to the Option on the date of grant if the discount is
expressly in lieu of a reasonable amount of salary or cash bonus, as
determined by the Board of Directors or the Committee in its sole
discretion. The exercise price of an Option may be subject to adjustment
pursuant to Section 9.3 hereof.
(b) Term of Option. The term during which an Option is exercisable
shall be that period determined by the Committee as set forth in the
applicable Option Agreement, provided that no Option shall have a term that
exceeds a period of 10 years from the date of its grant.
(c) Nontransferability of Option. No Option granted under the Plan
shall be transferable by the Grantee otherwise than by will or the laws of
descent and distribution, and each such Option shall be exercisable during
the Grantee's lifetime only by him. No transfer of an Option by a Grantee
by will or by the laws of descent and distribution shall be effective to
bind the Company unless the Company shall have been furnished with written
notice thereof and a copy of the will and/or such other evidence as the
Committee may determine necessary to establish the validity of the
(d) Exercise of Option. Unless the Option Agreement pursuant to which
an Option is granted provides otherwise, each Option shall become
exercisable, on a cumulative basis, with respect to 25% of the aggregate
number of the shares of Common Stock covered thereby on the first
anniversary of the date of grant and with respect to an additional 25% of
the shares of Common Stock covered thereby on each of the next three (3)
succeeding anniversaries of the date of grant; provided, however, the
Committee may establish a different vesting schedule for any optionee or
group of optionees. Any portion of an Option which has become exercisable
shall remain exercisable until it is exercised in full or terminates
pursuant to the terms of the Plan or the Option Agreement pursuant to which
it is granted.
(e) Acceleration of Exercise on Change of Control. Notwithstanding the
provisions of paragraph (d) of this Section or any other restrictions
limiting the number of shares of Common Stock as to which an Option may be
exercised, each Option shall become immediately exercisable in full upon
and simultaneously with any "Change of Control" of the Company unless the
Board determines that the optionee has been offered substantially identical
replacement options and a comparable position at any acquiring company. For
purposes of this Plan, a "Change of Control" shall be deemed to have
(i) any "person," as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any employee benefit plan
sponsored by the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 50% or more of the combined
voting power of the Company's then outstanding securities;
(ii) during any period of two consecutive years individuals
who at the beginning of
such period constitute the Board, and any new director (other than a
director designated by a person who has entered into an agreement with
the Company to effect a transaction described in clause (i), (iii) or
(iv) of this Section) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least a majority of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
For the purposes of this subsection (iv), "substantially all" of the
Company's assets shall mean assets for which the price or
consideration upon sale or disposition equals or exceeds seventy-five
percent (75%) or more of the fair market value of the Company.
(f) Incentive Stock Options Granted to Ten Percent Shareholders. No
Incentive Stock Options shall be granted to any Employee who owns, directly or
indirectly within the mean of Section 424(d) of the Code, stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary, unless at the time the Incentive Stock Option is
granted, the exercise price of the Incentive Stock Option is at least 110% of
the Fair Market Value of the Common Stock subject to such Incentive Stock Option
and such Incentive Stock Option, by its terms, is not exercisable after the
expiration of five years from the date such Incentive Stock Option is granted.
(g) Limitation on Incentive Stock Options. To the extent that the aggregate
Fair Market Value of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a Grantee during any calendar year
(under all plans of the Company and its parent and subsidiary corporations)
exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options.
For this purpose, Options shall be taken into account in the order in which they
were granted and the Fair Market Value of the Common Stock shall be determined
as of the time the Option with respect to such Common Stock is granted.
5.3. Payment of Exercise Price and Delivery of Shares.
(a) Notice and Payment for Shares. Each Option shall be exercised by
delivery of a written notice to the Company in such form as the Committee shall
approve stating the number of the whole shares of Common Stock as to which the
Option is being exercised and accompanied by payment therefor. No Option shall
be deemed exercised in the event that payment therefor is not received and
shares of Common Stock shall not be issued upon the exercise of an Option unless
the exercise price is paid in full. Payment for shares of Common Stock purchased
upon the exercise of an Option shall be made by (i) cash, (ii) certified check
payable to the order of the Company, (iii) outstanding shares of Common Stock
duly endorsed to the Company (which shares of Common Stock shall be valued at
their Fair Market Value as of the day preceding the date of such exercise), (iv)
any combination of the foregoing, or (v) such other method of payment as may be
provided in the applicable Option Agreement.
(b) Rights of Grantee in Stock. Neither any Grantee nor the legal
representatives, heirs, legatees or distributees of any Grantee, shall be deemed
to be the holder of, or to have any of the rights of a holder with respect to,
any shares of Common Stock issuable upon exercise of an Option granted hereunder
unless and until such shares are issued to him or them and such person or
persons have received a certificate or certificates therefor. Upon the issuance
and receipt of such certificate or certificates, such Grantee or the legal
representatives, heirs, legatees or distributees of such Grantee shall have
absolute ownership of the shares of Common Stock evidenced thereby, including
the right to vote such shares, to the same extent as any other owner of shares
of Common Stock, and to receive dividends thereon, subject, however, to the
terms, conditions and restrictions of this Plan.
5.4. Restricted Stock. The Committee may from time to time in its
discretion grant award shares of Restricted Stock to Employees at any time after
the Effective Date. Each award of Restricted Stock under the Plan shall be
evidenced by a written Restricted Stock Agreement between the Company and the
Grantee, in such form as the Committee shall from time to time approve, and
shall comply with the following terms and conditions (and with such other terms
and conditions not inconsistent with the terms of this Plan as the Committee, in
its discretion, shall establish:
(a) Number of Shares. Each Restricted Stock Agreement shall state the
number of shares of Restricted Stock to be subject to an award.
(b) Restrictions. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by will or
the laws of descent and distribution, for such period as the Committee shall
determine from the date on which the award is granted (the "Restricted Period").
The Committee may also impose such other restrictions and conditions on the
shares as it deems appropriate including the satisfaction of performance
criteria. Certificates for shares of stock issued pursuant to Restricted Stock
awards shall bear an appropriate legend referring to such restrictions, and any
attempt to dispose of any such shares of stock in contravention of such
restrictions shall be null and void and without effect. During the Restricted
Period, such certificates shall be held in escrow by an escrow agent appointed
by the Committee. In determining the Restricted Period of an award, the
Committee may provide that the foregoing restrictions shall lapse with respect
to specified percentages of the awarded shares on successive anniversaries of
the date of such award.
(c) Forfeiture. Subject to such exceptions as may be determined by the
Committee, if the Grantee's continuous employment with the Company or any
Subsidiary shall terminate for any reason prior to the expiration of the
Restricted Period of an award, any shares remaining subject to restrictions
(after taking into account the provisions of Section 5.4(e) hereof) shall
thereupon be forfeited by the Grantee and transferred to, and reacquired by, the
Company or a Subsidiary at no cost to the Company or Subsidiary.
(d) Ownership. During the Restricted Period the Grantee shall possess all
incidents of ownership of such shares, subject to Section 5.4(b) hereof,
including the right to receive dividends with respect to such shares and to vote
(e) Accelerated Lapse of Restrictions. The Committee shall have the
authority (and the Restricted Stock Agreement may, but need not, so provide) to
cancel all or any portion of any outstanding restrictions prior to the
expiration of the Restricted Period with respect to any or all of the shares of
Restricted Stock awarded on such terms and conditions as the Committee shall
(f) Accelerated Lapse of Restrictions on Change of Control.
Notwithstanding anything else provided in this Agreement, all outstanding
restrictions on each share of Restricted Stock shall immediately
be canceled in full upon and simultaneously with any "Change of Control" of the
Company unless the Board determines that the Grantee has been offered
substantially identical replacement restricted stock and a comparable position
at any acquiring company.
TERMINATION AND DEATH
6.1. Termination Other Than by Death or for Cause. If a Grantee's position
as an Employee of the Company or a Subsidiary terminates for any reason other
than death or for Cause (as defined in Section 6.2) he may, unless the
applicable Option Agreement provides otherwise, exercise an Option previously
granted and vested within three months after the date of such termination, but
in no event later than the date on which the Option would have expired in
accordance with its terms. To the extent the Option is not so exercised, it
shall expire at the end of such three-month period.
6.2. Termination for Cause. If a Grantee's position as an Employee of the
Company or a Subsidiary is terminated for Cause, any Option theretofore granted
to him shall expire and cease to be exercisable on the date notice of such
termination is delivered to the Grantee. "Cause" shall mean (a) the willful and
continued failure by a Grantee to substantially perform his duties with the
Company (other than any such failure resulting from his incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Grantee by the Board, which demand specifically identifies
the manner in which the Board believes that the Grantee has not substantially
performed his duties, or (b) the willful engaging by the Grantee in conduct
which is demonstrably and materially injurious to the Company, monetarily or
otherwise. For purposes of this Section 6.2, no act, or failure to act, shall
be deemed "willful" unless done, or omitted to be done, not in good faith and
without reasonable belief that such action or omission was in the best interest
of the Company.
6.3. Death. If a Grantee dies (i) while he is an Employee of the Company or
a Subsidiary or (ii) during the three-month period after the termination of his
position as an Employee of the Company or a Subsidiary, and at the time of
his death the Grantee was entitled to exercise an Option theretofore granted to
him, such Option shall, unless the applicable Option Agreement provides
otherwise, expire one year after the date of his death, but in no event later
than the date on which the Option would have expired if the Grantee had lived.
During such one-year period the Option may be exercised by the Grantee's
executor or administrator or by any person or persons who shall have acquired
the Option directly from the Grantee by bequest or inheritance, but only to the
extent that the Grantee was entitled to exercise the Option at the date of his
death and, to the extent the Option is not so exercised, it shall expire at the
end of such one-year period.
ADMINISTRATION OF PLAN
7.1. Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors or such other committee as may be appointed
by the Board of Directors of the Company, which Committee shall consist of not
less than two members, all of whom are members of the Board of Directors. A
majority of the Committee shall constitute a quorum thereof and the actions of a
majority of the Committee at a meeting at which a quorum is present, or actions
unanimously approved in writing by all members of the Committee, shall be the
actions of the Committee. Vacancies occurring on the Committee shall be filled
by the Board. The Committee shall have full and final authority (i) to
interpret the Plan and each of the Option Agreements and Restricted Stock
Agreements, (ii) to prescribe, amend and rescind rules and regulations, if any,
relating to the Plan, (iii) to make all determinations necessary or advisable
administration of the Plan and (iv) to correct any defect, supply any omission
and reconcile any inconsistency in the Plan and any Option Agreement or any
Restricted Stock Agreement. The Committee's determination in all matters
referred to herein shall be conclusive and binding for all purposes and upon all
persons including, but without limitation, the Company, the shareholders of the
Company, the Committee, and each of the members thereof, Employees and their
respective successors in interest.
7.2. Liability. No member of the Committee shall be liable for anything
done or omitted to be done by him or by any other member of the Committee in
connection with the Plan, except for his own willful misconduct or gross
negligence. The Committee shall have power to engage outside consultants,
auditors or other professional help to assist in the fulfillment of the
Committee's duties under the Plan at the Company's expense.
7.3. Determinations. In making its determinations concerning the key
Employees who shall receive Options or Restricted Stock as well as the number of
shares to be covered by such Options or to be issued and the time or times at
which they shall be granted, the Committee shall take into account the nature of
the services rendered by such key Employees, their past, present and potential
contribution to the Company's success and such other factors as the Committee
may deem relevant. The Committee shall determine the form of Option Agreements
and Restricted Stock Agreements under the Plan and the terms and conditions to
be included therein, provided such terms and conditions are not inconsistent
with the terms of the Plan. The Committee may waive any provisions of any
Option Agreement or any Restricted Stock Agreement, provided such waiver is not
inconsistent with the terms of the Plan as then in effect. The Committee's
determinations under the Plan need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Options under
the Plan, whether or not such persons are similarly situated.
AMENDMENT AND TERMINATION OF PLAN
8.1. Amendment of Plan.
(a) Generally. The Board of Directors may amend the Plan at any time and
from time to time. Rights and obligations under any Option granted before
amendment of the Plan shall not be materially altered, or impaired adversely, by
such amendment, except with consent of the Grantee. An amendment of the Plan
shall be subject to the approval of the Company's stockholders only to the
extent required by applicable laws, regulations or rules.
(b) Amendments Relating to Incentive Stock Options. To the extent
applicable, the Plan is intended to permit the issuance of Incentive Stock
Options to Employees in accordance with the provisions of Section 422 of the
Code. Subject to paragraph 8.1(a) above, the Plan, Option Agreements, and
Restricted Stock Agreements may be modified or amended at any time, both
prospectively and retroactively, and in a manner that may affect Incentive Stock
Options previously granted, if such amendment or modification is necessary for
the Plan and Incentive Stock Options granted hereunder to qualify under said
provisions of the Code.
8.2. Termination. The Board may at any time terminate the Plan as of any
date specified in a resolution adopted by the Board. If not earlier terminated,
the Plan shall terminate on November 11, 2007. No Options may be granted after
the Plan has terminated, but the Committee shall continue to supervise the
administration of Options previously granted.
9.1. Restrictions upon Grant of Options. If the listing upon any stock
exchange or the registration or qualification under any federal or state law of
any shares of Common Stock to be issued on the exercise of Options granted under
this Plan (whether to permit the grant of Options or the resale or other
disposition of any such shares of Common Stock by or on behalf of Grantees
receiving such shares) should be or become necessary or desirable, the Board in
its sole discretion may determine that delivery of the certificates for such
shares of Common Stock shall not be made until such listing, registration or
qualification shall have been completed. The Company agrees that it will use
its best efforts to effect any such listing, registration or qualification,
provided, however, that the Company shall not be required to use its best
efforts to effect such registration under the Securities Act of 1933 other than
on Form S-8 or such other forms as may be in effect from time to time calling
for information comparable to that presently required to be furnished under Form
9.2. Restrictions upon Resale of Unregistered Stock. Each Grantee shall,
if the Company deems it advisable, represent and agree in writing (i) that any
shares of Common Stock acquired by such Grantee pursuant to this Plan will not
be sold except pursuant to an effective registration statement under the
Securities Act of 1933 or pursuant to an exemption from registration under said
Act, (ii) that such Grantee is acquiring such shares of Common Stock for his own
account and not with a view to the distribution thereof, and (iii) to such other
customary matters as the Company may request. In such case, no shares of Common
Stock shall be issued to such Grantee unless such Grantee provides such
representations and agreements and the Company is reasonably satisfied that such
representations and agreements are correct.
(a) General. In the event of a subdivision of the outstanding Common
Stock, a declaration of a dividend payable in shares of Common Stock, a
declaration of a dividend payable in a form other than shares in an amount that
has a material effect on the value of shares of Common Stock, a combination or
consolidation of the outstanding Common Stock into a lesser number of shares of
Common Stock, a recapitalization, a reclassification or a similar occurrence,
the Committee shall make appropriate adjustments in one or more of (i) the
number of shares of Common Stock available for future grants of Options or
Restricted Stock under Section 3.2, (ii) the number of shares of Common Stock
covered by each outstanding Option or by each outstanding grant of Restricted
Stock, or (iii) the exercise price of each outstanding Option.
(b) Reorganizations. In the event that the Company is a party to a merger
or reorganization, outstanding Options shall be subject to the agreement of
merger or reorganization.
(c) Reservation of Rights. Except as provided in this Section 9.3, a
Grantee shall have no rights by reason of (i) any subdivision or consolidation
of shares of stock of any class, (ii) the payment of any dividend, or (iii) any
other increase or decrease in the number of shares of stock of any class. Any
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or exercise price of shares of
Common Stock subject to an Option. The grant of Option Shares pursuant to the
Plan shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
9.4. Withholding of Taxes; Tax Elections.
(a) Each Grantee who exercises a Nonstatutory Stock Option and each Grantee
Restricted Stock that has vested shall agree that no later than the date of
exercise or receipt of shares of Common Stock pursuant to such Option and no
later than the date such Restricted Stock vests (in whole or in part) he will
pay to the Company, or make arrangements satisfactory to the Committee regarding
payment of, any Federal, state or local taxes of any kind required by law to be
withheld with respect to the transfer to him or vesting in him of such shares of
(b) The applicable Option Agreement or Restricted Stock Agreement may
provide that a Grantee may satisfy, in whole or in part, the requirements of
(i) by delivery of shares of Common Stock owned by the Grantee for
at least six months (or such shorter or longer period as the Committee may
approve) having a Fair Market Value (determined as of the date of such
delivery) equal to all or part of the amount to be so withheld, or
(ii) by electing to have the Company withhold the requisite number
of shares from shares otherwise deliverable pursuant to the exercise of the
Option or vesting of Restricted Stock giving rise to the tax withholding
obligation provided, however, that
(A) the Grantee's election and the withholding pursuant
thereto take effect during the period beginning on the third
business day following the date of release for publication of the
quarterly and annual summary statements of the Company's sales and
earnings and ending on the twelfth business day following such date,
and six months have elapsed since the date the Option or Restricted
Stock was granted, or
(B) such election was irrevocably made by the Grantee and
filed with the Committee in writing at least six months in advance
of the date on which such withholding occurs.
The Committee may require, as a condition of accepting any such delivery of
Common Stock or any such election by the Grantee, that the Grantee furnish to
the Company an opinion of counsel to the effect that such delivery or election
will not result in the Grantee incurring any liability under Section 16(b) of
the Securities Exchange Act of 1934, as amended.
(c) If the Grantee, in connection with the acquisition of shares of Common
Stock under the Plan, is permitted under the terms of his Option Agreement or
Restricted Stock Agreement to make the election permitted under Section 83(b) of
the Code (i.e. an election to include in gross income in the year of transfer
the amounts specified in Section 83(b) of the Code notwithstanding the
continuing transfer restrictions) and if the Grantee makes such election, the
Grantee shall submit to the Company a copy of the notice filed by the Grantee
with the Internal Revenue Service within ten (10) days of filing such notice,
and shall pay, or make arrangements satisfactory to the Committee regarding
payment of, any federal, state or local taxes of any kind required by law to be
withheld as a result of such election, all in accordance with the provisions of
clauses (a) and (b) of this section 9.4.
9.5. Use of Proceeds. The proceeds from the sale of Common Stock pursuant
to Options granted under the Plan shall constitute general funds of the Company
and may be used for such corporate purposes as the Company may determine.
9.6. Substitution of Options.
(a) The Committee may, with the consent of the holder of any Option granted
under the Plan, cancel such Option and grant a new Option in substitution
therefor, provided that the Option as so substituted shall satisfy all of the
requirements of the Plan as of the date such new Option is granted.
(b) Options may be granted under this Plan in substitution for options held
by individuals who are employees of another corporation and who become Employees
of the Company or any Subsidiary of the Company eligible to receive Options
pursuant to the Plan as a result of a merger, consolidation, reorganization or
similar event. The terms and conditions of any Options so granted may vary from
those set forth in the Plan to the extent deemed appropriate by the Committee in
order to conform the provisions of Options granted pursuant to the Plan to the
provisions of the options in substitution for which they are granted.
9.7. Notices. Any notice required or permitted hereunder shall be
sufficiently given only if sent by registered or certified mail, return receipt
requested, postage prepaid, addressed to the Company at its principal place of
business, and to the Grantee at the address on file with the Company at the time
of grant hereunder, or to such other address as either party may hereafter
designate in writing by notice similarly given by one party to the other.
9.8. Governing Law. The Plan and all determinations made and actions taken
hereunder, to the extent not otherwise governed by the Code or the laws of the
Untied States of America, shall be governed by the laws of the State of
California and construed accordingly.