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Option Plan (the MGC stock option plan) which provided in
pertinent part: (1) The plan would be administered by a
committee of no fewer than two “disinterested persons” (the
committee), who would be appointed by MGC’s board of directors
(MGC board) from its membership or, in the absence of such
appointments, by the entire MGC board; (2) the committee would
have the sole discretion to (a) select the persons to be granted
options, (b) determine the number of shares subject to each
option, (c) determine the duration of the exercise period for any
option, (d) determine that options may only be exercised in
installments, and (e) impose other terms and conditions on each
option as the committee in its sole discretion deemed advisable.
The MGC stock option plan expressly contemplated that the
committee would grant to MGC employees ISOs within the meaning of
sections 421 and 422.
2. Petitioner’s Incentive Stock Options
On April 1, 1996, September 4, 1998, and March 1, 1999,
petitioner executed a series of share option agreements under
which he was granted ISOs from MGC. Each of the share option
agreements stated that if petitioner were considered an “insider”
subject to section 16(b) of the Exchange Act, petitioner “shall
be restricted from selling any Option Shares acquired by him
through exercise of the Options or any portion thereof during the
six (6) month period following the date of grant of the Option.”
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