-----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, PyRHEkVmTruS/wxypto+uppwn6HFOWvFPL5G9z/J1mDjcSmjgI6f0SW6fiiHzA1A uZD1lrATYNBVsD2eqjpRcQ== 0000914317-03-001197.txt : 20030411 0000914317-03-001197.hdr.sgml : 20030411 20030411162013 ACCESSION NUMBER: 0000914317-03-001197 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20030411 EFFECTIVENESS DATE: 20030411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELAXIS COMMUNICATIONS CORP CENTRAL INDEX KEY: 0000712511 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 042751645 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-104481 FILM NUMBER: 03647297 BUSINESS ADDRESS: STREET 1: 20 INDUSTRIAL DRIVE EAST CITY: SOUTH DEERFIELD STATE: MA ZIP: 01373 BUSINESS PHONE: 4136658551 MAIL ADDRESS: STREET 1: 20 INDUSTRIAL DRIVE EAST STREET 2: P O BOX 109 CITY: SOUTH DEERFEILD STATE: MA ZIP: 013730109 FORMER COMPANY: FORMER CONFORMED NAME: MILLITECH CORP DATE OF NAME CHANGE: 19990913 S-8 1 forms8-telaxis51247.txt As filed with the Securities and Exchange Commission on April 11, 2003. File No. 333- ==================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM S-8 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 -------------------------- Telaxis Communications Corporation (Exact name of registrant as specified in its charter) --------------------- MASSACHUSETTS 04-2751645 (State or other jurisdiction of (I.R.S Employer Identification Number) incorporation or organization) --------------------- 8000 Lee Highway Falls Church, VA 22042 (Address of Principal Executive Offices) --------------------- YOUNG DESIGN, INC. 2002 STOCK INCENTIVE PLAN (Full title of the plan) --------------------- ROBERT E. FITZGERALD President and Chief Executive Officer TELAXIS COMMUNICATIONS CORPORATION 8000 Lee Highway Falls Church, VA 22042 (Name and address of agent for service) (703) 205-0600 (Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE ==================================================================================================================================== Proposed maximum Proposed Title of securities Amount to offering price per maximum aggregate Amount of to be registered be registered(1) share offering price registration fee - ------------------------------------------------------------------------------------------------------------------------------------ Common Stock, $.01 par value (2)...... 1,778,750 (3) $0.40 (4) $711,500 (4) $58.00 ====================================================================================================================================
(1) Pursuant to Rule 416, this Registration Statement also relates to such indeterminate number of additional shares as may be necessary to satisfy the antidilution provisions of the Young Design, Inc. 2002 Stock Incentive Plan (the "Plan") to which this Registration Statement relates. (2) Each share includes one right to purchase shares of the registrant's class one participating cumulative preferred stock pursuant to the registrant's rights agreement dated as of May 18, 2001, as amended to date and as may be amended in the future. (3) Represents all shares reserved for issuance pursuant to awards under the Plan which are currently outstanding. (4) The proposed maximum offering price per share of Common Stock and the proposed maximum aggregate offering price are calculated solely for the purpose of determining the registration fee pursuant to Rule 457(h)(1) under the Securities Act of 1933, based on the weighted average exercise price per share of the awards outstanding under the Plan. PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. Incorporation of Documents by Reference. Telaxis Communications Corporation (the "Registrant" or the "Company") hereby incorporates by reference the following documents: (a) The Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2002 filed by the Registrant with the Securities and Exchange Commission on March 31, 2003. (b) The Registrant's Current Report on Form 8-K filed by the Registrant with the Securities and Exchange Commission on January 9, 2003. (c) The Registrant's Current Report on Form 8-K filed by the Registrant with the Securities and Exchange Commission on March 20, 2003. (d) The Registrant's Current Report on Form 8-K filed by the Registrant with the Securities and Exchange Commission on April 8, 2003. (e) The description of the Registrant's Common Stock contained in the Registrant's Registration Statement on Form S-1 (File No. 333-87885) in the form declared effective by the Securities and Exchange Commission on February 1, 2000, including the information in the Registrant's Current Report on Form 8-K filed by the Registrant with the Securities and Exchange Commission on May 21, 2001 for the purpose of updating that description. All documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part thereof from the date of filing of such documents. Item 4. Description of Securities. Not applicable. Item 5. Interests of Named Experts and Counsel. The validity of the Common Stock registered hereby is being passed upon for the Registrant by Foley Hoag LLP, Boston, Massachusetts. Item 6. Indemnification of Directors and Officers. Section 67 of Chapter 156B of the Massachusetts General Laws, or the Massachusetts Business Corporation Law (the "MBCL"), provides that the indemnification of directors, officers, employees and other agents of a corporation, and persons who serve at its request as directors, officers, employees or other agents of another organization, or who serve at its request in any capacity with respect to any employee benefit plan, may be provided by it to whatever extent shall be specified in or authorized by (i) the articles of organization or (ii) a by-law adopted by the stockholders or (iii) a vote adopted by the holders of a majority of the shares of stock entitled to vote on the election of directors. Except as the articles of organization or by-laws otherwise require, indemnification of any of those persons who are not directors of the corporation may be provided by it to the extent authorized by the directors. Such indemnification may include payment by the corporation of expenses incurred in defending a civil or criminal action or proceeding in advance of the final disposition of such action or proceeding, upon receipt of an undertaking by the person indemnified to repay such payment if he shall be adjudicated to be not entitled to indemnification, which undertaking may be accepted without reference to the financial ability of such person to make repayment. Any such indemnification may be provided although the person to be indemnified is no longer an officer, director, employee or agent of the corporation or of such other organization or no longer serves with respect to any such employee benefit plan. Section 67 further provides that no indemnification shall be provided for any person with respect to any matter as to which he shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his action was in the best interest of the corporation or, to the extent that such matter relates to service with respect to any employee benefit plan, in the best interest of the participants or beneficiaries of such employee benefit plan. The Registrant's By-laws provide that the Registrant shall indemnify each person who is or was a director, officer, employee or agent of the Registrant, or who is serving or served, at the request of the Registrant, as a director, officer, employee or other agent of another organization or in any capacity with respect to any employee benefit plan, against all judgments, fines, penalties, costs and expenses reasonably incurred by such person (including reasonable settlement costs other than amounts paid to the Registrant) in connection with or arising out of any claims made, or any action, suit or proceeding threatened or brought against him or in which he may be involved by reason of any action alleged to have been taken or omitted by him as a director, officer, employee or agent, or in any capacity with respect to any employee benefit plan. No indemnification is provided for any person with respect to any matter as to which he is adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interests of the Registrant or, to the extent that such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. Indemnification may, in the discretion of the Registrant's Board of Directors, include payments by the Registrant of costs and expenses incurred in advance of the final disposition of a proceeding upon receipt of an undertaking by the person indemnified to repay such payment if he is adjudicated to be not entitled to indemnification, which undertaking may be accepted without reference to the financial ability of such person to make repayment. Section 13(b)(1 1/2) of the MBCL permits a corporation to include in its articles of organization a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 61 or 62 of the MBCL (relating to 3 unlawful payment of dividends, unlawful stock purchase and redemption and loans to insiders) or (iv) for any transaction from which the director derived an improper personal benefit. Article VI of the Registrant's Articles of Organization provides that the Registrant's directors shall not be liable to the Registrant or its stockholders for monetary damages for breach of fiduciary duty as directors, except in the circumstances set forth in the MBCL. Section 67 of the MBCL also affords a Massachusetts corporation the power to obtain insurance on behalf of its directors and officers against liabilities incurred by them in those capacities. The Registrant currently maintains a $10,000,000 Directors and Officers Liability Insurance Policy. The Registrant has entered into indemnification agreements with each of its directors and executive officers. These agreements contain provisions that are, in some respects, broader than the specific indemnification provisions contained in the MBCL and in the Registrant's By-laws. In general, the indemnification agreements may require the Registrant: o to indemnify its directors and officers against liabilities that may arise due to their status or service as officers or directors, other than liabilities that may arise with respect to any matter as to which the person seeking indemnification is adjudicated not to have acted in good faith in the reasonable belief that their action was in the best interest of the Registrant; and o to advance their expenses incurred as a result of any proceeding against them as to which they may be entitled to indemnification. The Underwriting Agreement dated February 1, 2000 between the Registrant and Credit Suisse First Boston Corporation, Banc of America Securities LLC and CIBC World Markets Corp. provides that the underwriters named therein will indemnify and hold harmless the Registrant and each director, officer or controlling person of the Registrant from and against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"), and the Underwriting Agreement provides that such underwriters will contribute to certain liabilities of such persons under the Securities Act. Item 7. Exemption from Registration Claimed. Not Applicable. 4 Item 8. Exhibits. Exhibit Number Description ------ ----------- 4.1 Restated Articles of Organization of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Registration Statement on Form S-1 (File No. 333-87885)). 4.2 Certificate of Vote of Directors Establishing a Class or Series of Stock (incorporated by reference to Exhibit 3.1 to the Registrant's Form 10-Q filed with the Securities and Exchange Commission on August 10, 2001). 4.3 Rights Agreement, dated as of May 18, 2001, between the Registrant and Registrar and Transfer Company, as Rights Agent (incorporated by reference to Exhibit 1 to the Registrant's Form 8-A filed with the Securities and Exchange Commission on May 21, 2001). 4.4 Amendment No. 1 to Rights Agreement by and between the Company and Registrar and Transfer Company, as Rights Agent dated as of September 9, 2002 (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed with the Securities and Exchange Commission on September 12, 2002). 4.5 Amendment No. 2 to Rights Agreement by and between the Company and Registrar and Transfer Company, as Rights Agent dated as of March 17, 2003 (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed with the Securities and Exchange Commission on March 20, 2003). 4.6 Form of Right Certificate (incorporated by reference to Exhibit 3 to the Registrant's Form 8-A filed with the Securities and Exchange Commission on May 21, 2001). 4.7 Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant's Form 10-Q filed with the Securities and Exchange Commission on August 10, 2001). 5.1 Opinion of Foley Hoag LLP. 23.1 Consent of PricewaterhouseCoopers LLP, Independent Certified Public Accountants. 23.2 Consent of Foley Hoag LLP (included in Exhibit 5.1). 24 Power of Attorney (included on signature pages). 99.1 Young Design, Inc. 2002 Stock Incentive Plan. 5 Item 9. Undertakings. The undersigned Registrant 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 of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the 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 the registration statement; and (iii)To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (l)(i) and (l)(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 with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, 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. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the 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. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred 6 or paid by a director, officer or controlling person of the Registrant 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 Registrant 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 Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant 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 Falls Church, Commonwealth of Virginia on April 11, 2003. Telaxis Communications Corporation By: /s/ Robert E. Fitzgerald ----------------------------- Robert E. Fitzgerald, Chief Executive Officer POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS that each individual whose signature appears below hereby constitutes and appoints Robert E. Fitzgerald and Patrick L. Milton, and each of them, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing which they, or any of them, may deem necessary or advisable to be done in connection with this registration statement, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or any substitute or substitutes for him, any or all of them, may lawfully do or cause to be done by virtue hereof. 7 Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- Chief Executive Officer and Director April 11, 2003 /s/ Robert E. Fitzgerald (principal executive officer) - ------------------------------ Robert E. Fitzgerald Chief Financial Officer and Treasurer April 11, 2003 /s/ Patrick L. Milton (principal financial and accounting - ------------------------------ officer) Patrick L. Milton /s/ Carol B. Armitage Chairperson of the Board of Directors April 11, 2003 - ------------------------------ Carol B. Armitage /s/ Ralph A. Goldwasser Director April 11, 2003 - ------------------------------ Ralph A. Goldwasser /s/ Gordon D. Poole Director April 11, 2003 - ------------------------------ Gordon D. Poole /s/ Daniel A. Saginario Director April 11, 2003 - ------------------------------ Daniel A. Saginario /s/ Michael F. Young Director April 11, 2003 - ------------------------------ Michael F. Young /s/ John L. Youngblood Director April 11, 2003 - ------------------------------ John L. Youngblood
8 EXHIBIT INDEX Exhibit Number Description ------ ----------- 4.1 Restated Articles of Organization of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Registration Statement on Form S-1 (File No. 333-87885)). 4.2 Certificate of Vote of Directors Establishing a Class or Series of Stock (incorporated by reference to Exhibit 3.1 to the Registrant's Form 10-Q filed with the Securities and Exchange Commission on August 10, 2001). 4.3 Rights Agreement, dated as of May 18, 2001, between the Registrant and Registrar and Transfer Company, as Rights Agent (incorporated by reference to Exhibit 1 to the Registrant's Form 8-A filed with the Securities and Exchange Commission on May 21, 2001). 4.4 Amendment No. 1 to Rights Agreement by and between the Company and Registrar and Transfer Company, as Rights Agent dated as of September 9, 2002 (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed with the Securities and Exchange Commission on September 12, 2002). 4.5 Amendment No. 2 to Rights Agreement by and between the Company and Registrar and Transfer Company, as Rights Agent dated as of March 17, 2003 (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed with the Securities and Exchange Commission on March 20, 2003). 4.6 Form of Right Certificate (incorporated by reference to Exhibit 3 to the Registrant's Form 8-A filed with the Securities and Exchange Commission on May 21, 2001). 4.7 Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant's Form 10-Q filed with the Securities and Exchange Commission on August 10, 2001). 5.1 Opinion of Foley Hoag LLP. 23.1 Consent of PricewaterhouseCoopers LLP, Independent Certified Public Accountants. 23.2 Consent of Foley Hoag LLP (included in Exhibit 5.1). 24 Power of Attorney (included on signature pages). 99.1 Young Design, Inc. 2002 Stock Incentive Plan. 9 EX-5.1 3 exhibit5-1.txt Exhibit 5.1 April 11, 2003 Telaxis Communications Corporation 8000 Lee Highway Falls Church, Virginia 22042 Re: Young Design, Inc. 2002 Stock Incentive Plan We are familiar with the Registration Statement on Form S-8 (the "Registration Statement") to be filed by Telaxis Communications Corporation, a Massachusetts corporation (the "Company"), with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), relating to the offering by the Company of up to 1,778,750 shares (the "Shares") of its common stock, par value $0.01 per share, issuable upon exercise of stock options granted pursuant to the Young Design, Inc. 2002 Stock Incentive Plan (the "Plan"). In arriving at the opinion expressed below, we have examined and relied on the articles of organization of the Company, as amended to date, the by-laws of the Company, as amended to date, the records of meetings and consents of the Board of Directors and stockholders of the Company provided to us by the Company, the Registration Statement, and the Plan. In addition, we have examined and relied on the originals or copies certified or otherwise identified to our satisfaction of all such corporate records of the Company and such other instruments and other certificates of public officials, officers and representatives of the Company and such other persons, and we have made such examination of law, as we have deemed appropriate as a basis for the opinion expressed below. This opinion is limited solely to the laws of The Commonwealth of Massachusetts as applied by courts located in Massachusetts. We assume that all Shares to be issued upon exercise of options granted pursuant to the Plan will be issued in accordance with the terms of the Plan and that the purchase price of the Shares will be greater than or equal to the par value per share of the Shares. Based upon and subject to the foregoing, it is our opinion that the Shares, when issued and delivered upon the exercise of options duly granted pursuant to the Plan and against the receipt of the purchase price therefor, will be validly issued, fully paid and nonassessable. This opinion is to be used only in connection with the offer and sale of the Shares while the Registration Statement is in effect. Please note that we are opining only as to the matters expressly set forth herein, and no opinion should be inferred as to any other matters. 10 We hereby consent to the filing of this opinion as an exhibit to the Registration Statement in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act and to the reference to our firm under the caption, "Interests of Named Experts and Counsel." In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission. FOLEY HOAG LLP By: /s/ John D. Hancock ---------------------- John D. Hancock a Partner EX-23.1 4 exhibit23-1.txt 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 February 7, 2003, except for Note 24, as to which the date is March 19, 2003, relating to the financial statements and financial statement schedule of Telaxis Communications Corporation, which appears in Telaxis Communications Corporation's Annual Report on Form 10-K for the year ended December 31, 2002. /s/ PricewaterhouseCoopers LLP - ------------------------------ Hartford, Connecticut April 11, 2003 EX-99.1 5 exhibit99-1.txt YOUNG DESIGN, INC. 2002 STOCK INCENTIVE PLAN (As Adopted and Effective November 4, 2002) YOUNG DESIGN, INC. 2002 STOCK INCENTIVE PLAN - iv - YOUNG DESIGN, INC. 2002 STOCK INCENTIVE PLAN
TABLE OF CONTENTS ----------------- Page Section 1. Purpose............................................................................................5 Section 2. Definitions........................................................................................5 (a) "Award"..................................................................................................5 (b) "Board"..................................................................................................5 (c) "Change in Control"......................................................................................5 (d) "Code"...................................................................................................6 (e) "Committee"..............................................................................................6 (f) "Common-Law Employee"....................................................................................6 (g) "Common Stock"...........................................................................................6 (h) "Company"................................................................................................6 (i) "Consultant".............................................................................................6 (j) "Disability".............................................................................................6 (k) "Exchange Act"...........................................................................................6 (l) "Exercise"...............................................................................................6 (m) "Exercise Price".........................................................................................6 (n) "Fair Market Value"......................................................................................7 (o) "Incentive Stock Option".................................................................................7 (p) "Key Contributor"........................................................................................7 (q) "Non-Employee Director"..................................................................................7 (r) "Nonstatutory Option"....................................................................................8 (s) "Offeree"................................................................................................8 (t) "Option".................................................................................................8 (u) "Optionee"...............................................................................................8 (v) "Parent".................................................................................................8 (w) "Participant"............................................................................................8 (x) "Plan"...................................................................................................8 (y) "Purchase Price".........................................................................................8 (z) "Restricted Share".......................................................................................8 (aa) "Service"................................................................................................8 (bb) "Share"..................................................................................................8 (cc) "Stock Award Agreement"..................................................................................9 (dd) "Stock Option Agreement".................................................................................9 (ee) "Stock Purchase Agreement"...............................................................................9 (ff) "Subsidiary".............................................................................................9 (gg) "10% Stockholder"........................................................................................9 (hh) "Vesting"................................................................................................9 (ii) "W-2 Payroll"............................................................................................9 Section 3. Administration....................................................................................10 (a) Committees of the Board.................................................................................10 (b) Committee Procedures....................................................................................10 (c) Authority of the Committee..............................................................................10 (d) Committee Liability.....................................................................................10 Section 4. Eligibility.......................................................................................10 Section 5. Stock Subject To Plan.............................................................................11
(a) Basic Limitation........................................................................................11 (b) Additional Shares.......................................................................................11 Section 6. Terms and Conditions of Grants or Sales...........................................................11 (a) Stock Purchase Agreement................................................................................11 (b) Duration of Offers......................................................................................12 (c) Purchase Price..........................................................................................12 (d) Restrictions on Transfer of Common Stock................................................................12 Section 7. Additional Terms and Conditions of Restricted Shares..............................................12 (a) Form and Amount of Award................................................................................12 (b) Vesting.................................................................................................12 (c) Effect of Change in Control.............................................................................12 (d) Voting Rights...........................................................................................13 Section 8. Terms and Conditions of Options...................................................................13 (a) Stock Option Agreement..................................................................................13 (b) Number of Shares........................................................................................13 (c) Exercise Price..........................................................................................13 (d) Vesting.................................................................................................13 (e) Effect of Change in Control.............................................................................14 (f) Term....................................................................................................14 (g) Exercise of Options on Termination of Service...........................................................14 (h) No Rights as a Stockholder..............................................................................14 (i) Modification, Extension and Assumption of Options.......................................................14 (j) Restrictions on Transfer................................................................................15 Section 9. Forms of Payment..................................................................................15 (a) General Rule............................................................................................15 (b) Surrender of Stock......................................................................................15 (c) Promissory Notes........................................................................................15 (d) Cashless Exercise.......................................................................................16 (e) Other Forms of Payment..................................................................................16 Section 10. Adjustments upon Changes in Common Stock..........................................................16 (a) General.................................................................................................16 (b) Mergers and Consolidations..............................................................................16 (c) Reservation of Rights...................................................................................17 Section 11. Withholding Taxes.................................................................................17 (a) General.................................................................................................17 (b) Common Stock Withholding................................................................................17 (c) Cashless Exercise/Pledge................................................................................17 (d) Other Forms of Payment..................................................................................17 Section 12. Legal Requirements................................................................................18 (a) Restrictions on Issuance................................................................................18 Section 13. Assignment or Transfer of Awards..................................................................18 (a) General.................................................................................................18 (b) Trusts..................................................................................................18 Section 14. No Employment Rights..............................................................................18
-iii-
Section 15. Duration and Amendments...........................................................................19 (a) Term of the Plan........................................................................................19 (b) Right to Amend or Terminate the Plan....................................................................19 (c) Effect of Amendment or Termination......................................................................19 Section 16. Execution.........................................................................................19
-iv- YOUNG DESIGN, INC. 2002 STOCK INCENTIVE PLAN Section 1 Purpose. The purpose of the Plan is to offer selected employees, directors and consultants an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest, to encourage such persons to remain in the employ of the Company and to attract new employees with outstanding qualifications. The Plan seeks to achieve this purpose by providing for the direct grant or sale of restricted shares of Common Stock and for the grant of Options to purchase Common Stock. Options granted under the Plan may include Nonstatutory Options as well as Incentive Stock Options intended to qualify under section 422 of the Internal Revenue Code. Section 2 Definitions. (a) "Award" shall mean any award of an Option, Restricted Share or other right under the Plan. (b) "Board" shall mean the Board of Directors of the Company, as constituted from time to time. (c) "Change in Control" shall mean: (i) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity's securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization; or (ii) The sale, transfer or other disposition of all or substantially all of the Company's assets other than in connection with a dissolution of the Company. A transaction shall not constitute a Change in Control if: (a) its sole purpose is to change the state of the Company's incorporation, (b) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transaction or (c) such transaction constitutes the Company's initial public offering of its securities. -5- (d) "Code" shall mean the Internal Revenue Code of 1986, as amended. (e) "Committee" shall mean a committee consisting of one or more members of the Board that is appointed by the Board to administer the Plan under Section 3. (f) "Common-Law Employee" shall mean an individual paid from W-2 Payroll of the Company or a Subsidiary. If, during any period, the Company (or Subsidiary, as applicable) has not treated an individual as a Common-Law Employee and, for that reason, has not paid such individual in a manner which results in the issuance of a Form W-2 and withheld taxes with respect to him or her, then that individual shall not be an eligible Common-Law Employee for that period, even if any person, court or government agency determines, retroactively, that that individual is or was a Common-Law Employee during all or any portion of that period. (g) "Common Stock" shall mean the Company's common stock. (h) "Company" shall mean Young Design, Inc., a Virginia corporation. (i) "Consultant" shall mean an individual who performs bona fide services to the Company, a Parent or a Subsidiary other than as a Common-Law Employee, or a member of the Board, or a member of the board of directors of a Subsidiary. (j) "Disability" shall mean that the Optionee is unable to engage in any substantially gainful activity by reason of any medically determinable physical or mental impairment. (k) "Exchange Act" shall mean the Securities and Exchange Act of 1934, as amended. (l) "Exercise" shall mean the process by which an Optionee tenders payment for shares subject to an Option. (m) "Exercise Price" -6- shall mean the amount for which one share of Common Stock may be purchased upon exercise of an Option, as specified by the Board in the applicable Stock Option Agreement. (n) "Fair Market Value" shall mean the market price of Shares of Common Stock, determined by the Board as follows: (i) If the Shares were traded over-the-counter on the date in question but were not traded on the Nasdaq Stock Market or the Nasdaq National Market System, then the Fair Market Value shall be equal to the mean between the last reported representative bid and asked prices quoted for such date by the principal automated inter-dealer quotation system on which the shares are quoted or, if the Shares are not quoted on any such system, by the "Pink Sheets" published by the National Quotation Bureau, Inc.; (ii) If the Shares were traded over-the-counter on the date in question and were traded on the Nasdaq Stock Market or the Nasdaq National Market System, then the Fair Market Value shall be equal to the last-transaction price quoted for such date by the Nasdaq Stock Market or the Nasdaq National Market; (iii) If the Shares were traded on a stock exchange on the date in question, then the Fair Market Value shall be equal to the closing price reported by the applicable composite transactions report for such date; and (iv) If none of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Board in good faith on such basis as it deems appropriate. In all cases, the determination of Fair Market Value by the Board shall be conclusive and binding on all persons. (o) "Incentive Stock Option" or "ISO" shall mean an incentive stock option described in Code Section 422(b). (p) "Key Contributor" shall mean (i) any individual who is a Common-Law Employee of the Company, a Parent or a Subsidiary, (ii) a member of the Board, including (without limitation) a Non-Employee Director, or an affiliate of a member of the Board; (iii) a member of the board of directors of a Subsidiary, or (iv) a Consultant. Service as a member of the Board, a member of the board of directors of a Subsidiary or a Consultant shall be considered employment for all purposes of the Plan except the second sentence of Section 4. (q) "Non-Employee Director" shall mean a member of the Board who is not a Common-Law Employee of the Company or a Subsidiary. -7- (r) "Nonstatutory Option" or "NSO" shall mean a stock option that is not an ISO. (s) "Offeree" shall mean an individual to whom the Board has offered the right to acquire Common Stock under the Plan (other than upon exercise of an Option). (t) "Option" shall mean an ISO or NSO granted under the Plan entitling the holder to purchase Common Stock. (u) "Optionee" shall mean an individual who holds an Option. (v) "Parent" shall have the meaning set forth in Section 424(e) of the Code. (w) "Participant" shall mean an individual or estate who holds an Award. (x) "Plan" shall mean this 2002 Stock Incentive Plan of Young Design, Inc. (y) "Purchase Price" shall mean the consideration for which one share of Common Stock may be acquired under the Plan (other than upon exercise of an Option) pursuant to a grant or sale under Section 6, as specified by the Board. (z) "Restricted Share" shall mean a share of Common Stock sold or granted to an eligible Key Contributor which is nontransferable and subject to substantial risk of forfeiture until restrictions lapse. (aa) "Service" shall mean service as a Key Contributor. (bb) "Share" shall mean a share of the Company's Common Stock. -8- (cc) "Stock Award Agreement" shall mean the agreement between the Company and the recipient of a Restricted Share which contains the terms, conditions and restrictions pertaining to such Restricted Share. (dd) "Stock Option Agreement" shall mean the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to an Option. (ee) "Stock Purchase Agreement" shall mean the agreement between the Company and an Offeree who acquires Common Stock under the Plan (other than pursuant to an Option) that contains the terms, conditions and restrictions pertaining to the acquisition of such Common Stock. (ff) "Subsidiary" shall have the meaning set forth in Section 424(f) of the Code. (gg) "10% Stockholder" shall mean an individual who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries. For purposes of this Subsection (dd), in determining stock ownership, the attribution rules of Section 424(d) of the Code shall be applied. For purposes of this Subsection (dd), "outstanding stock" shall include all stock actually issued and outstanding immediately after the grant. "Outstanding stock" shall not include Common Stock authorized for issuance under outstanding Options held by the Key Contributor or by any other person. (hh) "Vesting" shall mean the process by which (1) an Optionee acquires non-forfeitable rights to purchase shares of Common Stock subject to an Option or non-forfeitable ownership of shares of Common Stock acquired upon Exercise of an Option or (2) an Offeree acquires non-forfeitable ownership of shares of Common Stock subject a Stock Award Agreement. (ii) "W-2 Payroll" shall mean whatever mechanism or procedure that the Company or a Subsidiary utilizes to pay any individual which results in the issuance of Form W-2 to the individual. "W-2 Payroll" does not include any mechanism or procedure which results in the issuance of any form other than a Form W-2 to an individual, including, but not limited to, any Form 1099 which may be issued to an independent contractor, an agency employee or a consultant. Whether a mechanism or procedure qualifies as a "W-2 Payroll" shall be determined in the absolute discretion of the Company (or Subsidiary, as applicable), and the Company or Subsidiary determination shall be conclusive and binding on all persons. -9- Section 3. Administration. (a) Committees of the Board. The Plan shall be administered by the Board. However, any or all administrative functions otherwise exercisable by the Board may be delegated to a Committee. Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee. Any reference to the Board in the Plan shall be construed as a reference to the Committee (if any) to whom the Board has assigned a particular function. In the event that the Company's Common Stock becomes publicly traded, the Board may appoint a Committee which, if appointed, shall be comprised solely of two or more Non-Employee Directors (although Committee functions may be delegated to officers to the extent the Awards relate to persons who are not subject to the reporting requirements of Section 16 of the Exchange Act). (b) Committee Procedures. The Board shall designate one of the members of the Committee as chairperson. The Committee may hold meetings at such times and places as it shall determine. The acts of a majority of the Committee members present at meetings at which a quorum exists, or acts reduced to or approved in writing by all Committee members, shall be valid acts of the Committee. (c) Authority of the Committee. Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. The Committee has authority in its discretion to determine eligible Key Contributors to whom, and the time or times at which, Awards may be granted and the number of Shares subject to each Award. Subject to the express provisions of the respective Award agreements (which need not be identical) and to make all other determinations necessary or advisable for Plan administration, the Committee has authority to prescribe, amend and rescind rules and regulations relating to the Plan. All decisions, interpretations and other actions of the Committee shall be final, conclusive and binding on all parties who have an interest in the Plan or any option or shares issued thereunder. (d) Committee Liability. No member of the Board or the Committee will be liable for any action or determination made in good faith by the Committee with respect to the Plan or any Award made under the Plan. Section 4. Eligibility. -10- Only Key Contributors shall be eligible for designation as Participants by the Board. In addition, only individuals who are employed as Common-Law Employees by the Company or a Subsidiary shall be eligible for the grant of ISOs. Section 5. Stock Subject To Plan. (a) Basic Limitation. The stock issuable under the Plan shall be Shares of authorized but unissued or reacquired Common Stock. The maximum number of Shares of Common Stock which may be issued under the Plan shall not exceed 1,000,000 shares, subject to adjustment pursuant to Section 10. In any event, (i) the number of Shares which are subject to Awards or other rights outstanding at any time under the Plan shall not exceed the number of Shares which then remain available for issuance under the Plan; and (ii) to the extent an award is made in reliance upon an exemption available under applicable federal or state law, the number of Shares which are subject to Awards or other rights outstanding at any time under the Plan or otherwise shall not exceed the limitation imposed by such law. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan. (b) Additional Shares. If any outstanding Option or other right to acquire Common Stock for any reason expires or is canceled, forfeited or otherwise terminated, the Common Stock allocable to the unexercised portion of such Option or other right shall again be available for the purposes of the Plan. If shares of Common Stock issued under the Plan are reacquired by the Company pursuant to any right of repurchase or right of first refusal, such shares of Common Stock shall again be available for the purposes of the Plan, except that the aggregate number of shares of Common Stock that may be issued upon the exercise of ISOs shall in no event exceed the number of shares of Common Stock reserved for issuance pursuant to paragraph (a) above plus the number of previously optioned shares returned to the Plan pursuant to the first sentence of this Section 5(b), as adjusted pursuant to Section 10. Section 6. Terms and Conditions of Grants or Sales. (a) Stock Purchase Agreement. Each grant or sale of Common Stock under the Plan (other than upon exercise of an Option) shall be evidenced by a Stock Purchase Agreement between the Offeree and the Company. Such grant or sale shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan and that the Board deems -11- appropriate for inclusion in a Stock Purchase Agreement. The provisions of the various Stock Purchase Agreements entered into under the Plan need not be identical. (b) Duration of Offers. Any right to acquire Common Stock under the Plan other than an Option shall automatically expire if not exercised by the Offeree within thirty (30) days after the grant of such right was communicated by the Board to the Offeree. (c) Purchase Price. The Purchase Price of Common Stock offered under the Plan shall be established by the Board in its sole discretion and set forth in the Stock Purchase Agreement. The Purchase Price shall be payable in a form described in Section 9 or, in the discretion of the Board, in consideration for past services rendered to the Company or for its benefit. (d) Restrictions on Transfer of Common Stock. No Common Stock granted or sold under the Plan may be sold or otherwise transferred or disposed of by the Offeree during the one hundred eighty (180) day period following the effective date of a registration statement covering securities of the Company filed under the Securities Act of 1933 (unless such restriction is consented to or waived by the managing underwriter). Subject to the preceding sentence, any Common Stock granted or sold under the Plan shall be subject to such special conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board may determine. Such restrictions shall apply in addition to any general restrictions that may apply to all holders of Common Stock. Section 7. Additional Terms and Conditions of Restricted Shares. (a) Form and Amount of Award. Each Stock Award Agreement shall specify the number of shares of Common Stock that are subject to the Award. Restricted Shares may be awarded in combination with NSOs and such an Award may provide that the Restricted Shares will be forfeited in the event that the related NSOs are exercised. (b) Vesting. Each Stock Award Agreement shall specify the conditions upon which Restricted Shares shall become Vested, in full or in installments. Subject to the preceding sentence, the Vesting of any Stock Award shall be determined by the Board in its sole discretion. (c) Effect of Change in Control. -12- The Board may determine at the time of making an Award or thereafter, that such Award shall become fully Vested, in whole or in part, in the event that a Change in Control occurs with respect to the Company. (d) Voting Rights. Holders of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as the Company's other stockholders. A Stock Award Agreement, however, may require that the holders invest any cash dividends received in additional Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were paid. Such additional Restricted Shares shall not reduce the number of Shares available under Section 5. Section 8. Terms and Conditions of Options. (a) Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan and that the Board deems appropriate for inclusion in a Stock Option Agreement. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. (b) Number of Shares. Each Stock Option Agreement shall specify the number of shares of Common Stock that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 10. The Stock Option Agreement shall also specify whether the Option is an ISO or an NSO. (c) Exercise Price. An Option's Exercise Price shall be established by the Board and set forth in a Stock Option Agreement. The Exercise Price of an ISO shall not be less than 100% of the Fair Market Value (110% for 10% Stockholders) on the date of grant. Subject to the preceding sentence, the Exercise Price under any Option shall be determined by the Board in its sole discretion. Additionally, an Option may be granted with an Exercise Price lower than that prescribed in this paragraph if the Option grant is attributable to the issuance or assumption of an option in a transaction to which Code section 424(a) applies. The Exercise Price shall be payable in a form described in Section 9. (d) Vesting. Each Stock Option Agreement shall specify the date when all or any installment of the Option is to Vest or become exercisable. The Vesting of any -13- Option shall be determined by the Board in its sole discretion. A Stock Option Agreement may permit an Optionee to exercise an Option before it is Vested (an "early exercise"), subject to the Company's right of repurchase over any shares acquired under the unvested portion of the Option, which right of repurchase shall lapse at the same rate the Option would have Vested had there been no early exercise. (e) Effect of Change in Control. The Board may determine, at the time of granting an Option or thereafter, whether, and under what circumstances, such Option shall become fully exercisable as to all shares of Common Stock subject to such Option in the event that a Change in Control occurs with respect to the Company. (f) Term. The Stock Option Agreement shall specify the term of the Option. The term shall not exceed ten (10) years from the date of grant (five (5) years in the case of an ISO granted to a 10% Stockholder). Subject to the preceding sentence, the Board in its sole discretion shall determine when an Option is to expire. (g) Exercise of Options on Termination of Service. Each Stock Option Agreement shall set forth the extent to which the Optionee shall have the right to exercise the Option following termination of the Optionee's Service with the Company and its Subsidiaries. Such provisions shall be determined in the sole discretion of the Board, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service. Notwithstanding the foregoing in this Section 8(g), to the extent required by applicable law, each Stock Option Agreement shall provide that the Optionee shall have the right to exercise the Option following termination of the Optionee's Service, during the Option's term, for at least thirty (30) days following termination of Service for any reason except cause, death or Disability, and for at least six (6) months following termination of Service due to death or Disability. (h) No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect to any Common Stock covered by an Option until such person becomes entitled to receive such Common Stock by filing a notice of exercise and paying the Exercise Price pursuant to the terms of such Option, and entering into a Notice of Exercise and Common Stock Purchase Agreement. (i) Modification, Extension and Assumption of Options. Within the limitations of the Plan, the Board may modify, extend or assume outstanding Options or may accept the cancellation of outstanding Options (whether granted by the Company or another issuer) in return for the grant of new Options for the same or a different number of shares of Common Stock and at the same or a different Exercise Price. The foregoing notwithstanding, no -14- modification of an Option shall, without the consent of the Optionee, impair the Optionee's rights or increase the Optionee's obligations under such Option. (j) Restrictions on Transfer. No shares of Common Stock issued upon exercise of an Option may be sold or otherwise transferred or disposed of by the Optionee during the one hundred eighty (180) day period following the effective date of a registration statement covering securities of the Company filed under the Securities Act of 1933 (unless such restriction is waived by the managing underwriter of the offering with respect to which such registration statement was filed). Subject to the preceding sentence, any Common Stock issued upon exercise of an Option shall be subject to such rights of repurchase, rights of first refusal and other transfer restrictions as the Board may determine. Such restrictions shall apply in addition to any restrictions that may apply to holders of Common Stock generally. Any right to repurchase an Optionee's Common Stock at the original Exercise Price upon termination of the Optionee's Service shall lapse at least as rapidly as the schedule set forth in Subsection (d) above. Any such repurchase right may be exercised only within ninety (90) days after the termination of the Optionee's Service for cash or for cancellation of indebtedness incurred in purchasing the Common Stock. Section 9. Forms of Payment. (a) General Rule. The entire Purchase Price or Exercise Price shall be payable in cash or cash equivalents acceptable to the Company at the time of exercise or purchase, except as otherwise provided in this Section 9. (b) Surrender of Stock. To the extent that a Stock Option Agreement or Stock Purchase Agreement so provides, payment may be made all or in part with Common Stock that has already been owned by the Offeree or Optionee, or the Offeree's or Optionee's representative, for any time period specified by the Board and that are surrendered to the Company in good form for transfer. Such Common Stock shall be valued at Fair Market Value on the date when the new Common Stock is purchased under the Plan. (c) Promissory Notes. To the extent that a Stock Option Agreement or Stock Purchase agreement so provides, payment may be made all or in part with a full recourse promissory note executed by the Optionee or Offeree. The interest rate and other terms and conditions of such note shall be determined by the Board. The Board may require that the Optionee pledge his or her Common Stock to the Company for the purpose of securing the payment of such note. In no event shall the stock certificate(s) representing such Common Stock be released to the Optionee or Offeree until such note is paid in full, unless otherwise provided in the Stock Option Agreement or Stock Purchase Agreement. -15- (d) Cashless Exercise. To the extent that a Stock Option Agreement or Stock Purchase Agreement so provides and a public market for the Common Stock exists, payment may be made all or in part by delivery (on a form acceptable to the Board) of an irrevocable direction to a securities broker to sell Common Stock and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price. (e) Other Forms of Payment. To the extent provided in the Stock Option Agreement or Stock Purchase Agreement, payment may be made in any other form that is consistent with applicable laws, regulations and rules. Section 10. Adjustments upon Changes in Common Stock. (a) General. In the event of a subdivision of the outstanding Common Stock, a declaration of a dividend payable in Common Stock, a declaration of an extraordinary dividend payable in a form other than Common Stock in an amount that has a material effect on the value of Common Stock, a combination or consolidation of the outstanding Common Stock into a lesser number of shares, a recapitalization, a reclassification or a similar occurrence, the Board shall make appropriate adjustments, subject to the limitations set forth in Section 10(c), in one or more of (i) the number of shares of Common Stock available for future grants of Options or other rights to acquire Common Stock under Section 5, (ii) the number of shares of Common Stock covered by each outstanding Option or other right to acquire Common Stock or (iii) the Exercise Price of each outstanding Option or the Purchase Price of each other right to acquire Common Stock. (b) Mergers and Consolidations. In the event that the Company is a party to a merger or consolidation, outstanding Options or other rights to acquire Common Stock shall be subject to the agreement of merger or reorganization. Such agreement, without an Optionee's consent, may provide for: (i) The continuation of such outstanding Options by the Company (if the Company is the surviving corporation); (ii) The assumption of the Plan and such outstanding Options by the surviving corporation or its parent; (iii) The substitution by the surviving corporation or its parent of options with substantially the same terms for such outstanding Options; or (iv) The cancellation of such outstanding Options without payment of any consideration. -16- (c) Reservation of Rights. Except as provided in this Section 10, an Optionee or Offeree shall have no rights by reason of (i) any subdivision or consolidation of shares of stock of any class, (ii) the payment of any dividend, or (iii) any other increase or decrease in the number of shares of stock of any class. Any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to an Option, or the number of shares subject to any other right to acquire Common Stock and/or the Exercise Price or Purchase Price. The grant of an Option or other right to acquire Common Stock pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. Section 11. Withholding Taxes. (a) General. To the extent required by applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Committee for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied. (b) Common Stock Withholding. The Committee may permit a Participant to satisfy all or part of his or her withholding or income tax obligations by having the Company withhold all or a portion of any shares of Common Stock that otherwise would be issued to him or her or by surrendering all or a portion of any shares of Common Stock that he or she previously acquired. Notwithstanding the previous sentence in this Section 11(b), the maximum amount that may be subject to common stock withholding under this Section 11(b) shall be determined by the Committee based upon the minimum rates of federal, state and employment withholding taxes applicable under the circumstances. Shares of Common Stock that are withheld or surrendered pursuant to this Section 11 shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. Any payment of taxes by assigning shares of Common Stock to the Company may be subject to restrictions, including any restrictions required by rules of any federal or state regulatory body or other authority. (c) Cashless Exercise/Pledge. The Committee may provide that if Company shares of Common Stock are publicly traded at the time of exercise, arrangements may be made to meet the Optionee's withholding obligation by cashless exercise or pledge. (d) Other Forms of Payment. -17- The Committee may permit such other means of tax withholding as it deems appropriate. Section 12. Legal Requirements. (a) Restrictions on Issuance. Common Stock shall not be issued under the Plan unless the issuance and delivery of such Common Stock complies with (or is exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange on which the Company's securities may then be listed, and the Company has obtained the approval or favorable ruling from any governmental agency that the Company determines is necessary or advisable. Section 13. Assignment or Transfer of Awards. (a) General. An Award granted under the Plan shall not be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any creditor's process, whether voluntarily, involuntarily or by operation of law, except as approved by the Committee in accordance with applicable law. Notwithstanding the foregoing, ISOs may not be transferred. (b) Trusts. Neither this Section 13 nor any other provision of the Plan shall preclude a Participant from transferring or assigning Restricted Shares to (a) the trustee of a trust that is revocable by such Participant alone, both at the time of the transfer or assignment and at all times thereafter prior to such Participant's death, or (b) the trustee of any other trust to the extent approved by the Committee in writing. A transfer or assignment of Restricted Shares from such trustee to any other person than such Participant shall be permitted only to the extent approved in advance by the Committee in writing, and Restricted Shares held by such trustee shall be subject to all the conditions and restrictions set forth in the Plan and in the applicable Stock Award Agreement, as if such trustee were a party to such Agreement. Section 14. No Employment Rights. No provision of the Plan, nor any Option granted or other right to acquire Common Stock granted under the Plan, shall be construed to give any person any right to become, to be treated as, or to remain a Key Contributor. The Company and its Subsidiaries reserve the right to terminate any person's Service at any time and for any reason. -18- Section 15. Duration and Amendments. (a) Term of the Plan. The Plan, as set forth herein, shall become effective on the date of its adoption by the Board, subject to the approval of the Company's stockholders. In the event that the stockholders fail to approve the Plan within twelve (12) months after its adoption by the Board, any Option grants or other right to acquire Common Stock already made shall be null and void, and no additional Option grants or other right to acquire Common Stock shall be made after such date. The Plan shall terminate automatically ten (10) years after its adoption by the Board and may be terminated on any earlier date pursuant to Section 15(b) below. (b) Right to Amend or Terminate the Plan. The Board may amend or terminate the Plan at any time. Except as provided under Section 10(b), the rights under any Option granted or other right to acquire Common Stock granted before amendment of the Plan shall not be materially impaired by any amendment or termination, except with consent of the Optionee or Offeree. An amendment of the Plan shall be subject to the approval of the Company's stockholders only to the extent required by applicable laws, regulations or rules. (c) Effect of Amendment or Termination. No Common Stock shall be issued or sold under the Plan after the termination thereof, except upon exercise of an Option granted prior to such termination. The termination of the Plan, or any amendment thereof, shall not affect any Common Stock previously issued or Option previously granted under the Plan. Section 16. Execution. To record the adoption of the Plan, the Company has caused its authorized officer to execute the same. YOUNG DESIGN, INC. By /s/ Robert E. Fitzgerald --------------------------- Robert E. Fitzgerald Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----