-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RaW8w1Z3qxKQxjC5bnvG24FCwcCeHV5clc0VrBLifwHqVsCog9Nom7dJFpwUIhOq Ccu+O0F8rr22hDqsjQtn1A== 0000950153-99-000993.txt : 19990809 0000950153-99-000993.hdr.sgml : 19990809 ACCESSION NUMBER: 0000950153-99-000993 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19990730 EFFECTIVENESS DATE: 19990730 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENTEGRA DENTAL GROUP INC CENTRAL INDEX KEY: 0001042291 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-OFFICES & CLINICS OF DOCTORS OF MEDICINE [8011] IRS NUMBER: 760545043 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-84205 FILM NUMBER: 99675395 BUSINESS ADDRESS: STREET 1: 2999 NORTH 44TH STREET STREET 2: SUITE 650 CITY: PHOENIX STATE: AZ ZIP: 85018 BUSINESS PHONE: 6029521200 MAIL ADDRESS: STREET 1: 2999 N 44TH STREET STREET 2: SUITE 650 CITY: PHOENIX STATE: AZ ZIP: 85018 S-8 1 S-8 1 As filed with the Securities and Exchange Commission on July 30, 1999. Registration No. 333-_____ - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------- PENTEGRA DENTAL GROUP, INC. (Exact name of registrant as specified in its charter) DELAWARE 76-0545043 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 2999 NORTH 44TH STREET, SUITE 650 85018 PHOENIX, ARIZONA (Zip Code) (Address of principal executive offices) ---------- OMEGA ORTHODONTICS INCENTIVE STOCK PLAN (Full title of the Plan) JAMES M. POWERS, JR., D.D.S. 2999 NORTH 44TH STREET, SUITE 650 PHOENIX, ARIZONA 85108 (602) 952-1200 (Name, address, including zip code and telephone number, including area code, of agent of service) ---------- COPIES TO: JAMES S. RYAN, III RICHARD S. ROTH Jackson Walker, L.L.P. Jackson Walker, L.L.P. 901 Main Street, Suite 6000 1100 Louisiana, Suite 4200 Dallas, Texas 75202 Houston, Texas 77002 APPROXIMATE DATE OF PROPOSED COMMENCEMENT OF SALES PURSUANT TO THE PLAN: From time to time after this Registration Statement becomes effective. CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------- Title of Proposed Proposed Securities to Amount to be Maximum Maximum Amount of be Registered Registered Offering Price Aggregate Registration Per Share(1) Offering Price(1) Fee - ------------------------------------------------------------------------------- Common Stock, $0.001 par value 29,676 shares $1.97 $58,462 $12.00 - -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee. Pursuant to Rule 457(h)(1) and Rule 457(c), the offering price and registration fee are computed on the basis of the average high and low prices of the Common Stock as listed on the American Stock Exchange on July 29, 1999. 2 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE. The following documents, which have been filed with the Securities and Exchange Commission (the "Commission") by the Company, are incorporated herein by reference and made a part hereof: (i) Annual Report on Form 10-K for the fiscal year ended March 31, 1999; (ii) Current Report on Form 8-K dated July 1, 1999; and (iii) Registration Statement on Form 8-A/A (No. 001-13725), effective as of March 24, 1998. All documents filed with the Commission pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the date of this Registration Statement and prior to the filing of a post-effective amendment that indicates that all securities offered have been sold or that deregisters all securities then remaining unsold, shall be deemed to be incorporated herein by reference and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. ITEM 4. DESCRIPTION OF SECURITIES. Not applicable. ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL. Not applicable. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. DELAWARE GENERAL CORPORATION LAW Section 145(a) of the General Corporation Law of the State of Delaware (the "DGCL") provides that a corporation may indemnify any person who was or is a party or is threatened to be made a -2- 3 party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 145(b) of the DGCL states that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 145(c) of the DGCL provides that to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Section 145(d) of the DGCL states that any indemnification under subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (a) and (b). Such determination shall be made (1) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, even -3- 4 though less than a quorum or (2) if there are no such directors or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders. Section 145(e) of the DGCL provides that expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in Section 145. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. Section 145(f) of the DGCL states that the indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of Section 145 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Section 145(g) of the DGCL provides that a corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of Section 145. Section 145(j) of the DGCL states that the indemnification and advancement of expenses provided by, or granted pursuant to, Section 145 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent, and shall inure to the benefit of the heirs, executors and administrators of such a person. RESTATED CERTIFICATE OF INCORPORATION The Restated Certificate of Incorporation of the Company provides that a director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided for in Section 174 of the DGCL. If the DGCL is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Company, in addition to the limitation on personal liability described above, shall be limited to the fullest extent permitted by the amended DGCL. Further, any repeal or modification of such provision of the Restated Certificate of Incorporation by the stockholders -4- 5 of the Company shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Company existing at the time of such repeal or modification. BYLAWS The Bylaws of the Company provide that the Company will indemnify any director or officer of the Company to the full extent permitted by applicable law, and may, if and to the extent authorized by the Board of Directors, so indemnify such other persons whom it has the power to indemnify against any liability, reasonable expense or other matter whatsoever. INSURANCE The Company maintains liability insurance for the benefit of its directors and officers. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") may be permitted to directors, officers or controlling persons of the Company pursuant to the foregoing provisions, the Company has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act, as amended, and is therefore unenforceable. ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable. ITEM 8. EXHIBITS. The following is a list of all exhibits filed as a part of this Registration Statement on Form S-8, including those incorporated herein by reference.
Exhibit No. Description of Exhibit - ------- ---------------------- 4.1 Restated Certificate of Incorporation of Pentegra Dental Group, Inc. (previously filed as an exhibit to the Company's Registration Statement on Form S-1 (File No. 333-37633) (the "Company's Form S-1"), and incorporated herein by reference). 4.2 Bylaws of Pentegra Dental Group, Inc. (previously filed as an exhibit to the Company's Form S-1, and incorporated herein by reference). 4.3 Form of certificate evidencing ownership of the Common Stock of Pentegra Dental Group, Inc. (previously filed as an exhibit to the Company's Form S-1, and incorporated herein by reference).
-5- 6 4.4 Form of Registration Rights Agreement for the dentist-owners of the founding affiliated dental practices of the Company (previously filed as an exhibit to the Company's Form S-1, and incorporated herein by reference). 4.5 Registration Rights Agreement, dated September 30, 1997, between Pentegra Dental Group, Inc. and the stockholders named therein (previously filed as an exhibit to the Company's Form S-1, and incorporated herein by reference). 4.6 Form of Stockholders Agreement for owners of affiliated practices (previously filed as an exhibit to the Company's Registration Statement on Form S-4 (No. 333-78535), and incorporated herein by reference). 4.7 Form of Indenture from Pentegra Dentist Group, Inc. to U.S. Trust Company of Texas, N.A., as trustee relating to convertible debt securities (previously filed as an exhibit to the Company's Registration Statement on Form S-4 (No. 333-64665), and incorporated herein by reference). 5.1 Opinion of Jackson Walker L.L.P. (filed herewith) 23.1 Consent of PricewaterhouseCoopers LLP (filed herewith) 23.2 Consent of Jackson Walker L.L.P. (contained in Exhibit 5.1) 24.1 Power of Attorney (contained on the signature page of this Registration Statement). 99 Omega Orthodontics Incentive Stock Plan (filed herewith).
ITEM 9. UNDERTAKINGS. (a) The Company hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; -6- 7 (iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement; Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Company pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The Company hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Company's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act), that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. -7- 8 POWER OF ATTORNEY Each person whose signature appears below authorizes James M. Powers, Jr., D.D.S. and Sam H. Carr, and each of them, each of whom may act without joinder of the other, to execute in the name of each such person who is then an officer or director of the Registrant, and to file any amendments to this Registration Statement necessary or advisable to enable the Registrant to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in respect thereof, in connection with the registration of the securities which are the subject of this Registration Statement, which amendments may make such changes to such Registration Statement as such attorney may deem appropriate. SIGNATURE PAGE Pursuant to the requirements of the Securities Act of 1933, as amended, Pentegra Dental Group, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Phoenix, State of Arizona on July 30, 1999. PENTEGRA DENTAL GROUP, INC. By: /s/ Sam H. Carr ------------------------------------ Sam H. Carr Senior Vice President, Chief Financial Officer and Secretary -8- 9 Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signatures Title Date ---------- ----- ---- /s/ James M. Powers, Jr. Chairman, President and July 30, 1999 - ---------------------------- Chief Executive Officer James M. Powers, Jr., D.D.S. (Principal Executive Officer) /s/ Sam H. Carr Senior Vice President, July 30, 1999 - ---------------------------- Chief Financial Officer, Sam H. Carr Secretary and Director (Principal Financial and Accounting Officer) /s/ Omer K. Reed Clinical Officer and Director July 30, 1999 - ---------------------------- Omer K. Reed, D.D.S. /s/ Ronnie L. Andress Director July 30, 1999 - ---------------------------- Ronnie L. Andress, D.D.S. /s/ James H. Clarke, Jr. Director July 30, 1999 - ---------------------------- James H. Clarke, Jr., D.D.S. /s/ Ronald E. Geistfeld Director July 30, 1999 - ---------------------------- Ronald E. Geistfeld, D.D.S. /s/ Mack E. Greder Director July 30, 1999 - ---------------------------- Mack E. Greder, D.D.S. /s/ Roger Allen Kay Director July 30, 1999 - ---------------------------- Roger Allen Kay, D.D.S. /s/ Gerald F. Mahoney Director July 30, 1999 - ---------------------------- Gerald F. Mahoney
-9- 10 /s/ Anthony P. Maris Director July 30, 1999 - ---------------------------- Anthony P. Maris /s/ George M. Siegel Director July 30, 1999 - ---------------------------- George M. Siegel /s/ Ronald M. Yaros Director July 30, 1999 - ---------------------------- Ronald M. Yaros, D.D.S.
-10- 11 INDEX TO EXHIBITS
Exhibit No. Description of Exhibit - ------- ---------------------- 4.1 Restated Certificate of Incorporation of Pentegra Dental Group, Inc. (previously filed as an exhibit to the Company's Registration Statement on Form S-1 (File No. 333-37633) (the "Company's Form S-1"), and incorporated herein by reference. 4.2 Bylaws of Pentegra Dental Group, Inc. (previously filed as an exhibit to the Company's Form S-1, and incorporated herein by reference). 4.3 Form of certificate evidencing ownership of the Common Stock of Pentegra Dental Group, Inc. (previously filed as an exhibit to the Company's Form S-1, and incorporated herein by reference). 4.4 Form of Registration Rights Agreement for the dentist-owners of the founding affiliated dental practices of the Company (previously filed as an exhibit to the Company's Form S-1, and incorporated herein by reference). 4.5 Registration Rights Agreement, dated September 30, 1997, between Pentegra Dental Group, Inc. and the stockholders named therein (previously filed as an exhibit to the Company's Form S-1, and incorporated herein by reference). 4.6 Form of Stockholders Agreement for owners of affiliated practices (previously filed as an exhibit to the Company's Registration Statement on Form S-4 (No. 333-78535), and incorporated herein by reference). 4.7 Form of Indenture from Pentegra Dentist Group, Inc. to U.S. Trust Company of Texas, N.A., as trustee relating to convertible debt securities (previously filed as an exhibit to the Company's Registration Statement on Form S-4 (No. 333-64665), and incorporated herein by reference). 5.1 Opinion of Jackson Walker L.L.P. (filed herewith) 23.1 Consent of PricewaterhouseCoopers LLP (filed herewith) 23.2 Consent of Jackson Walker L.L.P. (contained in Exhibit 5.1) 24.1 Power of Attorney (contained on the signature page of this Registration Statement). 99 Omega Orthodontics Incentive Stock Plan (filed herewith).
EX-5.1 2 EX-5.1 1 EXHIBIT 5.1 [Jackson Walker L.L.P. Letterhead] July 30, 1999 Pentegra Dental Group, Inc. 2999 N. 44th Street Suite 650 Phoenix, Arizona 85018 Re: Registration Statement on Form S-8 of Pentegra Dental Group, Inc. Gentlemen: We are acting as counsel for Pentegra Dental Group, Inc., a Delaware corporation (the "Company"), in connection with the registration under the Securities Act of 1933, as amended (the "Act"), of the offering and sale of up to 29,676 shares of the Company's Common Stock, par value $0.01 per share (the "Shares"), which Shares are issuable upon the exercise of options ("Options") granted or to be granted from time to time to eligible persons pursuant to the provisions of the Omega Orthodontics Incentive Stock Plan (the "Plan"). A Registration Statement on Form S-8 covering the offering and sale of the Shares (the "Registration Statement") is expected to be filed with the Securities and Exchange Commission (the "Commission") on or about the date hereof. In reaching the conclusions expressed in this opinion we have examined and relied on such documents, corporate records and other instruments, including certificates of public officials and certificates of officers of the Company, and made such further investigation and inquiry as we have deemed necessary to reach the opinions expressed herein. In making the foregoing examinations, we have assumed the genuineness of all signatures on original documents, the authenticity, accuracy and completeness of all documents submitted to us as originals and the conformity to original documents of all copies submitted to us. Based solely upon the foregoing, subject to the comments and exceptions hereinafter stated, it is our opinion that the Shares, when issued upon exercise of Options in accordance with the terms of the Plan, will be validly and legally issued, fully paid and nonassessable. We express no opinion as to the laws of any jurisdiction other than the State of Texas and, solely with respect to matters of corporate law, the State of Delaware. You should be aware that we are not admitted to practice law in the State of Delaware. Accordingly, any opinion herein as to the laws of the State of Delaware is based solely upon the latest generally available compilation of the statutes and case law of such state. 2 Pentegra Dental Group, Inc. July 30, 1999 Page 2 We hereby consent to the use of this opinion as an Exhibit to the Registration Statement. In giving this consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission promulgated thereunder. Very truly yours, JACKSON WALKER L.L.P. EX-23.1 3 EX-23.1 1 EXHIBIT 23.1 Consent of Independent Accountants We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated May 20, 1999 relating to the financial statements, which appears in the 1999 Annual Report to Shareholders of Pentegra Dental Group, Inc., which is incorporated by reference in the Company's Annual Report on Form 10-K for the year ended March 31, 1999. PricewaterhouseCoopers LLP July 30, 1999 EX-99 4 EX-99 1 EXHIBIT 99 OMEGA ORTHODONTICS INCENTIVE STOCK PLAN I. ESTABLISHMENT OF PLAN; DEFINITIONS 1. Purpose. The purpose of the Omega Orthodontics Incentive Stock Plan is to provide an incentive to key employees, directors and consultants to Omega Orthodontics, Inc. (the "Corporation") who are in a position to contribute materially to the long-term success of the Corporation, to increase their interest in the Corporation's welfare, and to aid in attracting and retaining employees, directors and consultants of outstanding ability. 2. Definitions. Unless the context clearly indicates otherwise, the following terms shall have the meanings set forth below: (a) "Board" shall mean the Board of Directors of the Corporation. (b) "Code" shall mean the Internal Revenue Code of 1986, as it may be amended from time to time. (c) "Committee" shall mean a committee whose members shall, from time to time, be appointed by the Board; provided, however, that such Committee shall at all times consist of at least two non-employee Directors. (d) "Consultants" shall mean individuals who provide services to the Corporation who are not Employees or Directors. (e) "Corporation" shall mean Omega Orthodontics, Inc., a Delaware corporation. (f) "Directors" shall mean those members of the Board of Directors of the Corporation who are not Employees. (g) "Disability" shall mean a medically determinable physical or mental condition which causes an Employee, Director or Consultant to be unable to engage in any substantial gainful activity and which can be expected to result in death or to be of long-continued and indefinite duration. (h) "Employee" shall mean any common law employee, including officers, of the Corporation as determined under the Code and the Treasury Regulations thereunder. (i) "Fair Market Value" shall mean the fair market value of the Stock as determined by the Committee on the basis of a review of the facts and circumstances at the time. OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 1 2 (j) "Grantee" shall mean an Employee, Director or Consultant granted a Stock Option or Stock Award under this Plan. (k) "Incentive Stock Option" shall mean an option granted pursuant to the Incentive Stock Option provisions as set forth in Part II of this Plan. (l) "Non-Qualified Stock Option" shall mean an option granted pursuant to the Non-Qualified Stock Option provisions as set forth in Part III of this Plan. (m) "Performance Shares" shall mean Stock which is issued pursuant to the performance share provisions as set forth in Part VII of this Plan. (n) "Plan" shall mean the Omega Orthodontics Incentive Stock Plan as set forth herein and as amended from time to time. (o) "Reload Option" shall mean an option granted pursuant to the reload option provisions as set forth in Part IV of this Plan. (p) "Restricted Stock" shall mean Stock which is issued pursuant to the Restricted Stock as set forth in Part V of this Plan. (q) "Stock" shall mean authorized but unissued shares of the Common Stock of the Corporation or reacquired shares of the Corporation's Common Stock. (r) "Stock Appreciation Right" shall mean a stock appreciation right granted pursuant to the Stock Appreciation Right provisions as set forth in Part II and III of this Plan. (s) "Stock Award" shall mean an award of Restricted or Unrestricted Stock or Performance Shares granted pursuant to this Plan. (t) "Stock Option" shall mean an option granted pursuant to the Plan to purchase shares of Stock. (u) "Ten Percent Shareholder" shall mean an Employee who at the time a Stock Option is granted owns stock possessing more than ten percent (10%) of the total combined voting power of all stock of the Corporation or of its parent or subsidiary corporation. (v) "Unrestricted Stock" shall mean Stock which is issued pursuant to the Unrestricted Stock provisions as set forth in Part VI of this Plan. 3. Shares of Stock Subject to the Plan. Subject to the provisions of Paragraph 2 of Part VIII of the Plan, the Stock which may be issued or transferred pursuant to Stock Options and Stock Awards granted under the Plan and the Stock which is subject to outstanding but unexercised Stock OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 2 3 Options under the Plan shall not exceed 450,000 shares in the aggregate. If a Stock Option shall expire and terminate for any reason, in whole or in part, without being exercised or, if Stock Awards are forfeited because the restrictions with respect to such Stock Awards shall not have been met or have lapsed, the number of shares of Stock which are no longer outstanding as Stock Awards or subject to Stock Options may again become available for the grant of Stock Awards or Stock Options. There shall be no terms and conditions in a Stock Award or Stock Option which provide that the exercise of an Incentive Stock Option reduces the number of shares of Stock for which an outstanding Non-Qualified Stock Option may be exercised; and there shall be no terms and conditions in a Stock Award or Stock Option which provide that the exercise of a Non-Qualified Stock Option reduces the number of shares of Stock for which an outstanding Incentive Stock Option may be exercised. 4. Administration of the Plan. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee shall have authority to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to it, to determine the terms and provisions of Stock Option agreements, and to make all other determinations necessary or advisable for the administration of the Plan. Any controversy or claim arising out of or related to this Plan shall be determined unilaterally by and at the sole discretion of the Committee. 5. Amendment or Termination. The Board may, at any time, alter, amend, suspend, discontinue, or terminate this Plan; provided, however, that such action shall not adversely affect the right of Grantees to Stock Awards or Stock Options previously granted and no amendment, without the approval of the stockholders of the Corporation, shall increase the maximum number of shares which may be awarded under the Plan in the aggregate, materially increase the benefits accruing to Grantees under the Plan, change the class of Employees eligible to receive options under the Plan, or materially modify the eligibility requirements for participation in the Plan. 6. Effective Date and Duration of the Plan. This Plan shall become effective on January 31, 1997. This Plan shall terminate at the close of business on January 31, 2007, and no Stock Award or Stock Option may be issued or granted under the Plan thereafter, but such termination shall not affect any Stock Award or Stock Option theretofore issued or granted. II. INCENTIVE STOCK OPTION PROVISIONS 1. Granting of Incentive Stock Options. (a) Only key Employees of the Corporation shall be eligible to receive Incentive Stock Options under the Plan. Directors and Consultants of the Corporation who are not also Employees shall not be eligible to receive Incentive Stock Options. (b) The purchase price of each share of Stock subject to an Incentive Stock Option shall not be less than 100% of the Fair Market Value of a share of the Stock on the date the Incentive Stock Option is granted; provided, however, that the purchase price of each share of Stock subject OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 3 4 to an Incentive Stock Option granted to a Ten Percent Shareholder shall not be less than 110% of the Fair Market Value of a share of the Stock on the date the Incentive Stock Option is granted. (c) No Incentive Stock Option shall be exercisable more than ten years from the date the Incentive Stock Option was granted; provided, however, that an Incentive Stock Option granted to a Ten Percent Shareholder shall not be exercisable more than five years from the date the Incentive Stock Option was granted. (d) The Committee shall determine and designate from time to time those Employees who are to be granted Incentive Stock Options and specify the number of shares subject to each Incentive Stock Option. (e) The Committee, in its sole discretion, shall determine whether any particular Incentive Stock Option shall become exercisable in one or more installments, specify the installment dates, and, within the limitations herein provided, determine the total period during which the Incentive Stock Option is exercisable. Further, the Committee may make such other provisions as may appear generally acceptable or desirable to the Committee or necessary to qualify its grants under the provisions of Section 422 of the Code. (f) The Committee may grant at any time new Incentive Stock Options to an Employee who has previously received Incentive Stock Options or other options whether such prior Incentive Stock Options or other options are still outstanding, have previously been exercised in whole or in part, or are canceled in connection with the issuance of new Incentive Stock Options. The purchase price of the new Incentive Stock Options may be established by the Committee without regard to the existing Incentive Stock Options or other options. (g) Notwithstanding any other provisions hereof, the aggregate fair market value (determined at the time the option is granted) of the Stock with respect to which Incentive Stock Options are exercisable for the first time by the Employee during any calendar year (under all such plans of the Grantee's employer corporation and its parent and subsidiary corporation) shall not exceed $100,000. 2. Exercise of Incentive Stock Options. The option price of an Incentive Stock Option shall be payable on exercise of the option (i) in cash or by check, bank draft or postal or express money order, (ii) by the surrender of Stock then owned by the Grantee, or (iii) partially in accordance with clause (i) and partially in accordance with clause (ii) of this Paragraph. Shares of Stock so surrendered in accordance with clause (ii) or (iii) shall be valued at the Fair Market Value thereof on the date of exercise, surrender of such Stock to be evidenced by delivery of the certificate(s) representing such shares in such manner, and endorsed in such form, or accompanied by stock powers endorsed in such form, as the Committee may determine. OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 4 5 3. Termination of Employment. (a) If a Grantee's employment with the Corporation is terminated other than by Disability or death the terms of any then outstanding Incentive Stock Option held by the Grantee shall extend for a period ending on the earlier of the date on which such Stock Option would otherwise expire or three months after such termination of employment, and such Stock Option shall be exercisable to the extent it was exercisable as of such last date of employment. (b) If a Grantee's employment with the Corporation is terminated by reason of Disability, the term of any then outstanding Incentive Stock Option held by the Grantee shall extend for a period ending on the earlier of the date on which such Stock Option would otherwise expire or twelve months after such termination of employment, and such Stock Option shall be exercisable to the extent it was exercisable as of such last date of employment. (c) If a Grantee's employment with the Corporation is terminated by reason of death, the representative of his estate or beneficiaries thereof to whom the Stock Option has been transferred shall have the right during the period ending on the earlier of the date on which such Stock Option would otherwise expire or twelve months after such date of death, to exercise any then outstanding Incentive Stock Options in whole or in part. If a Grantee dies without having fully exercised any then outstanding Incentive Stock Options, the representative of his estate or beneficiaries thereof to whom the Stock Option has been transferred shall have the right to exercise such Stock Options in whole or in part. 4. Stock Appreciation Rights (a) Grant. Stock Appreciation Rights related to all or any portion of an Incentive Stock Option may be granted by the Committee to any Grantee in connection with the grant of an Incentive Stock Option or unexercised portion thereof held by the Grantee at any time and from time to time during the term thereof. Each Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the provisions of this Part II as shall be determined by the Committee and included in the agreement relating to such Stock Appreciation Right, subject in any event, however, to the following terms and conditions of this Section 4. Each Stock Appreciation Right may include limitations as to the time when such Stock Appreciation Right becomes exercisable and when it ceases to be exercisable that are more restrictive than the limitations on the exercise of the Incentive Stock Option to which it relates. (b) Exercise. No Stock Appreciation Right shall be exercisable with respect to such related Incentive Stock Option or portion thereof unless such Incentive Stock Option or portion shall itself be exercisable at that time. A Stock Appreciation Right shall be exercised only upon surrender of the related Incentive Stock Option or portion thereof in respect of which the Stock Appreciation Right is then being exercised. (c) Amount of Payment. On exercise of a Stock Appreciation Right, a Grantee shall be entitled to receive an amount equal to the product of (i) the amount by which the Fair Market OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 5 6 Value of a share of Stock on the date of exercise of the Stock Appreciation Right exceeds the option price per share specified in the related Incentive Stock Option and (ii) the number of shares of Stock in respect of which the Stock Appreciation Right shall have been exercised. (d) Form of Payment. The Committee shall have the sole discretion either (i) to determine the form in which payment in settlement of a Stock Appreciation Right will be made (i.e., cash, Stock or any combination thereof), or (ii) to consent to or disapprove the election by the Grantee to receive cash in full or partial settlement of the Stock Appreciation Right, such consent or disapproval to be given at any time after the election to which it relates. If settlement of a Stock Appreciation Right, or portion thereof, is to be made in the form of Stock, the number of shares of Stock to be distributed shall be the largest whole number obtained by dividing the cash sum otherwise distributable in respect of such settlement by the Fair Market Value of a share of Stock on the date of exercise of the Stock Appreciation Right. The value of fractional shares of Stock shall be paid in cash. (e) Effect of Exercise of Right or Related Option. If the related Incentive Stock Option is exercised in whole or in part, then the Stock Appreciation Right with respect to the Stock purchased pursuant to such exercise (but not with respect to any unpurchased Stock) shall be terminated as of the date of exercise if such Stock Appreciation Right is not exercised on such date. (f) Non-transferability. A Stock Appreciation Right shall not be transferable or assignable by the Grantee other than by will or the laws of descent and distribution, and shall be exercisable during the Grantee's lifetime only by the Grantee. (g) Termination of Employment. If the Grantee ceases to be an Employee of the Corporation for any reason, each outstanding Stock Appreciation Right shall be exercisable for such period and to such extent as the related Incentive Stock Option or portion thereof. III. NON-QUALIFIED STOCK OPTION PROVISIONS 1. Granting of Stock Options. (a) Employees, Directors and Consultants shall be eligible to receive Non-Qualified Stock Options under the Plan. (b) The Committee shall determine and designate from time to time those Employees, Directors and Consultants who are to be granted Non-Qualified Stock Options and the amount subject to each Non-Qualified Stock Option. (c) The Committee may grant at any time new Non-Qualified Stock Options to an Employee, Director or Consultant who has previously received Non-Qualified Stock Options or other Stock Options, whether such prior Non-Qualified Stock Options or other Stock Options are still outstanding, have previously been exercised in whole or in part, or are canceled in connection with the issuance of new Non-Qualified Stock Options. OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 6 7 (d) The Committee shall determine the purchase price of each share of Stock subject to a Non-Qualified Stock Option. Such price shall not be less than [100%] of the Fair Market Value of such Stock on the date the Non-Qualified Stock Option is granted. (e) The Committee, in its sole discretion, shall determine whether any particular Non-Qualified Stock Option shall become exercisable in one or more installments, specify the installment dates, and, within the limitations herein provided, determine the total period during which the Non-Qualified Stock Option is exercisable. Further, the Committee may make such other provisions as may appear generally acceptable or desirable to the Committee. (f) No Non-Qualified Stock Option shall be exercisable more than ten years from the date such option is granted. 2. Exercise of Stock Options. The option price of a Non-Qualified Stock Option shall be payable on exercise of the Stock Option (i) in cash or by check, bank draft or postal or express money order, (ii) by the surrender of Stock then owned by the Grantee, or (iii) partially in accordance with clause (i) and partially in accordance with clause (ii) of this Paragraph. Shares of Stock so surrendered in accordance with clause (ii) or (iii) shall be valued at the Fair Market Value thereof on the date of exercise, surrender of such to be evidenced by delivery of the certificate(s)representing such shares in such manner, and endorsed in such form, or accompanied by stock powers endorsed in such form, as the Committee may determine. 3. Termination of Relationship. (a) If a Grantee's employment with the Corporation is terminated, a Director Grantee ceases to be a Director, or a Consultant Grantee ceases to be a Consultant, other than by reason of Disability or death, the terms of any then outstanding Non-Qualified Stock Option held by the Grantee shall extend for a period ending on the earlier of the date established by the Committee at the time of grant or three months after the Grantee's last date of employment or cessation of being a Director or Consultant, and such Stock Option shall be exercisable to the extent it was exercisable as of the date of termination of employment or cessation of being a Director or Consultant. (b) If a Grantee's employment is terminated by reason of Disability, a Director Grantee ceases to be a Director by reason of Disability or a Consultant Grantee ceases to be a Consultant by reason of Disability, the term of any then outstanding Non-Qualified Stock Option held by the Grantee shall extend for a period ending on the earlier of the date on which such Stock Option would otherwise expire or twelve months after the Grantee's last date of employment or cessation of being a Director or Consultant, and such Stock Option shall be exercisable to the extent it was exercisable as of such last date of employment or cessation of being a Director or Consultant. (c) If a Grantee's employment is terminated by reason of death, a Director Grantee ceases to be a Director by reason of death or a Consultant Grantee ceases to be a Consultant by reason of death, the representative of his estate or beneficiaries thereof to whom the Stock Option OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 7 8 has been transferred shall have the right during the period ending on the earlier of the date on which such Stock Option would otherwise expire or twelve months following his death to exercise any then outstanding Non-Qualified Stock Options in whole or in part. If a Grantee dies without having fully exercised any then outstanding Non-Qualified Stock Options, the representative of his estate or beneficiaries thereof to whom the Stock Option has been transferred shall have the right to exercise such Stock Options in whole or in part. 4. Stock Appreciation Rights. (a) Grant. Stock Appreciation Rights related to all or any portion of a Non-Qualified Stock Option may be granted by the Committee to any Grantee in connection with the grant of a Non-Qualified Stock Option or unexercised portion thereof held by the Grantee at any time and from time to time during the term thereof. Each Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the provisions of this Part III as shall be determined by the Committee and included in the agreement relating to such Stock Appreciation Right, subject in any event, however, to the following terms and conditions of this Section 4. Each Stock Appreciation Right may include limitations as to the time when such Stock Appreciation Right becomes exercisable and when it ceases to be exercisable that are more restrictive than the limitations on the exercise of the Non-Qualified Stock Option to which it relates. (b) Exercise. No Stock Appreciation Right shall be exercisable with respect to such related Non-Qualified Stock Option or portion thereof unless such Non-Qualified Stock Option or portion shall itself be exercisable at that time. A Stock Appreciation Right shall be exercised only upon surrender of the related Non-Qualified Stock Option or portion thereof in respect of which the Stock Appreciation Right is then being exercised. (c) Amount of Payment. On exercise of a Stock Appreciation Right, a Grantee shall be entitled to receive an amount equal to the product of (i) the amount by which the Fair Market Value of a share of Stock on the date of exercise of the Stock Appreciation Right exceeds the option price per share specified in the related Non-Qualified Stock Option and (ii) the number of shares of Stock in respect of which the Stock Appreciation Right shall have been exercised. (d) Form of Payment. The Committee shall have the sole discretion either (i) to determine the form in which payment in settlement of a Stock Appreciation Right will be made (i.e., cash, Stock or any combination thereof), or (ii) to consent to or disapprove the election by the Grantee to receive cash in full or partial settlement of the Stock Appreciation Right, such consent or disapproval to be given at any time after the election to which it relates. If settlement of a Stock Appreciation Right, or portion thereof, is to be made in the form of Stock, the number of shares of Stock to be distributed shall be the largest whole number obtained by dividing the cash sum otherwise distributable in respect of such settlement by the Fair Market Value of a share of Stock on the date of exercise of the Stock Appreciation Right. The value of fractional shares shall be paid in cash. OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 8 9 (e) Effect of Exercise of Right or Related Option. If the related Non-Qualified Stock Option is exercised in whole or in part, then the Stock Appreciation Right with respect to the Stock purchased pursuant to such exercise (but not with respect to any unpurchased Stock) shall be terminated as of the date of exercise if such Stock Appreciation Right is not exercised on such date. (f) Non-transferability. A Stock Appreciation Right shall not be transferable or assignable by the Grantee other than by will or the laws of descent and distribution, and shall be exercisable during the Grantee's lifetime only by the Grantee. (g) Termination of Employment. If the Grantee ceases to be an Employee, Director or Consultant of the Corporation for any reason, each outstanding Stock Appreciation Right shall be exercisable for such period and to such extent as the related Non-Qualified Stock Option or portion thereof. IV. RELOAD OPTIONS 1. Grant of Reload Options. (a) Employees, Directors and Consultants shall be eligible to receive Reload Options under the Plan. (b) Concurrently with the award of Incentive Stock Options or Non-Qualified Stock Options, the Committee may grant Reload Options to purchase Stock. The number of Reload Options shall, at the discretion of the Committee, equal the number of shares of Stock used to exercise the Incentive Stock Options or Non-Qualified Stock Options and the number of shares of Stock used to satisfy any tax withholding requirement applicable to the exercise of the underlying Stock Options. (c) The grant of a Reload Option shall become effective upon the exercise of the underlying Incentive Stock Options or Non-Qualified Stock Options. (d) Reload Options are not intended to qualify as incentive stock options pursuant to Section 422 of the Code. (e) The purchase price of each share of Stock subject to a Reload Option shall be the Fair Market Value of a share of the Stock on the date the Reload Option becomes effective. (f) The term of a Reload Option shall be equal to the remaining term of the underlying Incentive Stock Option or Non-Qualified Stock Option. (g) The terms and conditions of a Reload Option shall be same as the underlying Incentive Stock Option or Non-Qualified Stock Option. OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 9 10 2. Exercise of Reload Options. The option price of a Reload Option shall be payable on exercise of the Stock Option (i) in cash or by check, bank draft or postal or express money order, (ii)by the surrender of Stock then owned by the Grantee, or (iii) partially in accordance with clause (i) and partially in accordance with clause (ii) of this Paragraph. Shares of Stock so surrendered in accordance with clause (ii) or (iii) shall be valued at the Fair Market Value thereof on the date of exercise, surrender of such to be evidenced by delivery of the certificate(s) representing such shares in such manner, and endorsed in such form, or accompanied by stock powers endorsed in such form, as the Committee may determine. 3. Termination of Relationship. (a) If a Grantee's employment with the Corporation is terminated, a Director Grantee ceases to be a Director, or a Consultant Grantee ceases to be a Consultant other than by reason of Disability or death, the terms of any then outstanding Reload Option held by the Grantee shall extend for a period ending on the earlier of the date established by the Committee at the time of grant or three months after the Grantee's last date of employment or cessation of being a Director or Consultant, and such Stock Option shall be exercisable to the extent it was exercisable as of the date of termination of employment or cessation of being a Director or Consultant. (b) If a Grantee's employment is terminated by reason of Disability, a Director Grantee ceases to be a Director by reason of Disability or a Consultant Grantee ceases to be a Consultant by reason of Disability, the term of any then outstanding Non-Qualified Stock Option held by the Grantee shall extend for a period ending on the earlier of the date on which such Stock Option would otherwise expire or twelve months after the Grantee's last date of employment or cessation of being a Director or Consultant, and such Stock Option shall be exercisable to the extent it was exercisable as of such last date of employment or cessation of being a Director or Consultant. (c) If a Grantee's employment is terminated by reason of death, a Director Grantee ceases to be a Director by reason of death or a Consultant Grantee ceases to be a Consultant by reason of death, the representative of his estate or beneficiaries thereof to whom the Stock Option has been transferred shall have the right during the period ending on the earlier of the date on which such Stock Option would otherwise expire or twelve months following his death to exercise any then outstanding Non-Qualified Stock Options in whole or in part. If a Grantee dies without having fully exercised any then outstanding Non-Qualified Stock Options, the representative of his estate or beneficiaries thereof to whom the Stock Option has been transferred shall have the right to exercise such Stock Options in whole or in part. V. RESTRICTED STOCK AWARDS 1. Grant of Restricted Stock. (a) Employees, Directors and Consultants shall be eligible to receive grants of Restricted Stock under the Plan. OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 10 11 (b) The Committee shall determine and designate from time to time those Employees, Directors and Consultants who are to be granted Restricted Stock and the number of shares of Stock subject to such Stock Award. (c) The Committee, in its sole discretion, shall make such terms and conditions applicable to the grant of Restricted Stock as may appear generally acceptable or desirable to the Committee. 2. Termination of Relationship. (a) If a Grantee's employment with the Corporation, a Director Grantee ceases to be a Director, or a Consultant Grantee ceases to be a Consultant, prior to the lapse of any restrictions applicable to the Restricted Stock such Stock shall be forfeited and the Grantee shall return the certificates representing such Stock to the Corporation. (b) If the restrictions applicable to a grant of Restricted Stock shall lapse, the Grantee shall hold such Stock free and clear of all such restrictions except as otherwise provided in the Plan. VI. UNRESTRICTED STOCK AWARDS 1. Grant of Unrestricted Stock. (a) Employees, Directors and Consultants shall be eligible to receive grants of Unrestricted Stock under the Plan. (b) The Committee shall determine and designate from time to time those Employees, Directors and Consultants who are to be granted Unrestricted Stock and number of shares of Stock subject to such Stock Award. 2. Issuance of Stock. The Grantee shall hold Stock issued pursuant to an Unrestricted Stock award free and clear of all restrictions except as otherwise provided in the Plan. VII. PERFORMANCE SHARES 1. Grant of Performance Shares. (a) Employees, Directors and Consultants shall be eligible to receive grants of Performance Shares under the Plan. (b) The Committee shall determine and designate from time to time those Employees, Directors and Consultants who are to be granted Performance Shares and the number of shares of Stock subject to such Stock Award. OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 11 12 (c) The Committee, in its sole discretion, shall make such terms and conditions applicable to the grant of Performance Shares as may appear generally acceptable or desirable to the Committee. 2. Issuance of Stock. Upon the satisfaction of the terms and conditions applicable to the Performance Shares, the Grantee shall hold Stock issued pursuant to the Performance Share award free and clear of all restrictions except as otherwise provided in the Plan. VIII. GENERAL PROVISIONS 1. Substitution of Options. In the event of a corporate merger or consolidation, or the acquisition by the Corporation of property or stock of an acquired corporation or any reorganization or other transaction qualifying under Section 424 of the Code, the Committee may, in accordance with the provisions of that Section, substitute Stock Options, Stock Awards and Stock Appreciation Rights under this Plan for Stock Options, Stock Awards and Stock Appreciation Rights under the plan of the acquired corporation provided (i) the excess of the aggregate fair market value of the shares of Stock subject to Stock Option immediately after the substitution over the aggregate option price of such Stock is not more than the similar excess immediately before such substitution and (ii)the new Stock Option does not give the Grantee additional benefits, including any extension of the exercise period 2. Adjustment Provisions. (a) In the event that a dividend shall be declared upon the Stock payable in shares of the Corporation's common stock, the number of shares of Stock then subject to any Stock Option or Stock Award outstanding under the Plan and the number of shares reserved for the grant of Stock Options or Stock Awards pursuant to the Plan shall be adjusted by adding to each such share the number of shares which would be distributable in respect thereof if such shares had been outstanding on the date fixed for determining the shareholders of the Corporation entitled to receive such share dividend. (b) If the shares of Stock outstanding are changed into or exchanged for a different number or class or other securities of the Corporation or of another corporation, whether through split-up, merger, consolidation, reorganization, reclassification or recapitalization then there shall be substituted for each share of Stock subject to any such Stock Option or Stock Award and for each share of Stock reserved for the grant of Stock Options or Stock Awards pursuant to the Plan the number and kind of shares or other securities into which each outstanding share of Stock shall have been so changed or for which each share shall have been exchanged. (c) In the event there shall be any change, other than as specified above in this Section 2, in the number or kind of outstanding shares of Stock or of any shares or other securities into which such shares shall have been changed or for which they shall have been exchanged, then if the Board shall, in its sole discretion, determine that such change equitably requires an adjustment in the number or kind of shares theretofore reserved for the grant of Stock Options or Stock Awards OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 12 13 pursuant to the Plan and of the shares then subject to Stock Options or Stock Awards, such adjustment shall be made by the Board and shall be effective and binding for all purposes of the Plan and of each Stock Option and Stock Award outstanding thereunder. (d) Each Stock Appreciation Right outstanding at the time of any adjustment pursuant to this Section 2 and the number of outstanding Stock Appreciation Rights, shall be adjusted, changed or exchanged in the same manner as related Stock Options. (e) In the case of any such substitution or adjustment as provided for in this Section 2, the option price set forth in each outstanding Stock Option for each share covered thereby prior to such substitution or adjustment will be the option price for all shares or other securities which shall have been substituted for such share or to which such share shall have been adjusted pursuant to this Section 2, and the price per share shall be adjusted accordingly. (f) No adjustment or substitution provided for in this Section 2 shall require the Corporation to sell a fractional share, and the total substitution or adjustment with respect to each outstanding Stock Option shall be limited accordingly. (g) Upon any adjustment made pursuant to this Section 2 the Corporation will, upon request, deliver to the Grantee a certificate setting forth the option price thereafter in effect and the number and kind of shares or other securities thereafter purchasable on the exercise of such Stock Option. 3. General. (a) Each Stock Option, Stock Award and Stock Appreciation Right shall be evidenced by a written instrument containing such terms and conditions, not inconsistent with this Plan, as the Committee shall approve. (b) The granting of a Stock Option, Stock Award or Stock Appreciation Right in any year shall not give the Grantee any right to similar grants in future years or any right to be retained in the employ of the Corporation, and all Employees shall remain subject to discharge to the same extent as if the Plan were not in effect. (c) No Employee, Director or Consultant and no beneficiary or other person claiming under or through him, shall have any right, title or interest by reason of any Stock Option or any Stock Award to any particular assets of the Corporation, or any shares of Stock allocated or reserved for the purposes of the Plan or subject to any Stock Option or any Stock Award except as set forth herein. The Corporation shall not be required to establish any fund or make any other segregation of assets to assure the payment of any Stock Option or Stock Award. (d) No right under the Plan shall be subject to anticipation, sale, assignment, pledge, encumbrance, or charge except by will or the laws of descent and distribution, and a Stock Option shall be exercisable during the Grantee's lifetime only by the Grantee or his conservator. OMEGA ORTHODONTICS INCENTIVE STOCK PLAN - PAGE 13 14 (e) Notwithstanding any other provision of this Plan or agreements made pursuant thereto, the Corporation's obligation to issue or deliver any certificate or certificates for shares of Stock under a Stock Option or Stock Award, and the transferability of Stock acquired by exercise of a Stock Option or grant of a Stock Award, shall be subject to all of the following conditions: (i) Any registration or other qualification of such shares under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Board shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and (ii) The obtaining of any other consent, approval, or permit from any state or federal governmental agency which the Board shall, in its absolute discretion upon the advice of counsel, determine to be necessary or advisable. (f) All payments to Grantees or to their legal representatives shall be subject to any applicable tax, community property, or other statutes or regulations of the United States or of any state having jurisdiction thereof. The Grantee may be required to pay to the Corporation the amount of any withholding taxes which the Corporation is required to withhold with respect to a Stock Option or its exercise or a Stock Award. In the event that such payment is not made when due, the Corporation shall have the right to deduct, to the extent permitted by law, from any payment of any kind otherwise due to such person all or part of the amount required to be withheld. (g) In the case of a grant of a Stock Option or Stock Award to any Employee of a subsidiary of the Corporation, the Corporation may, if the Committee so directs, issue or transfer the shares, if any, covered by the Stock Option or Stock Award to the subsidiary, for such lawful consideration as the Committee may specify, upon the condition or understanding that the subsidiary will transfer the shares to the Employee in accordance with the terms of the Stock Option or Stock Award specified by the Committee pursuant to the provisions of the Plan. For purposes of this Section, a subsidiary shall mean any subsidiary corporation of the Corporation as defined in Section 424 of the Code. (h) A Grantee entitled to Stock as a result of the exercise of a Stock Option or grant of a Stock Award shall not be deemed for any purpose to be, or have rights as, a shareholder of the Corporation by virtue of such exercise, except to the extent a stock certificate is issued therefor and then only from the date such certificate is issued. No adjustments shall be made for dividends or distributions or other rights for which the record date is prior to the date such stock certificate is issued. The Corporation shall issue any stock certificates required to be issued in connection with the exercise of a Stock Option with reasonable promptness after such exercise. (i) The grant or exercise of Stock Options granted under the Plan or the grant of a Stock Award under the Plan shall be subject to, and shall in all respects comply with, applicable law relating to such grant or exercise, or to the number of shares of Stock which may be beneficially owned or held by any Grantee. 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