Exhibit 10.23
DIGITAL DESCRIPTOR SYSTEMS, INC.
1996 DIRECTOR OPTION PLAN
19. Purposes of the Plan. The purposes of the 1996 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be "non-statutory stock
options."
20. Definitions. As used herein, the following definitions shall apply:
a. "Board" means the Board of Directors of the Company.
b. "Code" means the Internal Revenue Code of 1986, as amended.
c. "Common Stock" means the Common Stock of the Company.
d. "Company" means Digital Descriptor Systems, Inc., a
Delaware corporation.
e. "Continuous Status as a Director" means the absence of any
interruption or termination of service as a Director.
f. "Director" means a member of the Board.
g. "Employee" means 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 and the retention of a director
as a consultant shall not be sufficient in and of itself to constitute
"employment" by the Company.
h. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
i. "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
i. If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the date of
grant, as reported in The Wall Street Journal or such other source as the board
deems reliable;
ii. If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the bid and
asked prices for the Common Stock on the last market trading day prior to the
day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable, or;
iii. In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
j. "Option" means a stock option granted pursuant to the Plan.
k. "Optioned Stock" means the Common Stock subject to an
Option.
l. "Optionee" means an Outside Director who receives an
Option.
m. "Outside Director" means a Director who is not an Employee.
n. "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
o. "Plan" means this 1996 Director Option Plan.
p. "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
q. "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code
of 1986.
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 200,000 Shares (the "Pool") 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.
21. Administration of and Grants of Options under the Plan.
a. Procedure for Grants. The provisions set forth in this
Section 4(a) 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 to Outside
Directors under the Plan shall be automatic and non-discretionary and shall be
made strictly in accordance with the following provisions:
i. No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine the number of
Shares to be covered by Options granted to Outside Directors.
ii. Each Outside Director shall be automatically
granted an Option to purchase 15,000 Shares (the "First Option") on the date on
which the later of the following events occurs: (A) the effective date of this
Plan, as determined in accordance with Section 6 hereof, or (B) the date on
which such person first becomes a Director, whether through election by the
stockholders of the Company or appointment by the Board to fill a vacancy.
iii. After the First Option has been granted to an
Outside Director, such Outside Director shall thereafter be automatically
granted an Option to purchase 1,000 Shares (a "Subsequent Option") each year on
the date of the annual meeting of the stockholders of the Company, if on such
date, he shall have served on the Board for at least six (6) months.
iv. Notwithstanding the provisions of subsections
(ii) and (iii) hereof, any exercise of an Option made before the Company has
obtained stockholder approval of the Plan in accordance with Section 16 hereof
shall be conditioned upon obtaining such stockholders approval of the Plan in
accordance with Section 16 hereof.
v. The terms of a First Option granted hereunder
shall be as follows:
(1) the terms of the First Option shall be
ten (10) years.
(2) the First Option shall be exercisable
only while the Outside Director remains a Director of the Company, except as set
forth in Section 8 hereof.
(3) the exercise price per Share shall be
100% of the fair market value per Share on the date of grant of the First
Option.
(4) the First Option shall become
exercisable in installments cumulatively as follows: on the date which is the
six (6) month anniversary of the date of grant, for the greater of 1/8th of the
Shares subject to the First Option, or 1/48th of the Shares subject to the First
Option times the number of full months that the Outside Director had served in
such capacity as of such six (6) month anniversary; and thereafter at the rate
of 1/48th of the Shares subject to the First Option on each monthly anniversary
of the date of grant.
vi. The terms of a Subsequent Option granted
hereunder shall be as follows:
(1) the terms of the Subsequent Option shall
be ten (10) years.
(2) the Subsequent Options shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Section 8 hereof.
(3) the exercise price per Share shall be
100% of the fair market value per Share on the date of grant of the Subsequent
Option.
(4) the Subsequent Option shall become
exercisable as to 100% percent of the Shares subject to the Subsequent Option on
the first anniversary of its date of grant.
vii. In the event that any Option granted under the
Plan would cause the number of Shares subject to outstanding Options plus the
number of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options to
the Outside Directors on a pro rata basis. No further grants shall be made until
such time, if any, as additional Shares become available for grant under the
Plan through action of the stockholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
22. 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 hereof. An Outside Director who has been granted an Option may, if he
is otherwise eligible, be granted an additional Option or Options in accordance
with such provisions.
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 of the Company
may have to terminate his or her directorship at any time.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the stockholders 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 11 of the Plan.
24. Form of Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (ii) 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 (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) delivery of a properly
executed exercise notice together with such other documentation as the Company
and the broker, if applicable, shall require to effect an exercise of the Option
and delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (v) any combination of the foregoing methods of payment.
25. Exercise of Option.
a. Procedure for Exercise; Rights as a Stockholder. Any option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
stockholder 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 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 stockholder 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. Rule 16b-3. Options granted to Outside Directors must
comply with the applicable provisions of Rule 16b-3 promulgated under the
Exchange Act or any successor thereto 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 Plan
transactions.
c. Termination of Continuous Status as Director. In the event
an Optionee's Continuous Status as a Director terminates [other than upon the
Optionee's death or total and permanent disability (as defined in Section
22(e)(3) of the Code)], the Optionee may exercise his or her Option, but only
within three (3) months from the date of such termination, and only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option at
the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
d. Disability of Optionee. In the event Optionee's Continuous
Status as a Director terminates as a result of total and permanent disability
(as defined in Section 22(e)(3) of the Code), the Optionee may exercise his or
her Option, but only within twelve (12) months from the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it at the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option at the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
e. Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it at the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option at the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
26. 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.
27. Adjustments Upon Changes in Capitalization, Dissolution, Merger,
Asset Sale or Change of Control.
a. Changes in Capitalization.Subject to any required action by
the stockholders of the Company, the number of Shares covered by each
outstanding Option and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares 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 Shares 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." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
b. Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action.
c. Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option shall be assumed or an
equivalent option shall be substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation does not agree to assume the Option or to substitute an equivalent
option, each outstanding Option shall become fully vested and exercisable,
including as to Shares as which it would not otherwise be exercisable, unless
the Board, in its discretion, determines otherwise. If an Option becomes fully
vested and exercisable in the event of a merger or sale of assets, the Board
shall notify the Optionee that the Option shall be fully exercisable for a
period of thirty (30) days from the date of such notice, and the Option will
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase, for each
Share of Option Stock subject to the Option immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger 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).
28. Amendment and Termination of the Plan.
a. Amendment and Termination.Except as set forth in Section 4,
the Board may at any time amend, alter, suspend, or discontinue the Plan, but no
amendment, alternation, suspension, or discontinuation 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 stockholder 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.
29. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 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.
30. Conditions Upon Issuance of Shares.Shares shall not be issued
pursuant to the exercise of 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.
31. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
32. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
33. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the granting of an Option hereunder.
Such stockholder approval shall be obtained in the degree and manner required
under applicable state and federal law.
DIGITAL DESCRIPTOR SYSTEMS, INC.
DIRECTOR OPTION AGREEMENT
Digital Descriptor Systems, Inc., a Delaware corporation (the
"Company"), has granted to
__________________________________________________________________ (the
"Optionee"), an option to purchase a total of ______ shares of the Company's
Common Stock (the "Optioned Stock"), at the price determined as provided herein,
and in all respects subject to the terms, definitions and provisions of the 1996
Director Option Plan (the "Plan") adopted by the company which is incorporated
herein by reference. The terms defined in the Plan shall have the same defined
meanings herein.
35. Nature of the Option. This Option is a nonstatutory option and is
not intended to qualify for any special tax benefits to the Optionee.
36. Exercise Price. The exercise price is $______________ for each
share of Common Stock, which is 100% of the fair market value of the Common
Stock as determined on the date of grant of this Option.
37. Exercise of Option. This Option shall be exercisable during its
term in accordance with the provisions of Section 8 of the Plan as follows:
a. Right to Exercise.
i) [____________________] provided, however, that in
no event shall this Option be exercisable until shareholder approval of the Plan
has been obtained in accordance with Section 16 thereof.
ii) This Option may not be exercised for a fraction
of a share.
iii) In the event of Optionee's death, disability or
other termination of service as a Director, the exercisability of the Option is
governed by Sections 6, 7 and 8 of this Agreement.
b. Method of Exercise. This Option shall be exercisable by
written notice (in the form attached hereto as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such Shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written notice shall
be accompanied by payment of the exercise price.
38. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
a. cash;
b. check; or
c. surrender of other Shares of Common Stock of the Company
which (A) either have been owned by the Optionee for more than six (6) months on
the date of surrender or were not acquired, directly or indirectly, from the
Company, and (B) have a fair market value on the date of surrender equal to the
exercise price of the Shares as to which the Option is being exercised.
39. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
company as may be required by any applicable law or regulation.
40. Termination of Status as a Director. If Optionee ceases to serve as
a Director, he may, but only within three (3) months after the date he ceases to
be a Director of the Company, exercise this Option to the extent that he was
entitled to exercise it at the date of such termination. Notwithstanding the
foregoing, in no event may the Option be exercised after its five (5) year term
has expired. To the extent that he was not entitled to exercise this Option at
the date of such termination, or if he does not exercise this Option within the
time specified herein, the Option shall terminate.
41. Disability of Optionee. Notwithstanding the provisions of Section 6
above, if Optionee is unable to continue his service as a Director as a result
of is total and permanent disability (as defined in Section 22(e)(3) of the
Internal Revenue Code), he may, but only with six (6) months from the date of
termination, exercise this 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 this Option at the date of termination, or if he does not exercise this
Option within the time specified herein, the Option shall terminate.
42. Death of Optionee. In the event of the death of Optionee, the
Option may be exercised, at any time within six (6) months following the date of
death, by 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 death.
43. Non-Transferability of Option. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. the terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
44. Term of Option. This Option may not be exercised more than five (5)
years from the date of grant of this Option, and may be exercised during such
term only in accordance with the Plan and the terms of this Option.
45. Taxation Upon Exercise of Option. Optionee understands that, upon
exercise of this Option, he will recognize income for tax purposes in an amount
equal to the excess of the then fair market value of the Shares purchased over
the exercise price paid for such Shares. (Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, the
measurement and timing of such income may be deferred, and the Optionee is
advised to contact a tax advisor concerning the desirability of filing an 83(b)
election in connection with the exercise of the Option.) Upon a resale of such
Shares by the Optionee, any difference between the sale price and the fair
market value of the Shares on the date of exercise of the Option will be treated
as capital gain or loss.
DATE OF GRANT: _______________
DIGITAL DESCRIPTOR SYSTEMS, INC.,
a Delaware corporation
By:_______________________________
President
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
annexed hereto, and represents that he is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board upon any questions arising
under the Plan.
Dated: _____________________
---------------------------
Optionee
EXHIBIT A
DIRECTOR STOCK OPTION EXERCISE NOTICE
Digital Descriptor Systems, Inc.
Attention: Corporate Secretary
46. Exercise of Option. The undersigned ("Optionee") hereby elects to
exercise Optionee's option to purchase ___ shares of the Common Stock (the
"Shares") of Digital Descriptor Systems, Inc. (the "Company") under and pursuant
to the Company's 1996 Director Option Plan and the Director Stock Option
Agreement dated ______________________ the "Agreement")
47. Representations of Optionee. Optionee acknowledges that Optionee
has received, read and understood the Agreement.
48. Federal Restrictions on Transfer. Optionee understands that the
Shares must be held indefinitely unless they are registered under the Securities
Act of 1933, as amended (the "1933 Act") or unless an exemption from such
registration is available and that the certificate(s) representing the Shares
may bear a legend to that effect. Optionee understands that the Company is under
no obligation to register the Shares and that an exemption may not be available
or may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
49. Tax Consequences. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the company for
any tax advice.
50. Delivery of Payment. Optionee herewith delivers to the Company the
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
51. Entire Agreement. The Agreement is incorporated herein by
reference. This Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject matter hereof. This Notice
and the Agreement are governed by Illinois law except for that body of law
pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: DIGITAL DESCRIPTOR SYSTEMS, INC.
_____________________________ By:________________________________
Dated:_____________________ Dated:_______________________