THE 2002 INCENTIVE AWARD PLAN
OF
ASSISTED LIVING CONCEPTS, INC.
Assisted Living Concepts, Inc., a Nevada corporation, has
adopted the 2002 Incentive Award Plan of Assisted Living Concepts, Inc. (the
"Plan"), effective March 6, 2002, for the benefit of its eligible employees,
consultants and directors. The Plan consists of two plans, one pertaining solely
to the grant of Incentive Stock Options (as defined below), and one pertaining
to the grant of all other Awards (as defined below).
The purposes of the Plan are as follows:
(1) To provide an additional incentive for directors, key
Employees and Consultants (as such terms are defined below) to further the
growth, development and financial success of the Company by personally
benefiting through the ownership of Company stock and/or rights which recognize
such growth, development and financial success.
(2) To enable the Company to obtain and retain the
services of directors, key Employees and Consultants considered essential to the
long range success of the Company by offering them an opportunity to own stock
in the Company and/or rights which will reflect the growth, development and
financial success of the Company.
ARTICLE I.
DEFINITIONS
Wherever the following terms are used in the Plan they shall
have the meanings specified below, unless the context clearly indicates
otherwise. The singular pronoun shall include the plural where the context so
indicates.
1.1. "Administrator" shall mean the entity that conducts
the general administration of the Plan as provided herein. With reference to the
administration of the Plan with respect to Options granted to Independent
Directors, the term "Administrator" shall refer to the Board. With reference to
the administration of the Plan with respect to any other Award, the term
"Administrator" shall refer to the Committee unless the Board has assumed the
authority for administration of the Plan generally as provided in Section 10.1.
1.2. "Award" shall mean an Option, a Restricted Stock
award, a Performance Award, a Dividend Equivalents award, a Deferred Stock
award, a Stock Payment award or a Stock Appreciation Right which may be awarded
or granted under the Plan (collectively, "Awards").
1.3. "Award Agreement" shall mean a written agreement
executed by an authorized officer of the Company and the Holder which shall
contain such terms and conditions
with respect to an Award as the Administrator shall determine, consistent with
the Plan.
1.4. "Award Limit" shall mean 100,000 shares of Common
Stock, as adjusted pursuant to Section 11.3; provided, however, that solely with
respect to Performance Awards granted pursuant to Section 8.2(b), Award Limit
shall mean $100,000.
1.5. "Board" shall mean the Board of Directors of the
Company.
1.6. "Change in Control" shall mean the occurrence of any
of the following:
(a) the sale of all or substantially all of the
assets of the Company and its CIC Subsidiaries, taken as a whole, to any Person
or related group of Persons;
(b) the consummation of any consolidation or
merger of the Company:
(i) in which the Company is not the
continuing or surviving corporation, other than a
consolidation or merger:
(1) with a wholly-owned CIC
Subsidiary of the Company in which all of the common
stock of the Company outstanding immediately prior to
the effectiveness thereof is changed into or
exchanged for the same consideration, or
(2) in which the stockholders
of the Company immediately prior to the consummation
of such consolidation or merger own greater than 50%
of the total voting power of all classes of capital
shares of the continuing or surviving corporation
immediately following the consummation of such
consolidation or merger; or
(ii) pursuant to which the shares of
common stock of the Company are converted into cash,
securities, or other property, unless the stockholders of the
Company immediately prior to the consummation of such
consolidation or merger own greater than 50% of the total
voting power of all classes of capital shares of the
continuing or surviving corporation immediately following the
consummation of such consolidation or merger;
(c) the acquisition by any Person individually
or any Persons (in each case other than any Person who is a holder of more than
5% of all classes of capital shares of the Company as of January 1, 2002) acting
together that would constitute a "group" for purposes of Section 13(d) of the
Exchange Act, together with any affiliates thereof, of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) of greater than 50% of the total
voting power of all classes of capital shares of the Company entitled to vote
generally in the election of directors of the Company; or
(d) the first day on which a majority of members
of the Board are not Continuing Directors.
Notwithstanding clause (a) of this definition of "Change in Control," a Change
in Control will not be deemed to have occurred as a result of a transaction in
which either (1) the holders of the shares of common stock of the Company
immediately prior to the sale of all or substantially all of the Company's
assets have, directly or indirectly, at least a majority of the shares of common
stock of the corporation to which such assets were sold immediately after such
asset sale; or (2) the holders of the shares of common stock of the Company
immediately prior to the consolidation or merger have, directly or indirectly,
at least a majority of the shares of common stock of the continuing or surviving
corporation immediately after such consolidation or merger.
Notwithstanding clause (c) of this definition of "Change in Control," a Change
in Control will not be deemed to have occurred solely by virtue of any of the
following Persons filing or becoming obligated to file a report under or in
response to Schedule 13D or Schedule 14D-1 (or any successor schedule, form, or
report) under the Exchange Act disclosing beneficial ownership by it of shares
or securities of the Company, of greater than 50% of the total voting power
referred to in clause (c) of the foregoing definition or otherwise: (1) the
Company; (2) any CIC Subsidiary; (3) any employee share purchase plan, share
option plan, or other share incentive plan or program; (4) any retirement plan
or automatic dividend reinvestment plan; or (5) any substantially similar plan
of the Company or any CIC Subsidiary or any Person holding securities of the
Company for or pursuant to the terms of any such employee benefit plan.
For purposes of this Section 1.6, "CIC Subsidiary" shall mean a "Subsidiary," as
defined in that certain Indenture, dated as of January 1, 2002 between the
Company, Carriage House Assisted Living, Inc., Home and Community Care, Inc.,
and ALC Indiana, as guarantors, and BNY Midwest Trust Company, an Illinois trust
company, as trustee.
1.7. "Code" shall mean the Internal Revenue Code of 1986,
as amended.
1.8. "Committee" shall mean the Compensation Committee of
the Board, or another committee or subcommittee of the Board, appointed as
provided in Section 10.1.
1.9. "Common Stock" shall mean the common stock of the
Company, par value $0.01 per share.
1.10. "Company" shall mean Assisted Living Concepts, Inc.,
a Nevada corporation.
1.11. "Consultant" shall mean any consultant or adviser if:
(a) The consultant or adviser renders bona fide services
to the Company;
(b) The services rendered by the consultant or adviser
are not in connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market for
the Company's securities; and
(c) The consultant or adviser is a natural person who has
contracted directly with the Company to render such services.
1.12. "Continuing Director" shall mean, as of any date of
determination, any
member of the Board who:
(a) was a member of such Board on January 1, 2002; or
(b) was nominated for election or elected to such Board
with the approval of a majority of the Continuing Directors who were members of
such Board at the time of such nomination or election.
1.13. "Deferred Stock" shall mean Common Stock awarded
under Article VIII of the Plan.
1.14. "Director" shall mean a member of the Board.
1.15. "Dividend Equivalent" shall mean a right to receive
the equivalent value (in cash or Common Stock) of dividends paid on Common
Stock, awarded under Article VIII of the Plan.
1.16. "DRO" shall mean a domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
1.17. "Employee" shall mean any officer or other employee
(as defined in accordance with Section 3401(c) of the Code) of the Company, or
of any corporation which is a Subsidiary.
1.18. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
1.19. "Fair Market Value" of a share of Common Stock as of
a given date shall be (a) the closing price of a share of Common Stock on the
principal exchange on which shares of Common Stock are then trading, if any (or
as reported on any composite index which includes such principal exchange), on
the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (b) if Common Stock is not traded on an exchange but is
quoted on Nasdaq (but not the Nasdaq National Market) or a successor quotation
system or the over-the-counter bulletin board system, or is regularly quoted by
a recognized securities dealer but selling prices are not reported, the mean
between the closing representative bid and asked prices for the Common Stock on
the trading day previous to such date, or (c) if Common Stock is not publicly
traded on an exchange and not quoted in a manner described in subparagraph (b)
above, the Fair Market Value of a share of Common Stock as established by the
Administrator acting in good faith.
1.20. "Holder" shall mean a person who has been granted or
awarded an Award.
1.21. "Incentive Stock Option" shall mean an option which
conforms to the applicable provisions of Section 422 of the Code and which is
designated as an Incentive Stock Option by the Administrator.
1.22. "Independent Director" shall mean a member of the
Board who is not an
Employee of the Company.
1.23. "Non-Qualified Stock Option" shall mean an Option
which is not designated as an Incentive Stock Option by the Administrator.
1.24. "Option" shall mean a stock option granted under
Article IV of the Plan. An Option granted under the Plan shall, as determined by
the Administrator, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to Independent Directors and
Consultants shall be Non-Qualified Stock Options.
1.25. "Performance Award" shall mean a cash bonus, stock
bonus or other performance or incentive award that is paid in cash, Common Stock
or a combination of both, awarded under Article VIII of the Plan.
1.26. "Performance Criteria" shall mean the following
business criteria with respect to the Company, any Subsidiary or any division or
operating unit: (a) net income, (b) pre-tax income, (c) operating income, (d)
cash flow, (e) earnings per share, (f) return on equity, (g) return on invested
capital or assets, (h) cost reductions or savings, (i) funds from operations,
(j) appreciation in the fair market value of Common Stock, and (k) earnings
before any one or more of the following items: interest, taxes, depreciation or
amortization.
1.27. "Person" shall mean any individual, corporation,
limited liability company, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government (or any agency,
instrumentality or political subdivision thereof).
1.28. "Plan" shall mean the 2002 Incentive Award Plan of
Assisted Living Concepts, Inc.
1.29. "Restricted Stock" shall mean Common Stock awarded
under Article VII of the Plan.
1.30. "Rule 16b-3" shall mean Rule 16b-3 promulgated under
the Exchange Act, as such Rule may be amended from time to time.
1.31. "Section 162(m) Participant" shall mean any key
Employee designated by the Administrator as a key Employee whose compensation
for the fiscal year in which the key Employee is so designated or a future
fiscal year may be subject to the limit on deductible compensation imposed by
Section 162(m) of the Code.
1.32. "Securities Act" shall mean the Securities Act of
1933, as amended.
1.33. "Stock Appreciation Right" shall mean a stock
appreciation right granted under Article IX of the Plan.
1.34. "Stock Payment" shall mean (a) a payment in the form
of shares of Common Stock, or (b) an option or other right to purchase shares of
Common Stock, as part of a deferred compensation arrangement, made in lieu of
all or any portion of the compensation, including without limitation, salary,
bonuses and commissions, that would otherwise become
payable to a key Employee or Consultant in cash, awarded under Article VIII of
the Plan.
1.35. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
1.36. "Substitute Award" shall mean an Option granted under
this Plan upon the assumption of, or in substitution for, outstanding equity
awards previously granted by a company or other entity in connection with a
corporate transaction, such as a merger, combination, consolidation or
acquisition of property or stock; provided, however, that in no event shall the
term "Substitute Award" be construed to refer to an award made in connection
with the cancellation and repricing of an Option.
1.37. "Termination of Consultancy" shall mean the time when
the engagement of a Holder as a Consultant to the Company or a Subsidiary is
terminated for any reason, with or without cause, including, but not by way of
limitation, by resignation, discharge, death or retirement, but excluding
terminations where there is a simultaneous commencement of employment with the
Company or any Subsidiary. The Administrator, in its absolute discretion, shall
determine the effect of all matters and questions relating to Termination of
Consultancy, including, but not by way of limitation, the question of whether a
Termination of Consultancy resulted from a discharge for good cause, and all
questions of whether a particular leave of absence constitutes a Termination of
Consultancy. Notwithstanding any other provision of the Plan, the Company or any
Subsidiary has an absolute and unrestricted right to terminate a Consultant's
service at any time for any reason whatsoever, with or without cause, except to
the extent expressly provided otherwise in writing.
1.38. "Termination of Directorship" shall mean the time
when a Holder who is an Independent Director ceases to be a Director for any
reason, including, but not by way of limitation, a termination by resignation,
failure to be elected, death or retirement. The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Directorship with respect to Independent Directors.
1.39. "Termination of Employment" shall mean the time when
the employee-employer relationship between a Holder and the Company or any
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, a termination by resignation, discharge, death,
disability or retirement; but excluding (a) terminations where there is a
simultaneous reemployment or continuing employment of a Holder by the Company or
any Subsidiary, (b) at the discretion of the Administrator, terminations which
result in a temporary severance of the employee-employer relationship, and (c)
at the discretion of the Administrator, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Administrator, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Employment, including, but not by way of limitation, the question
of whether a Termination of Employment resulted from a discharge for good cause,
and all questions of whether a particular leave of absence constitutes a
Termination of Employment; provided, however, that, with respect to Incentive
Stock Options, unless otherwise determined by the Administrator in its
discretion, a
leave of absence, change in status from an employee to an independent contractor
or other change in the employee-employer relationship shall constitute a
Termination of Employment if, and to the extent that, such leave of absence,
change in status or other change interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1. Shares Subject to Plan.
(a) The shares of stock subject to Awards shall
be Common Stock, initially shares of the Company's Common Stock.
Subject to adjustment as provided in Section 11.3, the aggregate number
of such shares which may be issued upon exercise of such Options or
rights or upon any such Awards under the Plan shall not exceed 325,000.
The shares of Common Stock issuable upon exercise of such Options or
rights or upon any such awards may be either previously authorized but
unissued shares or treasury shares.
(b) The maximum number of shares which may be
subject to Awards granted under the Plan to any individual in any
calendar year shall not exceed the Award Limit. To the extent required
by Section 162(m) of the Code, shares subject to Options which are
canceled continue to be counted against the Award Limit.
2.2. Add-back of Options and Other Rights. If any Option,
or other right to acquire shares of Common Stock under any other Award under the
Plan, expires or is canceled without having been fully exercised, or is
exercised in whole or in part for cash as permitted by the Plan, the number of
shares subject to such Option or other right but as to which such Option or
other right was not exercised prior to its expiration, cancellation or exercise
may again be optioned, granted or awarded hereunder, subject to the limitations
of Section 2.1. Furthermore, any shares subject to Awards which are adjusted
pursuant to Section 11.3 and become exercisable with respect to shares of stock
of another corporation shall be considered cancelled and may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1. Shares
of Common Stock which are delivered by the Holder or withheld by the Company
upon the exercise of any Award under the Plan, in payment of the exercise price
thereof or tax withholding thereon, may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. If any shares of
Restricted Stock are surrendered by the Holder or repurchased by the Company
pursuant to Section 7.4 or 7.5 hereof, such shares may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.
ARTICLE III.
GRANTING OF AWARDS
3.1. Award Agreement. Each Award shall be evidenced by an
Award
Agreement. Award Agreements evidencing Awards intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. Award Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 422 of the Code.
3.2. Provisions Applicable to Section 162(m) Participants.
(a) The Committee, in its discretion, may
determine whether an Award is to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code.
(b) Notwithstanding anything in the Plan to the
contrary, the Committee may grant any Award to a Section 162(m)
Participant, including Restricted Stock the restrictions with respect
to which lapse upon the attainment of performance goals which are
related to one or more of the Performance Criteria and any performance
or incentive award described in Article VIII that vests or becomes
exercisable or payable upon the attainment of performance goals which
are related to one or more of the Performance Criteria.
(c) To the extent necessary to comply with the
performance-based compensation requirements of Section 162(m)(4)(C) of
the Code, with respect to any Award granted under Articles VII and VIII
which may be granted to one or more Section 162(m) Participants, no
later than ninety (90) days following the commencement of any fiscal
year in question or any other designated fiscal period or period of
service (or such other time as may be required or permitted by Section
162(m) of the Code), the Committee shall, in writing, (i) designate one
or more Section 162(m) Participants, (ii) select the Performance
Criteria applicable to the fiscal year or other designated fiscal
period or period of service, (iii) establish the various performance
targets, in terms of an objective formula or standard, and amounts of
such Awards, as applicable, which may be earned for such fiscal year or
other designated fiscal period or period of service, and (iv) specify
the relationship between Performance Criteria and the performance
targets and the amounts of such Awards, as applicable, to be earned by
each Section 162(m) Participant for such fiscal year or other
designated fiscal period or period of service. Following the completion
of each fiscal year or other designated fiscal period or period of
service, the Committee shall certify in writing whether the applicable
performance targets have been achieved for such fiscal year or other
designated fiscal period or period of service. In determining the
amount earned by a Section 162(m) Participant, the Committee shall have
the right to reduce (but not to increase) the amount payable at a given
level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or
corporate performance for the fiscal year or other designated fiscal
period or period of service.
(d) Furthermore, notwithstanding any other
provision of the Plan, any Award which is granted to a Section 162(m)
Participant and is intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall be
subject to any additional limitations set forth in Section 162(m) of
the Code (including
any amendment to Section 162(m) of the Code) or any regulations or
rulings issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of
the Code, and the Plan shall be deemed amended to the extent necessary
to conform to such requirements.
3.3. Limitations Applicable to Section 16 Persons.
Notwithstanding any other provision of the Plan, the Plan, and any Award granted
or awarded to any individual who is then subject to Section 16 of the Exchange
Act, shall be subject to any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including any amendment to
Rule 16b-3 of the Exchange Act) that are requirements for the application of
such exemptive rule. To the extent permitted by applicable law, the Plan and
Awards granted or awarded hereunder shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule.
3.4. Consideration. The Award Agreement may provide that
in consideration of the granting of an Award under the Plan, the Holder shall
agree to remain in the employ of (or to consult for or to serve as an
Independent Director of, as applicable) the Company or any Subsidiary for a
period of at least one year (or such shorter period as may be fixed in the Award
Agreement or by action of the Administrator following grant of the Award) after
the Award is granted (or, in the case of an Independent Director, until the next
annual meeting of stockholders of the Company).
3.5. At-Will Employment. Nothing in the Plan or in any
Award Agreement hereunder shall confer upon any Holder any right to continue in
the employ of, or as a Consultant for, the Company or any Subsidiary, or as a
director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Holder at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in a written employment
agreement between the Holder and the Company and any Subsidiary.
ARTICLE IV.
GRANTING OF OPTIONS TO EMPLOYEES,
CONSULTANTS AND INDEPENDENT DIRECTORS
4.1. Eligibility. Any Employee or Consultant selected by
the Committee pursuant to Section 4.4(a)(i) shall be eligible to be granted an
Option. Each Independent Director of the Company shall be eligible to be granted
Options at the times and in the manner set forth in Section 4.5.
4.2. Disqualification for Stock Ownership. No person may
be granted an Incentive Stock Option under the Plan if such person, at the time
the Incentive Stock Option is granted, owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.
4.3. Qualification of Incentive Stock Options. No
Incentive Stock Option shall
be granted to any person who is not an Employee.
4.4. Granting of Options to Employees and Consultants.
(a) The Committee shall from time to time, in
its absolute discretion, and subject to applicable limitations of the
Plan:
(i) Determine which Employees are key
Employees and select from among the key Employees or
Consultants (including Employees or Consultants who have
previously received Awards under the Plan) such of them as in
its opinion should be granted Options;
(ii) Subject to the Award Limit,
determine the number of shares to be subject to such Options
granted to the selected key Employees or Consultants;
(iii) Subject to Section 4.3, determine
whether such Options are to be Incentive Stock Options or
Non-Qualified Stock Options and whether such Options are to
qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions
of such Options, consistent with the Plan; provided, however,
that the terms and conditions of Options intended to qualify
as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall include, but not be limited to,
such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code.
(b) Upon the selection of a key Employee or
Consultant to be granted an Option, the Committee shall instruct the
Secretary of the Company to issue the Option and may impose such
conditions on the grant of the Option as it deems appropriate.
(c) Any Incentive Stock Option granted under the
Plan may be modified by the Committee, with the consent of the Holder,
to disqualify such Option from treatment as an "incentive stock option"
under Section 422 of the Code.
4.5. Granting of Options to Independent Directors. During
the term of the Plan, each person who is an Independent Director as of the date
on which the Board approves the Plan (the "Board Approval Date") automatically
shall be granted (a) an Option to purchase 2,000 shares of Common Stock (subject
to adjustment as provided in Section 11.3) on the Board Approval Date, and (b)
an Option to purchase 500 shares of Common Stock (subject to adjustment as
provided in Section 11.3) on the date of each annual meeting of stockholders
after the Board Approval Date at which the Independent Director is re-elected to
the Board. During the term of the Plan, a person who is initially elected to the
Board after the Board Approval Date and who is an Independent Director at the
time of such initial election automatically shall be granted (x) an Option to
purchase 2,000 shares of Common Stock (subject to adjustment as provided in
Section 11.3) on the date of such initial election, and (y) an Option to
purchase 500
shares of Common Stock (subject to adjustment as provided in Section 11.3) on
the date of each annual meeting of stockholders after such initial election at
which the Independent Director is re-elected to the Board. Members of the Board
who are employees of the Company who subsequently retire from the Company and
remain on the Board will not receive an initial Option grant pursuant to clause
(x) of the preceding sentence, but to the extent that they are otherwise
eligible, will receive, after retirement from employment with the Company,
Options as described in clause (y) of the preceding sentence. Options granted
pursuant to clauses (a) and (x) of this Section 4.5 are hereinafter referred to
as "Initial Options," and Options granted pursuant to clauses (b) and (y) of
this Section 4.5 are hereinafter referred to as "Subsequent Options".
4.6. Options in Lieu of Cash Compensation. To the extent
permitted by applicable law, Options may be granted under the Plan to Employees
and Consultants in lieu of cash bonuses which would otherwise be payable to such
Employees and Consultants and to Independent Directors in lieu of directors'
fees which would otherwise be payable to such Independent Directors, pursuant to
such policies which may be adopted by the Administrator from time to time.
ARTICLE V.
TERMS OF OPTIONS
5.1. Option Price. The price per share of the shares
subject to each Option granted to Employees and Consultants shall be set by the
Committee; provided, however, that such price shall be no less than 100% of the
Fair Market Value of a share of Common Stock on the date the Option is granted,
and:
(a) In the case of Options intended to qualify
as performance-based compensation as described in Section 162(m)(4)(C)
of the Code, such price shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the date the Option is granted;
(b) In the case of Incentive Stock Options such
price shall not be less than 100% of the Fair Market Value of a share
of Common Stock on the date the Option is granted (or the date the
Option is modified, extended or renewed for purposes of Section 424(h)
of the Code);
(c) In the case of Incentive Stock Options
granted to an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of
all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code),
such price shall not be less than 110% of the Fair Market Value of a
share of Common Stock on the date the Option is granted (or the date
the Option is modified, extended or renewed for purposes of Section
424(h) of the Code).
5.2. Option Term. The term of an Option granted to an
Employee or consultant shall be set by the Committee in its discretion;
provided, however, that, in the case of Incentive Stock Options, the term shall
not be more than 10 years from the date the Incentive Stock Option is granted,
or five years from the date the Incentive Stock Option is granted if the
Incentive Stock Option is granted to an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code). Except as
limited by requirements of Section 422 of the Code and regulations and rulings
thereunder applicable to Incentive Stock Options, the Committee may extend the
term of any outstanding Option in connection with any Termination of Employment
or Termination of Consultancy of the Holder, or amend any other term or
condition of such Option relating to such a termination.
5.3. Option Vesting.
(a) The period during which the right to
exercise, in whole or in part, an Option granted to an Employee or a
Consultant vests in the Holder shall be set by the Committee and the
Committee may determine that an Option may not be exercised in whole or
in part for a specified period after it is granted; provided, however,
that, unless the Committee otherwise provides in the terms of the Award
Agreement or otherwise, no Option shall be exercisable by any Holder
who is then subject to Section 16 of the Exchange Act within the period
ending six months and one day after the date the Option is granted. At
any time after grant of an Option, the Committee may, in its sole and
absolute discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option granted to an
Employee or Consultant vests.
(b) No portion of an Option granted to an
Employee or Consultant which is unexercisable at Termination of
Employment or Termination of Consultancy, as applicable, shall
thereafter become exercisable, except as may be otherwise provided by
the Committee either in the Award Agreement or by action of the
Committee following the grant of the Option.
(c) To the extent that the aggregate Fair Market
Value of stock with respect to which "incentive stock options" (within
the meaning of Section 422 of the Code, but without regard to Section
422(d) of the Code) are exercisable for the first time by a Holder
during any calendar year (under the Plan and all other incentive stock
option plans of the Company and any parent or subsidiary corporation,
within the meaning of Section 422 of the Code) of the Company, exceeds
$100,000, such Options shall be treated as Non-Qualified Stock Options
to the extent required by Section 422 of the Code. The rule set forth
in the preceding sentence shall be applied by taking Options into
account in the order in which they were granted. For purposes of this
Section 5.3(c), the Fair Market Value of stock shall be determined as
of the time the Option with respect to such stock is granted.
5.4. Terms of Options Granted to Independent Directors.
The price per share of the shares subject to each Option granted to an
Independent Director shall equal 100% of the Fair Market Value of a share of
Common Stock on the date the Option is granted. Initial Options granted to
Independent Directors shall become vested and exercisable in cumulative
installments of one third (1/3) of the shares subject thereto on the date of
each of the first, second and third annual meetings of stockholders after the
date on which the Initial Option is granted. Subsequent Options granted to
Independent Directors shall become vested and exercisable with respect to
100% of the shares subject thereto on the date of the first annual meeting of
stockholders after the date on which the Subsequent Option is granted. Subject
to Section 6.6, the term of each Option granted to an Independent Director shall
be 10 years from the date the Option is granted, except that any Option granted
to an Independent Director may by its terms become immediately exercisable in
full upon the retirement of the Independent Director in accordance with the
Company's retirement policy applicable to directors. Notwithstanding the
foregoing, no portion of an Option which is unexercisable at Termination of
Directorship shall thereafter become exercisable.
5.5. Substitute Awards. Notwithstanding the foregoing
provisions of this Article V to the contrary, in the case of an Option that is a
Substitute Award, the price per share of the shares subject to such Option may
be less than the Fair Market Value per share on the date of grant, provided,
that the excess of:
(a) The aggregate Fair Market Value (as of the
date such Substitute Award is granted) of the shares subject to the
Substitute Award; over
(b) The aggregate exercise price thereof;
does not exceed the excess of:
(c) The aggregate fair market value (as of the
time immediately preceding the transaction giving rise to the
Substitute Award, such fair market value to be determined by the
Committee) of the shares of the predecessor entity that were subject to
the grant assumed or substituted for by the Company; over
(d) The aggregate exercise price of such shares.
ARTICLE VI.
EXERCISE OF OPTIONS
6.1. Partial Exercise. An exercisable Option may be
exercised in whole or in part. However, an Option shall not be exercisable with
respect to fractional shares and the Administrator may require that, by the
terms of the Option, a partial exercise be with respect to a minimum number of
shares.
6.2. Manner of Exercise. All or a portion of an
exercisable Option shall be deemed exercised upon delivery of all of the
following to the Secretary of the Company or his or her office:
(a) A written notice complying with the
applicable rules established by the Administrator stating that the
Option, or a portion thereof, is exercised. The notice shall be signed
by the Holder or other person then entitled to exercise the Option or
such portion of the Option;
(b) Such representations and documents as the
Administrator, in its absolute discretion, deems necessary or advisable
to effect compliance with all applicable provisions of the Securities
Act and any other federal or state securities laws or
regulations. The Administrator may, in its absolute discretion, also
take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and
registrars;
(c) In the event that the Option shall be
exercised pursuant to Section 11.1 by any person or persons other than
the Holder, appropriate proof of the right of such person or persons to
exercise the Option; and
(d) Full cash payment to the Secretary of the
Company for the shares with respect to which the Option, or portion
thereof, is exercised. However, the Administrator may, in its
discretion, (i) allow a delay in payment up to 30 days from the date
the Option, or portion thereof, is exercised; (ii) allow payment, in
whole or in part, through the delivery of shares of Common Stock which
have been owned by the Holder for at least six months, duly endorsed
for transfer to the Company with a Fair Market Value on the date of
delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) allow payment, in whole or in part,
through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option
exercise equal to the aggregate exercise price of the Option or
exercised portion thereof; (iv) allow payment, in whole or in part,
through the delivery of property of any kind which constitutes good and
valuable consideration; (v) allow payment, in whole or in part, through
the delivery of a full recourse promissory note bearing interest (at no
less than such rate as shall then preclude the imputation of interest
under the Code) and payable upon such terms as may be prescribed by the
Administrator; (vi) allow payment, in whole or in part, through the
delivery of a notice that the Holder has placed a market sell order
with a broker with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price, provided that payment of
such proceeds is then made to the Company upon settlement of such sale;
or (vii) allow payment through any combination of the consideration
provided in the foregoing subparagraphs (ii), (iii), (iv), (v) and
(vi). In the case of a promissory note, the Administrator may also
prescribe the form of such note and the security to be given for such
note. The Option may not be exercised, however, by delivery of a
promissory note or by a loan from the Company when or where such loan
or other extension of credit is prohibited by law.
6.3. Conditions to Issuance of Stock Certificates. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on
all stock exchanges on which such class of stock is then listed;
(b) The completion of any registration or other
qualification of such shares under any state or federal law, or under
the rulings or regulations of the Securities and Exchange Commission or
any other governmental regulatory body which the Administrator shall,
in its absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other
clearance from any state or federal governmental agency which the
Administrator shall, in its absolute discretion, determine to be
necessary or advisable;
(d) The lapse of such reasonable period of time
following the exercise of the Option as the Administrator may establish
from time to time for reasons of administrative convenience; and
(e) The receipt by the Company of full payment
for such shares, including payment of any applicable withholding tax,
which in the discretion of the Administrator may be in the form of
consideration used by the Holder to pay for such shares under Section
6.2(d).
6.4. Rights as Stockholders. Holders shall not be, nor
have any of the rights or privileges of, stockholders of the Company in respect
of any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such Holders.
6.5. Ownership and Transfer Restrictions. The
Administrator, in its absolute discretion, may impose such restrictions on the
ownership and transferability of the shares purchasable upon the exercise of an
Option as it deems appropriate. Any such restriction shall be set forth in the
respective Award Agreement and may be referred to on the certificates evidencing
such shares. The Holder shall give the Company prompt notice of any disposition
of shares of Common Stock acquired by exercise of an Incentive Stock Option
within (a) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Holder, or (b) one year after the transfer of such shares to such
Holder.
6.6. Limitations on Exercise of Options Granted to
Independent Directors. No Option granted to an Independent Director may be
exercised to any extent by anyone after the first to occur of the following
events:
(a) The expiration of 12 months from the date of
the Holder's death;
(b) The expiration of 12 months from the date of
the Holder's Termination of Directorship by reason of his or her
permanent and total disability (within the meaning of Section 22(e)(3)
of the Code);
(c) The expiration of six months from the date
of the Holder's Termination of Directorship for any reason other than
such Holder's death or his or her permanent and total disability,
unless the Holder dies within said six-month period; or
(d) The expiration of 10 years from the date the
Option was granted.
6.7. Additional Limitations on Exercise of Options.
Holders may be required to comply with any timing or other restrictions with
respect to the settlement or exercise of an Option, including a window-period
limitation, as may be imposed in the discretion of the Administrator.
ARTICLE VII.
AWARD OF RESTRICTED STOCK
7.1. Eligibility. Subject to the Award Limit, Restricted
Stock may be awarded to any Employee who the Committee determines is a key
Employee or any Consultant who the Committee determines should receive such an
Award.
7.2. Award of Restricted Stock.
(a) The Committee may from time to time, in its
absolute discretion:
(i) Determine which Employees are key
Employees and select from among the key Employees or
Consultants (including Employees or Consultants who have
previously received other awards under the Plan) such of them
as in its opinion should be awarded Restricted Stock; and
(ii) Determine the purchase price, if
any, and other terms and conditions applicable to such
Restricted Stock, consistent with the Plan.
(b) The Committee shall establish the purchase price,
if any, and form of payment for Restricted Stock; provided, however,
that such purchase price shall be no less than the par value of the
Common Stock to be purchased, unless otherwise permitted by applicable
state law. In all cases, legal consideration shall be required for each
issuance of Restricted Stock.
(c) Upon the selection of a key Employee or
Consultant to be awarded Restricted Stock, the Committee shall instruct
the Secretary of the Company to issue such Restricted Stock and may
impose such conditions on the issuance of such Restricted Stock as it
deems appropriate.
7.3. Rights as Stockholders. Subject to Section 7.4, upon
delivery of the shares of Restricted Stock to the escrow holder pursuant to
Section 7.6, the Holder shall have, unless otherwise provided by the Committee,
all the rights of a stockholder with respect to said shares, subject to the
restrictions in his or her Award Agreement, including the right to receive all
dividends and other distributions paid or made with respect to the shares;
provided, however, that in the discretion of the Committee, any extraordinary
distributions with respect to the Common Stock shall be subject to the
restrictions set forth in Section 7.4.
7.4. Restriction. All shares of Restricted Stock issued
under the Plan (including any shares received by holders thereof with respect to
shares of Restricted Stock as a result of stock dividends, stock splits or any
other form of recapitalization) shall, in the terms of each individual Award
Agreement, be subject to such restrictions as the Committee shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment with
the Company, Company performance and individual performance; provided, however,
that, unless the Committee otherwise provides in the terms of the Award
Agreement or otherwise, no share of
Restricted Stock granted to a person subject to Section 16 of the Exchange Act
shall be sold, assigned or otherwise transferred until at least six months and
one day have elapsed from the date on which the Restricted Stock was issued, and
provided, further, that, except with respect to shares of Restricted Stock
granted to Section 162(m) Participants, by action taken after the Restricted
Stock is issued, the Committee may, on such terms and conditions as it may
determine to be appropriate, remove any or all of the restrictions imposed by
the terms of the Award Agreement. Restricted Stock may not be sold or encumbered
until all restrictions are terminated or expire. If no consideration was paid by
the Holder upon issuance, a Holder's rights in unvested Restricted Stock shall
lapse, and such Restricted Stock shall be surrendered to the Company without
consideration, upon Termination of Employment or, if applicable, upon
Termination of Consultancy with the Company; provided, however, that the
Committee in its sole and absolute discretion may provide that such rights shall
not lapse in the event of a Termination of Employment following a "change of
ownership or control" (within the meaning of Treasury Regulation Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because
of the Holder's death or disability; provided, further, except with respect to
shares of Restricted Stock granted to Section 162(m) Participants, the Committee
in its sole and absolute discretion may provide that no such lapse or surrender
shall occur in the event of a Termination of Employment, or a Termination of
Consultancy, without cause or following any Change in Control of the Company or
because of the Holder's retirement, or otherwise.
7.5. Repurchase of Restricted Stock. The Committee shall
provide in the terms of each individual Award Agreement that the Company shall
have the right to repurchase from the Holder the Restricted Stock then subject
to restrictions under the Award Agreement immediately upon a Termination of
Employment or, if applicable, upon a Termination of Consultancy between the
Holder and the Company, at a cash price per share equal to the price paid by the
Holder for such Restricted Stock; provided, however, that the Committee in its
sole and absolute discretion may provide that no such right of repurchase shall
exist in the event of a Termination of Employment following a "change of
ownership or control" (within the meaning of Treasury Regulation Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because
of the Holder's death or disability; provided, further, that, except with
respect to shares of Restricted Stock granted to Section 162(m) Participants,
the Committee in its sole and absolute discretion may provide that no such right
of repurchase shall exist in the event of a Termination of Employment or a
Termination of Consultancy without cause or following any Change in Control of
the Company or because of the Holder's retirement, or otherwise.
7.6. Escrow. The Secretary of the Company or such other
escrow holder as the Committee may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the restrictions imposed
under the Award Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
7.7. Legend. In order to enforce the restrictions imposed
upon shares of Restricted Stock hereunder, the Committee shall cause a legend or
legends to be placed on certificates representing all shares of Restricted Stock
that are still subject to restrictions under Award Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.
7.8. Section 83(b) Election. If a Holder makes an election
under Section 83(b)
of the Code, or any successor section thereto, to be taxed with respect to the
Restricted Stock as of the date of transfer of the Restricted Stock rather than
as of the date or dates upon which the Holder would otherwise be taxable under
Section 83(a) of the Code, the Holder shall deliver a copy of such election to
the Company immediately after filing such election with the Internal Revenue
Service.
ARTICLE VIII.
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK,
STOCK PAYMENTS
8.1. Eligibility. Subject to the Award Limit, one or more
Performance Awards, Dividend Equivalents, awards of Deferred Stock and/or Stock
Payments may be granted to any Employee whom the Committee determines is a key
Employee or any Consultant whom the Committee determines should receive such an
Award.
8.2. Performance Awards.
(a) Any key Employee or Consultant selected by
the Committee may be granted one or more Performance Awards. The value
of such Performance Awards may be linked to any one or more of the
Performance Criteria or other specific performance criteria determined
appropriate by the Committee, in each case on a specified date or dates
or over any period or periods determined by the Committee. In making
such determinations, the Committee shall consider (among such other
factors as it deems relevant in light of the specific type of award)
the contributions, responsibilities and other compensation of the
particular key Employee or Consultant.
(b) Without limiting Section 8.2(a), the
Committee may grant Performance Awards to any Section 162(m)
Participant in the form of a cash bonus payable upon the attainment of
objective performance goals which are established by the Committee and
relate to one or more of the Performance Criteria, in each case on a
specified date or dates or over any period or periods determined by the
Committee. Any such bonuses paid to Section 162(m) Participants shall
be based upon objectively determinable bonus formulas established in
accordance with the provisions of Section 3.2. The maximum amount of
any Performance Award payable to a Section 162(m) Participant under
this Section 8.2(b) shall not exceed the Award Limit with respect to
any calendar year.
8.3. Dividend Equivalents.
(a) Any key Employee or Consultant selected by
the Committee may be granted Dividend Equivalents based on the
dividends declared on Common Stock, to be credited as of dividend
payment dates, during the period between the date a Stock Appreciation
Right, Deferred Stock or Performance Award is granted, and the date
such Stock Appreciation Right, Deferred Stock or Performance Award is
exercised, vests or expires, as determined by the Committee. Such
Dividend Equivalents shall be converted to cash or additional shares of
Common Stock by such formula and at such time and subject to such
limitations as may be determined by the Committee.
(b) Any Holder of an Option who is an Employee
or Consultant selected by the Committee may be granted Dividend
Equivalents based on the dividends declared on Common Stock, to be
credited as of dividend payment dates, during the period between the
date an Option is granted, and the date such Option is exercised, vests
or expires, as determined by the Committee. Such Dividend Equivalents
shall be converted to cash or additional shares of Common Stock by such
formula and at such time and subject to such limitations as may be
determined by the Committee.
(c) Any Holder of an Option who is an
Independent Director selected by the Board may be granted Dividend
Equivalents based on the dividends declared on Common Stock, to be
credited as of dividend payment dates, during the period between the
date an Option is granted and the date such Option is exercised, vests
or expires, as determined by the Board. Such Dividend Equivalents shall
be converted to cash or additional shares of Common Stock by such
formula and at such time and subject to such limitations as may be
determined by the Board.
(d) Dividend Equivalents granted with respect to
Options intended to be qualified performance-based compensation for
purposes of Section 162(m) of the Code shall be payable, with respect
to pre-exercise periods, regardless of whether such Option is
subsequently exercised.
8.4. Stock Payments. Any key Employee or Consultant
selected by the Committee may receive Stock Payments in the manner determined
from time to time by the Committee. The number of shares shall be determined by
the Committee and may be based upon the Performance Criteria or other specific
performance criteria determined appropriate by the Committee, determined on the
date such Stock Payment is made or on any date thereafter.
8.5. Deferred Stock. Any key Employee or Consultant
selected by the Committee may be granted an award of Deferred Stock in the
manner determined from time to time by the Committee. The number of shares of
Deferred Stock shall be determined by the Committee and may be linked to the
Performance Criteria or other specific performance criteria determined to be
appropriate by the Committee, in each case on a specified date or dates or over
any period or periods determined by the Committee. Common Stock underlying a
Deferred Stock award will not be issued until the Deferred Stock award has
vested, pursuant to a vesting schedule or performance criteria set by the
Committee. Unless otherwise provided by the Committee, a Holder of Deferred
Stock shall have no rights as a Company stockholder with respect to such
Deferred Stock until such time as the Award has vested and the Common Stock
underlying the Award has been issued.
8.6. Term. The term of a Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment shall be set by the
Committee in its discretion.
8.7. Exercise or Purchase Price. The Committee may
establish the exercise or purchase price of a Performance Award, shares of
Deferred Stock or shares received as a Stock Payment; provided, however, that
such price shall not be less than the par value of a share of Common Stock,
unless otherwise permitted by applicable state law.
8.8. Exercise Upon Termination of Employment, Termination
of Consultancy or Termination of Directorship. A Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment is exercisable or
payable only while the Holder is an Employee, Consultant or Independent
Director, as applicable; provided, however, that the Administrator in its sole
and absolute discretion may provide that the Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment may be exercised or
paid subsequent to a Termination of Employment following a "change of control or
ownership" (within the meaning of Section 1.162-27(e)(2)(v) or any successor
regulation thereto) of the Company; provided, further, that except with respect
to Performance Awards granted to Section 162(m) Participants, the Administrator
in its sole and absolute discretion may provide that Performance Awards may be
exercised or paid following a Termination of Employment or a Termination of
Consultancy without cause, or following a Change in Control of the Company, or
because of the Holder's retirement, death or disability, or otherwise.
8.9. Form of Payment. Payment of the amount determined
under Section 8.2 or 8.3 above shall be in cash, in Common Stock or a
combination of both, as determined by the Committee. To the extent any payment
under this Article VIII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 6.3.
ARTICLE IX.
STOCK APPRECIATION RIGHTS
9.1. Grant of Stock Appreciation Rights. A Stock
Appreciation Right may be granted to any key Employee or Consultant selected by
the Committee. A Stock Appreciation Right may be granted (a) in connection and
simultaneously with the grant of an Option, (b) with respect to a previously
granted Option, or (c) independent of an Option. A Stock Appreciation Right
shall be subject to such terms and conditions not inconsistent with the Plan as
the Committee shall impose and shall be evidenced by an Award Agreement.
9.2. Coupled Stock Appreciation Rights.
(a) A Coupled Stock Appreciation Right ("CSAR")
shall be related to a particular Option and shall be exercisable only
when and to the extent the related Option is exercisable.
(b) A CSAR may be granted to the Holder for no
more than the number of shares subject to the simultaneously or
previously granted Option to which it is coupled.
(c) A CSAR shall entitle the Holder (or other
person entitled to exercise the Option pursuant to the Plan) to
surrender to the Company unexercised a portion of the Option to which
the CSAR relates (to the extent then exercisable pursuant to its terms)
and to receive from the Company in exchange therefor an amount
determined by multiplying the difference obtained by subtracting the
Option exercise price from the Fair Market Value of a share of Common
Stock on the date of exercise of the CSAR by the number of shares of
Common Stock with respect to which the CSAR shall have been exercised,
subject to any limitations the Committee may impose.
9.3. Independent Stock Appreciation Rights.
(a) An Independent Stock Appreciation Right
("ISAR") shall be unrelated to any Option and shall have a term set by
the Committee. An ISAR shall be exercisable in such installments as the
Committee may determine. An ISAR shall cover such number of shares of
Common Stock as the Committee may determine; provided, however, that
unless the Committee otherwise provides in the terms of the ISAR or
otherwise, no ISAR granted to a person subject to Section 16 of the
Exchange Act shall be exercisable until at least six months have
elapsed from (but excluding) the date on which the Option was granted.
The exercise price per share of Common Stock subject to each ISAR shall
be set by the Committee. An ISAR is exercisable only while the Holder
is an Employee or Consultant; provided, that the Committee may
determine that the ISAR may be exercised subsequent to Termination of
Employment or Termination of Consultancy without cause, or following a
Change in Control of the Company, or because of the Holder's
retirement, death or disability, or otherwise.
(b) An ISAR shall entitle the Holder (or other
person entitled to exercise the ISAR pursuant to the Plan) to exercise
all or a specified portion of the ISAR (to the extent then exercisable
pursuant to its terms) and to receive from the Company an amount
determined by multiplying the difference obtained by subtracting the
exercise price per share of the ISAR from the Fair Market Value of a
share of Common Stock on the date of exercise of the ISAR by the number
of shares of Common Stock with respect to which the ISAR shall have
been exercised, subject to any limitations the Committee may impose.
9.4. Payment and Limitations on Exercise.
(a) Payment of the amounts determined under
Section 9.2(c) and 9.3(b) above shall be in cash, in Common Stock
(based on its Fair Market Value as of the date the Stock Appreciation
Right is exercised) or a combination of both, as determined by the
Committee. To the extent such payment is effected in Common Stock it
shall be made subject to satisfaction of all provisions of Section 6.3
above pertaining to Options.
(b) Holders of Stock Appreciation Rights may be
required to comply with any timing or other restrictions with respect
to the settlement or exercise of a Stock Appreciation Right, including
a window-period limitation, as may be imposed in the discretion of the
Committee.
ARTICLE X.
ADMINISTRATION
10.1. Compensation Committee. The Compensation Committee
(or another committee or a subcommittee of the Board assuming the functions of
the Committee under the Plan) shall consist solely of two or more Independent
Directors appointed by and holding office at the pleasure of the Board, each of
whom is both a "non-employee director" as defined by Rule 16b-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members
may resign at any time by delivering written notice to the Board. Vacancies in
the Committee may be filled by the Board.
10.2. Duties and Powers of Committee. It shall be the duty
of the Committee to conduct the general administration of the Plan in accordance
with its provisions. The Committee shall have the power to interpret the Plan
and the Award Agreements, and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith, to
interpret, amend or revoke any such rules and to amend any Award Agreement
provided that the rights or obligations of the Holder of the Award that is the
subject of any such Award Agreement are not affected adversely. Any such grant
or award under the Plan need not be the same with respect to each Holder. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan except with respect to matters
which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or
rules issued thereunder, are required to be determined in the sole discretion of
the Committee. Notwithstanding the foregoing, the full Board, acting by a
majority of its members in office, shall conduct the general administration of
the Plan with respect to Options and Dividend Equivalents granted to Independent
Directors.
10.3. Majority Rule; Unanimous Written Consent. The
Committee shall act by a majority of its members in attendance at a meeting at
which a quorum is present or by a memorandum or other written instrument signed
by all members of the Committee.
10.4. Compensation; Professional Assistance; Good Faith
Actions. Members of the Committee shall receive such compensation, if any, for
their services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Holders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or Awards, and all members of the Committee and the Board
shall be fully protected by the Company in respect of any such action,
determination or interpretation.
10.5. Delegation of Authority to Grant Awards. To the
extent permitted by applicable law, the Committee may, but need not, delegate
from time to time some or all of its authority to grant Awards under the Plan to
a committee consisting of one or more members of the Committee or of one or more
officers of the Company; provided, however, that the Committee may not delegate
its authority to grant Awards to individuals (a) who are subject on the date of
the grant to the reporting rules under Section 16(a) of the Exchange Act, (b)
who are Section 162(m) Participants, or (c) who are officers of the Company who
are delegated authority by the Committee hereunder. Any delegation hereunder
shall be subject to the restrictions and limits that the Committee specifies at
the time of such delegation of authority and may be rescinded at any time by the
Committee. At all times, any committee appointed under this
Section 10.5 shall serve in such capacity at the pleasure of the Committee.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
11.1. Not Transferable.
(a) Except as otherwise provided in Section
11.1(b):
(i) No Award under the Plan may be
sold, pledged, assigned or transferred in any manner other
than by will or the laws of descent and distribution or,
subject to the consent of the Administrator, pursuant to a
DRO, unless and until such Award has been exercised, or the
shares underlying such Award have been issued, and all
restrictions applicable to such shares have lapsed;
(ii) No Award or interest or right
therein shall be liable for the debts, contracts or
engagements of the Holder or his or her successors in interest
or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or
by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including
bankruptcy), and any attempted disposition thereof shall be
null and void and of no effect, except to the extent that such
disposition is permitted by clause (i) above; and
(iii) During the lifetime of the Holder,
only he or she may exercise an Option or other Award (or any
portion thereof) granted to him or her under the Plan, unless
it has been disposed of with the consent of the Administrator
pursuant to a DRO. After the death of the Holder, any
exercisable portion of an Option or other Award may, prior to
the time when such portion becomes unexercisable under the
Plan or the applicable Award Agreement, be exercised by his or
her personal representative or by any person empowered to do
so under the deceased Holder's will or under the then
applicable laws of descent and distribution.
(b) Notwithstanding Section 11.1(a), the
Administrator, in its sole discretion, may determine to permit a Holder
to transfer a Non-Qualified Stock Option to any one or more Permitted
Transferees (as defined below), subject to the following terms and
conditions: (i) a Non-Qualified Stock Option transferred to a Permitted
Transferee shall not be assignable or transferable by the Permitted
Transferee other than by will or the laws of descent and distribution;
(ii) any Non-Qualified Stock Option which is transferred to a Permitted
Transferee shall continue to be subject to all the terms and conditions
of the Non-Qualified Stock Option as applicable to the original Holder
(other than the ability to further transfer the Non-Qualified Stock
Option); and (iii) the Holder and the Permitted Transferee shall
execute any and all documents requested by the Administrator,
including, without limitation documents to (A) confirm the status of
the
transferee as a Permitted Transferee, (B) satisfy any requirements for
an exemption for the transfer under applicable federal and state
securities laws and (C) evidence the transfer. For purposes of this
Section 11.1(b), "Permitted Transferee" shall mean, with respect to a
Holder, any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any
person sharing the Holder's household (other than a tenant or
employee), a trust in which these persons (or the Holder) control the
management of assets, and any other entity in which these persons (or
the Holder) own more than fifty percent of the voting interests, or any
other transferee specifically approved by the Administrator after
taking into account any state or federal tax or securities laws
applicable to transferable Non-Qualified Stock Options.
11.2. Amendment, Suspension or Termination of the Plan.
Except as otherwise provided in this Section 11.2, the Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time or
from time to time by the Administrator. However, without approval of the
Company's stockholders given within 12 months before or after the action by the
Administrator, no action of the Administrator may, except as provided in Section
11.3, increase the limits imposed in Section 2.1 on the maximum number of shares
which may be issued under the Plan. No amendment, suspension or termination of
the Plan shall, without the consent of the Holder, alter or impair any rights or
obligations under any Award theretofore granted or awarded, unless the Award
itself otherwise expressly so provides. No Awards may be granted or awarded
during any period of suspension or after termination of the Plan, and in no
event may any Incentive Stock Option be granted under the Plan after the first
to occur of the following events:
(a) The expiration of 10 years from the date the
Plan is adopted by the Board; or
(b) The expiration of 10 years from the date the
Plan is approved by the Company's stockholders under Section 11.4.
11.3. Changes in Common Stock or Assets of the Company,
Acquisition or Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 11.3(e), in the event
that the Administrator determines that any dividend or other
distribution (whether in the form of cash, Common Stock, other
securities or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase,
liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company,
or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or
event, in the Administrator's sole discretion, affects the Common Stock
such that an adjustment is determined by the Administrator to be
appropriate in order to prevent dilution or enlargement of the benefits
or potential benefits intended to be made available under the Plan or
with respect to an Award, then the Administrator shall, in such manner
as it may
deem equitable, adjust any or all of:
(i) The number and kind of shares of
Common Stock (or other securities or property) with respect to
which Awards may be granted or awarded (including, but not
limited to, adjustments of the limitations in Section 2.1 on
the maximum number and kind of shares which may be issued and
adjustments of the Award Limit);
(ii) The number and kind of shares of
Common Stock (or other securities or property) subject to
outstanding Awards; and
(iii) The grant or exercise price with
respect to any Award.
(b) Subject to Sections 11.3(b)(vii), 11.3(c)
and 11.3(e), in the event of any transaction or event described in
Section 11.3(a) or any unusual or nonrecurring transactions or events
affecting the Company, any affiliate of the Company, or the financial
statements of the Company or any affiliate, or of changes in applicable
laws, regulations or accounting principles, the Administrator, in its
sole and absolute discretion, and on such terms and conditions as it
deems appropriate, either by the terms of the Award or by action taken
prior to the occurrence of such transaction or event and either
automatically or upon the Holder's request, is hereby authorized to
take any one or more of the following actions whenever the
Administrator determines that such action is appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to any
Award under the Plan, to facilitate such transactions or events or to
give effect to such changes in laws, regulations or principles:
(i) To provide for either the purchase
of any such Award for an amount of cash equal to the amount
that could have been attained upon the exercise of such Award
or realization of the Holder's rights had such Award been
currently exercisable or payable or fully vested or the
replacement of such Award with other rights or property
selected by the Administrator in its sole discretion;
(ii) To provide that the Award cannot
vest, be exercised or become payable after such event;
(iii) To provide that such Award shall be
exercisable as to all shares covered thereby, notwithstanding
anything to the contrary in Section 5.3 or 5.4 or the
provisions of such Award;
(iv) To provide that such Award be
assumed by the successor or survivor corporation, or a parent
or subsidiary thereof, or shall be substituted for by similar
options, rights or awards covering the stock of the successor
or survivor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of
shares and prices; and
(v) To make adjustments in the number
and type of shares of Common Stock (or other securities or
property) subject to outstanding Awards, and in the number and
kind of outstanding Restricted Stock or Deferred Stock and/or
in the terms and conditions of (including the grant or
exercise price), and the criteria included in, outstanding
options, rights and awards and options, rights and awards
which may be granted in the future.
(vi) To provide that, for a specified
period of time prior to such event, the restrictions imposed
under an Award Agreement upon some or all shares of Restricted
Stock or Deferred Stock may be terminated, and, in the case of
Restricted Stock, some or all shares of such Restricted Stock
may cease to be subject to repurchase under Section 7.5 or
forfeiture under Section 7.4 after such event.
(vii) Notwithstanding any other provision
of the Plan, in the event of a Change in Control, each
outstanding Award shall, immediately prior to the effective
date of the Change in Control, automatically become fully
exercisable for all of the shares of Common Stock at the time
subject to such rights and may be exercised for any or all of
those shares as fully-vested shares of Common Stock.
(c) Notwithstanding any other provision of the
Plan, in the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option shall be assumed or an equivalent
option substituted by the successor corporation or a parent or
subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the Option,
the optionee shall have the right to exercise the Option as to all of
the optioned stock, including shares as to which it would not otherwise
be exercisable. If an Option is exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the
Administrator shall notify the optionee that the Option shall be fully
exercisable for a period of 15 days from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the
purposes of this Section 11.3(c), the Option shall be considered
assumed if, following the merger or sale of assets, the option confers
the right to purchase or receive, for each share of optioned stock
subject to the Option immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common
Stock for each share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding
shares); provided, however, that if such consideration received in the
merger or sale of assets was not solely common stock of the successor
corporation or its parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received
upon the exercise of the Option, for each share of optioned stock
subject to the Option, to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale
of assets.
(d) Subject to Sections 11.3(e), 3.2 and 3.3,
the Administrator may, in its discretion, include such further
provisions and limitations in any Award, agreement or certificate, as
it may deem equitable and in the best interests of the Company.
(e) With respect to Awards which are granted to
Section 162(m) Participants and are intended to qualify as
performance-based compensation under Section 162(m)(4)(C), no
adjustment or action described in this Section 11.3 or in any other
provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify under
Section 162(m)(4)(C), or any successor provisions thereto. No
adjustment or action described in this Section 11.3 or in any other
provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1)
of the Code. Furthermore, no such adjustment or action shall be
authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Administrator determines that the
Award is not to comply with such exemptive conditions. The number of
shares of Common Stock subject to any Award shall always be rounded to
the next whole number.
(f) The existence of the Plan, the Award
Agreement and the Awards granted hereunder shall not affect or restrict
in any way the right or power of the Company or the shareholders of the
Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or
its business, any merger or consolidation of the Company, any issue of
stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are
superior to or affect the Common Stock or the rights thereof or which
are convertible into or exchangeable for Common Stock, or the
dissolution or liquidation of the company, or any sale or transfer of
all or any part of its assets or business, or any other corporate act
or proceeding, whether of a similar character or otherwise.
11.4. Approval of Plan by Stockholders. The Plan will be
submitted for the approval of the Company's stockholders within 12 months after
the date of the Board's initial adoption of the Plan. Awards may be granted or
awarded prior to such stockholder approval, provided that no Incentive Stock
Option granted prior to stockholder approval shall be exercisable or vest prior
to the time when the Plan is approved by the stockholders, and provided further
that if such approval has not been obtained at the end of said twelve-month
period, all Incentive Stock Options previously granted or awarded under the Plan
shall thereupon be canceled and become null and void. In addition, if the Board
determines that Awards other than Options or Stock Appreciation Rights which may
be granted to Section 162(m) Participants should continue to be eligible to
qualify as performance-based compensation under Section 162(m)(4)(C) of the
Code, the Performance Criteria must be disclosed to and approved by the
Company's stockholders no later than the first stockholder meeting that occurs
in the fifth year following the year in which the Company's stockholders
previously approved the Performance Criteria.
11.5. Tax Withholding. The Company shall be entitled to
require payment in cash or deduction from other compensation payable to each
Holder of any sums required by
federal, state or local tax law to be withheld with respect to the issuance,
vesting, exercise or payment of any Award. The Administrator may in its
discretion and in satisfaction of the foregoing requirement allow such Holder to
elect to have the Company withhold shares of Common Stock otherwise issuable
under such Award (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld. Notwithstanding any
other provision of the Plan, the number of shares of Common Stock which may be
withheld with respect to the issuance, vesting, exercise or payment of any Award
(or which may be repurchased from the Holder of such Award within six months
after such shares of Common Stock were acquired by the Holder from the Company)
in order to satisfy the Holder's federal and state income and payroll tax
liabilities with respect to the issuance, vesting, exercise or payment of the
Award shall be limited to the number of shares which have a Fair Market Value on
the date of withholding or repurchase equal to the aggregate amount of such
liabilities based on the minimum statutory withholding rates for federal and
state tax income and payroll tax purposes that are applicable to such
supplemental taxable income.
11.6. Loans. The Committee may, in its discretion, extend
one or more loans to key Employees in connection with the exercise or receipt of
an Award granted or awarded under the Plan, or the issuance of Restricted Stock
or Deferred Stock awarded under the Plan. The terms and conditions of any such
loan shall be set by the Committee.
11.7. Forfeiture Provisions. Pursuant to its general
authority to determine the terms and conditions applicable to Awards under the
Plan, the Administrator shall have the right to provide, in the terms of Awards
made under the Plan, or to require a Holder to agree by separate written
instrument, that (a)(i) any proceeds, gains or other economic benefit actually
or constructively received by the Holder upon any receipt or exercise of the
Award, or upon the receipt or resale of any Common Stock underlying the Award,
must be paid to the Company, and (ii) the Award shall terminate and any
unexercised portion of the Award (whether or not vested) shall be forfeited, if
(b)(i) a Termination of Employment, Termination of Consultancy or Termination of
Directorship occurs prior to a specified date, or within a specified time period
following receipt or exercise of the Award, or (ii) the Holder at any time, or
during a specified time period, engages in any activity in competition with the
Company, or which is inimical, contrary or harmful to the interests of the
Company, as further defined by the Administrator or (iii) the Holder incurs a
Termination of Employment, Termination of Consultancy or Termination of
Directorship for cause.
11.8. Effect of Plan Upon Options and Compensation Plans.
The adoption of the Plan shall not affect any other compensation or incentive
plans in effect for the Company or any Subsidiary. Nothing in the Plan shall be
construed to limit the right of the Company (a) to establish any other forms of
incentives or compensation for Employees, Directors or Consultants of the
Company or any Subsidiary, or (b) to grant or assume options or other rights or
awards otherwise than under the Plan in connection with any proper corporate
purpose including but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
partnership, limited liability company, firm or association.
11.9. Compliance with Laws. The Plan, the granting and
vesting of Awards under the Plan and the issuance and delivery of shares of
Common Stock and the payment of
money under the Plan or under Awards granted or awarded hereunder are subject to
compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
the Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
and regulations.
11.10. Titles. Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of the
Plan.
11.11. Governing Law. The Plan and any agreements hereunder
shall be administered, interpreted and enforced under the internal laws of the
State of Oregon without regard to conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by
the Board of Directors of Assisted Living Concepts, Inc. on March 6, 2002.
Executed on this 6th day of March, 2002.
/s/ Sandra Campbell
____________________________________
Secretary
* * *
I hereby certify that the foregoing Plan was approved by the
stockholders of Assisted Living Concepts, Inc. on ____________ __, 200__.
Executed on this ____ day of _______________, 200___.
____________________________________
Secretary