EXHIBIT 10.3
SKILLED HEALTHCARE GROUP, INC.
2007 INCENTIVE AWARD PLAN
Skilled Healthcare Group, Inc., a Delaware corporation (the "Company"), by
resolution of its Board of Directors, hereby adopts the Skilled Healthcare
Group, Inc. 2007 Incentive Award Plan (the "Plan"). The Plan will become
effective upon the approval of the Plan by the Company's stockholders (the
"Effective Date").
The purpose of the Plan is to promote the success and enhance the value of
the Company by linking the personal interests of the members of the Board,
Employees, and Consultants to those of the Company's stockholders and by
providing such individuals with an incentive for outstanding performance to
generate superior returns to the Company's stockholders. The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of members of the Board, Employees, and
Consultants upon whose judgment, interest, and special effort the successful
conduct of the Company's operation is largely dependent.
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 in Article X. With reference to the
duties of the Committee under the Plan which have been delegated to one or more
persons pursuant to Section 10.5, or as to which the Board has assumed, the term
"Administrator" shall refer to such person(s) unless the Committee has revoked
such delegation.
1.2. "Award" shall mean an Option, a Restricted Stock award, a
Restricted Stock Unit 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, 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 Five Hundred Sixty One Thousand
(561,000) shares of Common Stock, as adjusted pursuant to Section 11.3. Solely
with respect to Performance Awards granted pursuant to Section 8.2(b), "Award
Limit" shall mean One Million Dollars ($1,000,000).
1.5. "Board" shall mean the Board of Directors of the Company, as
constituted from time to time.
1.6. "Change in Control" means the occurrence of any of the
following events:
(a) a transaction or series of transactions (other than an
offering of Stock to the general public through a registration statement filed
with the Securities and Exchange Commission) whereby any "person" or related
"group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of
the Exchange Act) (other than the Company, any of its subsidiaries, an employee
benefit plan maintained by the Company or any of its subsidiaries or a "person"
that, prior to such transaction, directly or indirectly controls, is controlled
by, or is under common control with, the Company) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company possessing more than 50% of the total
combined voting power of the Company's securities outstanding immediately after
such acquisition; or
(b) During any 36-month period, individuals who, at the
beginning of such period, constitute the Board together with any new director(s)
(other than a director designated by a person who shall have entered into an
agreement with the Company to effect a transaction described in Section 1.6(a)
or Section 1.6(c)) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the beginning of the
36-month period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or
(c) The consummation by the Company (whether directly
involving the Company or indirectly involving the Company through one or more
intermediaries) of (x) a merger, consolidation, reorganization, or business
combination or (y) a sale or other disposition of all or substantially all of
the Company's assets in any single transaction or series of related transactions
or (z) the acquisition of assets or stock of another entity, in each case other
than a transaction:
(i) Which results in the Company's voting securities
outstanding immediately before the transaction continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the Company or the person that, as a result of the
transaction, controls, directly or indirectly, the Company or owns,
directly or indirectly, all or substantially all of the Company's assets
or otherwise succeeds to the business of the Company (the Company or such
person, the "Successor Entity")) directly or indirectly, at least a
majority of the combined voting power of the Successor Entity's
outstanding voting securities immediately after the transaction, and
(ii) After which no person or group beneficially owns
voting securities representing 50% or more of the combined voting power of
the Successor Entity; provided, however, that no person or group shall be
treated for purposes of this Section 1.6(c)(ii) as beneficially owning 50%
or more of combined voting power of the Successor Entity solely as a
result of the voting power held in the Company prior to the consummation
of the transaction; or
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(d) The Company's stockholders approve a liquidation or
dissolution of the Company.
For purposes of subsection (a) above, the calculation of
voting power shall be made as if the date of the acquisition were a record date
for a vote of the Company's stockholders, and for purposes of subsection (c)
above, the calculation of voting power shall be made as if the date of the
consummation of the transaction were a record date for a vote of the Company's
stockholders.
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 Class A common stock of the
Company, par value $0.001 per share.
1.10. "Company" shall mean Skilled Healthcare Group, Inc., a
Delaware corporation, or any successor entity.
1.11. "Consultant" shall mean any consultant or adviser if: (a) the
consultant or adviser is a natural person, (b) the consultant or adviser renders
bona fide services to the Company or any Subsidiary; and (c) 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.
1.12. "Covered Employee" shall mean any Employee who is, or could
be, a "covered employee" within the meaning of Section 162(m) of the Code.
1.13. "Deferred Stock" shall mean rights to receive Common Stock
awarded under Article VIII of the Plan, which may be expressed in terms of
units, shares or otherwise.
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 with respect to Awards pursuant to 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. "Effective Date" shall mean the date the Plan is approved by
the Company's stockholders.
1.18. "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 Subsidiary.
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1.19. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
1.20. "Fair Market Value" means, as of any date:
(a) If the Common Stock is listed on any established stock
exchange (such as the New York Stock Exchange) or any national market system,
including without limitation any market system of The NASDAQ Stock Market, its
Fair Market Value shall be the closing sales price for a share of Common Stock
as quoted on such exchange or system on that date (or if no such sales price is
quoted on such date, then the Fair Market Value shall be the closing sale price
on the last preceding date for which such quotation exists), as reported in The
Wall Street Journal or such other source as the Administrator deems reliable;
(b) If the Common Stock is regularly quoted by a recognized
securities dealer but closing sales prices are not reported, its Fair Market
Value shall be the mean of the high bid and low asked prices on that date (or if
no such sales price is quoted on such date, then the Fair Market Value shall be
the closing sale price on the last preceding date for which such information
exists), as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or
(c) If the Common Stock is neither listed on an established
stock exchange or a national market system nor regularly quoted by a recognized
securities dealer, the Fair Market Value thereof shall be established by the
Administrator in good faith.
Notwithstanding the foregoing, The Fair Market Value of a
share of Common Stock on the effective date of the initial public offering of
the Common Stock shall be the initial offering price to the public under such
initial public offering.
1.21. "Fiscal Year" means the fiscal year of the Company.
1.22. "Holder" shall mean a person who has been granted or awarded
an Award.
1.23. "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.
1.24. "Non-Employee Director" shall mean a member of the Board who
is not an Employee.
1.25. "Non-Qualified Stock Option" shall mean an Option which is not
designated as an Incentive Stock Option by the Administrator.
1.26. "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 Non-Employee Directors and
Consultants shall be Non-Qualified Stock Options.
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1.27. "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.
1.28. "Performance Criteria" means the criteria that the Committee
selects for an Award for purposes of establishing the Performance Goal or
Performance Goals for a Performance Period. The Performance Criteria that will
be used to establish Performance Goals are limited to the following, or growth
in the following, alone or in combination: (a) net earnings (either before or
after (i) interest, (ii) taxes, (iii) depreciation and (iv) amortization), (b)
gross or net sales or revenue, (c) net income (either before or after taxes),
(d) operating earnings, (e) cash flow (including, but not limited to, operating
cash flow and free cash flow), (f) return on assets, (g) return on capital, (h)
return on stockholders' equity, (i) return on sales, (j) gross or net profit or
operating margin, (k) costs, (l) funds from operations, (m) expense, (n) working
capital, (o) earnings per share, (p) price per share of Common Stock, (q) FDA or
other regulatory body approval for commercialization of a product, (r)
implementation or completion of critical projects, and (s) market share, any of
which may be measured either in absolute terms or as compared to any incremental
increase or decrease or as compared to results of a peer group. The Committee
shall, within the time prescribed by Section 162(m) of the Code, define in an
objective fashion the manner of calculating the Performance Criteria it selects
to use for such Performance Period for such Award; provided, however, that each
Performance Criteria shall be determined in accordance with generally accepted
accounting principles to the extent applicable.
1.29. "Performance Goals" means, for a Performance Period, the goals
established in writing by the Committee for the Performance Period based upon
the Performance Criteria. Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance or the performance of a division, business
unit, or an individual. The Committee, in its discretion, may, within the time
prescribed by Section 162(m) of the Code, adjust or modify the calculation of
Performance Goals for such Performance Period in order to prevent the dilution
or enlargement of the rights of any Holder of a Performance Award (a) in the
event of, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event, or development, or (b) in recognition of, or in anticipation
of, any other unusual or nonrecurring events affecting the Company, or the
financial statements of the Company, or in response to, or in anticipation of,
changes in applicable laws, regulations, accounting principles, or business
conditions. The achievement of each Performance Goal shall be determined in
accordance with generally accepted accounting principles to the extent
applicable.
1.30. "Performance Period" means one or more periods of time, which
may be of varying and overlapping durations, as the Committee may select, over
which the attainment of one or more Performance Goals will be measured for the
purpose of determining a Holder's right to, and the payment of, a Performance
Award.
1.31. "Plan" shall mean the Skilled Healthcare Group, Inc. 2007
Incentive Award Plan, as the same may be amended or restated from time to time.
1.32. "Restricted Stock" shall mean Common Stock awarded under
Article VII of the Plan.
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1.33. "Restricted Stock Units" shall mean rights to receive Common
Stock awarded under Article VIII.
1.34. "Rule 16b-3" shall mean Rule 16b-3 promulgated under the
Exchange Act, as such Rule may be amended from time to time.
1.35. "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.36. " Stock Appreciation Right" shall mean a stock appreciation
right granted under Article IX of the Plan.
1.37. " 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, commissions and directors' fees, that would otherwise become payable to
a Employee, Non-Employee Director or Consultant in cash, awarded under Article
VIII of the Plan.
1.38. "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.
1.39. "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.
1.40. "Termination of Service" shall mean:
(i) the time when a Holder who is a Non-Employee Director
ceases to be a Director for any reason, including, without limitation, a
termination by resignation, failure to be elected, death or retirement; or
(ii) 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, without limitation, by resignation, discharge,
death or retirement, but excluding terminations where there is a
simultaneous commencement of employment with the Company or any
Subsidiary; or
(iii) 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, without 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, and (b)
terminations which are followed by the simultaneous establishment of a
consulting
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relationship by the Company or a Subsidiary with the former employee,
provided, however, that, with respect to Incentive Stock Options, unless
the Administrator otherwise provides in the terms of the Award Agreement
or otherwise, 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.
The Administrator, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Service,
including, without limitation, the question of whether a Termination of Service
resulted from a discharge for cause. Notwithstanding any other provision of the
Plan, the Company or any Subsidiary has an absolute and unrestricted right to
terminate a Consultant's or Employee's service at any time for any reason
whatsoever, with or without cause, except to the extent expressly provided
otherwise in writing. For purposes of the Plan, a Holder's employee-employer
relationship or consulting relationship, as applicable, shall be deemed to be
terminated in the event that the Subsidiary employing such Holder ceases to
remain a Subsidiary following any merger, sale of stock or other corporate
transaction or event (including, without limitation, a spin-off).
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1. Shares Subject to Plan.
(a) Subject to Section 11.3 and Section 2.1(b), the aggregate
number of shares of Common Stock that may be issued or transferred pursuant to
Awards under the Plan shall be equal to One Million One Hundred Twenty Three
Thousand One Hundred Eighty One (1,123,181) shares.
(b) To the extent that an Award terminates, expires, lapses or
is forfeited for any reason, any shares of Common Stock then subject to such
Award shall again be available for grant pursuant to the Plan. To the extent
permitted by applicable law or any exchange rule, shares of Common Stock issued
in assumption of, or in substitution for, any outstanding awards of any entity
acquired in any form of combination by the Company or any Subsidiary, and all
Substitution Awards, shall not be counted against shares of Common Stock
available for grant pursuant to this Plan. 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 granted or awarded hereunder, subject to
the limitations of Section 2.1(a). Shares of Common Stock withheld by the
Company or delivered to the Company in payment of the exercise price or tax
withholding obligations of any Award shall not be available for grant under the
Plan. The payment of Dividend Equivalents in conjunction with any outstanding
Awards shall not be counted against the shares available for issuance under the
Plan. Notwithstanding the provisions of this Section 2.1(b), 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.
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2.2. Stock Distributed. Any Common Stock distributed pursuant to an
Award shall consist, in whole or in part, of authorized and unissued Common
Stock or shares of Common Stock held in treasury.
2.3. Limitation on Number of Shares Subject to Awards.
Notwithstanding any provision in the Plan to the contrary, and subject to
Article XI, the maximum number of shares of Common Stock with respect to one or
more Awards that may be granted to any one individual during any calendar year
shall not exceed the Award Limit; provided, however, that in the year of initial
hiring of an Employee, the maximum number of shares of Common Stock with respect
to one or more Awards that may be granted to such Employee during such year of
initial hiring shall not exceed 150% of the Award Limit. To the extent required
by Section 162(m) of the Code, shares subject to Awards which are canceled shall
continue to be counted against the Award Limit.
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 Covered Employees.
(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 Covered Employee, including Restricted Stock
the restrictions with respect to which lapse upon the attainment of specified
Performance Goals and any performance or incentive award described in Article
VIII that vests or becomes exercisable or payable upon the attainment of one or
more specified Performance Goals.
(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 Covered Employees, 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 Covered Employees, (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
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amounts of such Awards, as applicable, to be earned by each Covered Employee 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 Covered Employee, 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 Covered Employee 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. 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 rights 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.
3.5. Foreign Laws. Notwithstanding any provision of the Plan to the
contrary, in order to comply with the laws in other countries in which the
Company or its Subsidiaries operate or have Employees, Non-Employee Directors or
Consultants, or in order to comply with the listing standards of any foreign
stock exchange on which the Company's shares are listed or traded, the
Administrator, in its discretion, shall have the power and authority to: (i)
determine which Subsidiaries shall be covered by the Plan; (ii) determine which
Employees, Non-Employee Directors or Consultants outside the United States are
eligible to participate in the Plan; (iii) modify the terms and conditions of
any Awards to comply with applicable foreign laws or listing requirements of any
such foreign stock exchange; (iv) establish subplans and modify exercise
procedures and other terms and procedures, to the extent such actions may be
necessary or advisable (any such subplans and/or modifications shall be attached
to this Plan as
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appendices); provided, however, that no such subplans and/or modifications shall
increase the share limitation contained in Section 2.1 of the Plan; and (v) take
any action, before or after an Award is made, that it deems advisable to obtain
approval or comply with any necessary local or foreign governmental regulatory
exemptions or approvals or listing requirements of any such foreign stock
exchange. Notwithstanding the foregoing, the Administrator may not take any
actions under this Section 3.6 that would violate the Code, any applicable
federal, state or foreign securities law or governing statute or any other
applicable law or that would require prior stockholder approval (until such
approval was obtained).
3.6. Awards in Lieu of Cash Compensation. Awards 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 Non-Employee
Directors in lieu of directors' fees which would otherwise be payable to such
Non-Employee Directors, pursuant to such policies which may be adopted by the
Administrator from time to time.
ARTICLE IV.
GRANTING OF OPTIONS TO EMPLOYEES,
CONSULTANTS AND NON-EMPLOYEE DIRECTORS
4.1. Eligibility. Each Employee, Consultant and Non-Employee
Director selected by the Administrator shall be eligible to be granted an
Option.
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 (as defined in Section 424(e) 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 Administrator shall from time to time, in its absolute
discretion, and, subject to applicable limitations of the Plan:
(i) Select from among the 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 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
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whether such Options are to qualify as performance-based compensation (as
described in Section 162(m)(4)(C) of the Code); and
(iv) Subject to the provisions of Article V, 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 an Employee or Consultant to be
granted an Option, the Administrator 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 Administrator, 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 Non-Employee Director. The Administrator
shall from time to time, in its absolute discretion, and subject to applicable
limitations of the Plan:
(a) Select from among the Non-Employee Directors (including
Non-Employee Directors who have previously received Awards under the Plan) such
of them as in its opinion should be granted Options;
(b) Subject to the Award Limit, determine the number of shares
to be subject to such Options granted to the selected Non-Employee Directors;
and
(c) Subject to the provisions of Article V, determine the
terms and conditions of such Options, consistent with the Plan.
ARTICLE V.
TERMS OF OPTIONS
5.1. Option Price. The price per share of the shares subject to each
Option granted to Employees, Non-Employee Directors and Consultants shall be set
by the Administrator; provided, however, that:
(a) 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; and
(b) 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
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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,
Non-Employee Director or Consultant shall be set by the Administrator in its
discretion; provided, however, that the term shall not be more than ten (10)
years from the date the Option is granted, or five (5) years from the date the
Option is granted if the Option is an Incentive Stock Option 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 409A or
Section 422 of the Code and regulations and rulings thereunder, the
Administrator may extend the term of any outstanding Option in connection with
any Termination of Service of the Holder, or amend any other term or condition
of such Option relating to such a Termination of Service.
5.3. Option Vesting.
(a) The period during which the right to exercise, in whole or
in part, an Option vests in the Holder shall be set by the Administrator and the
Administrator may determine that an Option may not be exercised in whole or in
part for a specified period after it is granted. At any time after grant of an
Option, the Administrator may, in its sole and absolute discretion and subject
to whatever terms and conditions it selects, accelerate the period during which
an Option vests.
(b) No portion of an Option granted to an Employee,
Non-Employee Director or Consultant which is unexercisable at Termination of
Service shall thereafter become exercisable, except as may be otherwise provided
by the Administrator either in the Award Agreement or by action of the
Administrator 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 plans of the Company and any Subsidiary or parent
corporation thereof, within the meaning of Section 424 of the Code, exceeds
$100,000, the 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 and other "incentive stock 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 or other "incentive stock options" with respect to such stock is
granted.
5.4. 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: (x) the aggregate fair
market value (as of the time immediately preceding the transaction giving rise
to the Substitute Award, such fair
12
market value to be determined by the Administrator) of the shares of the
predecessor entity that were subject to the grant assumed or substituted for by
the Company, over (y) 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 such other person or entity designated by the Administrator,
or his, her or its office, as applicable:
(a) A written notice complying with the applicable rules
established by the Administrator stating that the Option, or a portion
thereof, is to be exercised;
(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;
(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, allow such payment to
be made, in whole or in part, (i) through the delivery (actual or
constructive through attestation) of shares of Common Stock with a Fair
Market Value on the date of delivery equal to the aggregate exercise price
of the Option or exercised portion thereof; (ii) 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; (iii) through
the delivery of property of any kind which constitutes good and valuable
consideration; (iv) 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 the broker timely
pays a sufficient portion of the net proceeds of the sale to the Company
in satisfaction of the Option exercise price; or (v) through any
combination of the consideration provided in the foregoing subparagraphs
(i), (ii), (iii) and (iv); provided, however, that the payment in the
manner prescribed in the preceding paragraphs shall not be permitted to
the extent that
13
the Administrator determines that payment in such manner shall result in
an extension or maintenance of credit, an arrangement for the extension of
credit, or a renewal or an extension of credit in the form of a personal
loan to or for any Director or executive officer of the Company that is
prohibited by Section 13(k) of the Exchange Act or other applicable law;
and
(e) The receipt by the Company of full 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).
6.3. 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.
6.4. 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.
ARTICLE VII.
AWARD OF RESTRICTED STOCK
7.1. Eligibility. Subject to the Award Limit, Restricted Stock may
be awarded to any Employee, Non-Employee Director or Consultant who the
Administrator determines should receive such an Award.
7.2. Award of Restricted Stock.
(a) The Administrator may from time to time, in its absolute
discretion:
(i) Select from among the Employees, Non-Employee
Directors or Consultants (including Employees, Non-Employee Directors or
Consultants who have previously received Awards under the Plan) such of
them as in its opinion should be awarded Restricted Stock; and
(ii) Determine the purchase price, if any, restrictions
and other terms and conditions applicable to such Restricted Stock,
consistent with the Plan.
14
(b) The Administrator 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 an Employee, Non-Employee Director
or Consultant to be awarded Restricted Stock, the Administrator 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. The Holder shall have, unless otherwise
provided by the Administrator, all the rights of a stockholder with respect to
the Restricted Stock issued to the Holder, 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 Administrator, 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 Administrator shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment,
directorship or consultancy with the Company, Company performance, and
individual performance or any of the Performance Criteria or other criteria
determined appropriate by the Administrator. Restricted Stock may not be sold or
encumbered until all restrictions are terminated or expire. By action taken
after the Restricted Stock is issued, the Administrator 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. If no consideration
was paid by the Holder upon issuance, the Holder shall automatically forfeit all
rights in Restricted Stock then subject to restrictions, and such Restricted
Stock shall be surrendered to the Company without consideration upon Termination
of Service; provided, however, that the Administrator in its sole and absolute
discretion may provide that the Holder shall not forfeit any or all of such
shares of Restricted Stock and the restrictions thereon shall lapse in the event
of Termination of Service following a Change in Control of the Company or
because of the Holder's retirement, death or disability or termination without
cause, or otherwise.
7.5. Repurchase of Restricted Stock. The Administrator 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
Service, at a cash price per share equal to the price paid by the Holder for
such Restricted Stock; provided, however, that the Administrator in its sole and
absolute discretion may provide that the Company shall not have such right of
repurchase for any or all of such shares of Restricted Stock and the
restrictions thereon shall lapse in the event of a Termination of Service,
following a Change in Control of the Company or because of the Holder's
retirement, death or disability or termination without cause, or otherwise.
15
7.6. Escrow. The Secretary of the Company or such other escrow
holder as the Administrator 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 Administrator shall cause a legend or
legends to be placed on certificates (or book entries) 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, RESTRICTED STOCK UNITS
8.1. Eligibility. Subject to the Award Limit, one or more
Performance Awards, Dividend Equivalent awards, Deferred Stock awards, Stock
Payment awards, and/or Restricted Stock Unit awards may be granted to any
Employee, Non-Employee Director or Consultant whom the Administrator determines
should receive such an Award.
8.2. Performance Awards.
(a) Any Employee, Non-Employee Director or Consultant selected
by the Administrator 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 criteria determined appropriate by the Administrator,
in each case on a specified date or dates or over any period or periods
determined by the Administrator. In making such determinations, the
Administrator 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 Employee, Non-Employee Director or
Consultant.
(b) Without limiting Section 8.2(a), the Administrator may
grant Performance Awards to any Covered Employee in the form of a cash bonus
payable upon the attainment of objective Performance Goals which are established
by the Administrator, in each case on a specified date or dates or over any
period or periods determined by the Administrator. Any such bonuses paid to
Covered Employees shall be based upon objectively determinable bonus formulas
established in accordance with the provisions of Section 3.2. The maximum
aggregate amount of all Performance Awards granted to a Covered Employee under
this Section 8.2(b) during any calendar year shall not exceed the Award Limit.
Unless otherwise specified by the Administrator at the time of grant, the
Performance Criteria with respect to a Performance
16
Award payable to a Covered Employee shall be determined on the basis of
generally accepted accounting principles.
8.3. Dividend Equivalents. Any Employee, Non-Employee Director or
Consultant selected by the Administrator 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 Award is granted and the
date such Award vests, is exercised, is distributed or expires, as determined by
the Administrator. 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 Administrator.
8.4. Stock Payments. Any Employee, Non-Employee Director or
Consultant selected by the Administrator may receive Stock Payments in the
manner determined from time to time by the Administrator. The number of shares
shall be determined by the Administrator and may be based upon the Performance
Criteria or other specific criteria determined appropriate by the Administrator,
determined on the date such Stock Payment is made or on any date thereafter.
8.5. Deferred Stock. Any Employee, Non-Employee Director or
Consultant selected by the Administrator may be granted an award of Deferred
Stock in the manner determined from time to time by the Administrator. The
number of shares of Deferred Stock shall be determined by the Administrator and
may be linked to the satisfaction of one or more Performance Criteria or other
specific criteria as the Administrator determines to be appropriate at the time
of grant, in each case on a specified date or dates or over any period or
periods determined by the Administrator. 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 Administrator,
if applicable, and until such distribution date as specified by the
Administrator. The Administrator may permit the Holder to elect the distribution
date, subject to compliance with Section 409A of the Code. Unless otherwise
provided by the Administrator, 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. Restricted Stock Units. Any Employee, Non-Employee Director or
Consultant selected by the Administrator may be granted an award of Restricted
Stock Units in the manner determined from time to time by the Administrator. The
Administrator is authorized to make awards of Restricted Stock Units in such
amounts and subject to such terms and conditions as determined by the
Administrator. The Administrator shall specify the date or dates on which the
Restricted Stock Units shall become fully vested and nonforfeitable, and may
specify such conditions to vesting as it deems appropriate, and may specify that
such Restricted Stock Units become fully vested and nonforfeitable pursuant to
the satisfaction of one or more Performance Criteria or other specific criteria
as the Administrator determines to be appropriate at the time of the grant, in
each case on a specified date or dates or over any period or periods determined
by the Administrator. The Administrator shall specify the distribution dates
applicable to each award of Restricted Stock Units, which shall be no earlier
than the vesting dates. The Administrator may permit the Holder to elect the
distribution date, subject to compliance with Section 409A of the Code. On the
distribution dates, the Company shall issue
17
to the Holder one unrestricted, fully transferable share of Common Stock for
each Restricted Stock Unit distributed.
8.7. Term. The term of a Performance Award, Dividend Equivalent
award, Deferred Stock award, Stock Payment award and/or Restricted Stock Unit
award shall be set by the Administrator in its discretion.
8.8. Exercise or Purchase Price. The Administrator may establish the
exercise or purchase price of a Performance Award, shares of Deferred Stock,
shares distributed as a Stock Payment award or shares distributed pursuant to a
Restricted Stock Unit award; 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.
8.9. Termination of Employment, Termination of Consultancy or
Termination of Directorship. A Performance Award, Dividend Equivalent award,
Deferred Stock award, Stock Payment award and/or Restricted Stock Unit award may
vest or become exercisable or distributable only while the Holder is an
Employee, Consultant or Non-Employee Director, as applicable; provided, however,
that the Administrator in its sole and absolute discretion may provide that such
Award may vest, be exercised or distributed subsequent to a Termination of
Service following a Change in Control of the Company or because of the Holder's
retirement, death or disability or termination without cause, or otherwise.
8.10. 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 Administrator. 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 11.7.
ARTICLE IX.
STOCK APPRECIATION RIGHTS
9.1. Grant of Stock Appreciation Rights. A Stock Appreciation Right
may be granted to any Employee, Non-Employee Director or Consultant selected by
the Administrator. A Stock Appreciation Right may be granted: (a) in connection
and simultaneously with the grant of an Option, or (b) independent of an Option.
A Stock Appreciation Right shall be subject to such terms and conditions not
inconsistent with the Plan as the Administrator 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 granted Option to which it is
coupled.
18
(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 (i) the difference
obtained by subtracting the exercise price per share of the CSAR from (ii) 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 Administrator 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 Administrator but in no
event longer than ten (10) years following the grant date. An ISAR shall be
exercisable in such installments as the Administrator may determine. An ISAR
shall cover such number of shares of Common Stock as the Administrator may
determine. The exercise price per share of Common Stock subject to each ISAR
shall be set by the Administrator; provided, that such exercise price per share
shall not be less than 100% of the Fair Market Value of a share of Common Stock
on the date the ISAR is granted. An ISAR is exercisable only while the Holder is
an Employee, Non-Employee Director or Consultant; provided, that the
Administrator may determine that the ISAR may be exercised subsequent to
Termination of Service 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 (i) 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 (ii) the number of shares of Common Stock with respect to which the ISAR
shall have been exercised, subject to any limitations the Administrator 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, shares of 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 Administrator. The Company shall not
be required to issue or deliver any certificate or certificates for shares of
stock issuable upon the exercise of any Stock Appreciation Right prior to
fulfillment of the conditions set forth in Section 6.3 above.
(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 Administrator.
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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 Non-Employee Directors
appointed by and holding office at the pleasure of the Board, each of whom is
intended to qualify as 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 Awards granted to Non-Employee 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.
20
10.5. Delegation of Authority to Grant Awards. 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
Board 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 Covered Employees, 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. Transferability of Awards.
(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
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, hypothecation, 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 the preceding
sentence; and
(iii) During the lifetime of the Holder, only the Holder
may exercise an Option or other Award (or any portion thereof) granted to
him under the Plan, unless it has been disposed of 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
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
21
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 twelve (12) months before or after the action by the
Administrator, no action of the Administrator may, except as provided in Section
11.3, (i) increase the limits imposed in Section 2.1 on the maximum number of
shares which may be issued under the Plan, (ii) take any action in violation of
Section 11.6 to decrease the exercise price of any outstanding Option or Stock
Appreciation Right granted under the Plan, or (iii) take any action requiring
stockholder approval under any applicable law or requirement of any stock
exchange or any national market system. Except as provided in Section 11.2, no
amendment, suspension or termination of the Plan shall, without the consent of
the Holder, adversely 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 Award be granted under
the Plan after the expiration of ten (10) years from the Effective Date.
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 of 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
22
rights to purchase Common Stock or other securities of the Company, or other
similar corporate transaction or event, the Administrator shall make
proportionate adjustments to 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, without limitation, adjustments of the limitations
in Section 2.1 on the maximum number and kind of shares which may be
issued under the Plan 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;
(iii) The number and kind of shares of Common Stock (or
other securities or property) for which automatic grants are subsequently
to be made to new and continuing Non-Employee Directors pursuant to
Section 4.6;
(iv) The grant or exercise price with respect to any
Award.
(b) Subject to Sections 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 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 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
23
successor or survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices;
(v) To make adjustments in the number and type of shares
of Common Stock (or other securities or property) subject to outstanding
Awards, and/or in the terms and conditions of (including the grant,
exercise or purchase price), and the criteria included in, outstanding
options, rights and awards and options, rights and awards which may be
granted in the future; and
(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, Restricted Stock Units 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.
(c) Notwithstanding any other provision of the Plan, in the
event of a Change in Control, each outstanding Award shall be assumed or an
equivalent Award 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 Award, the Administrator may
cause any or all of such Awards to become fully exercisable immediately prior to
the consummation of such transaction and all forfeiture restrictions on any or
all of such Awards to lapse. If an Award is exercisable in lieu of assumption or
substitution in the event of a Change in Control, the Administrator shall notify
the Holder that the Award shall be fully exercisable for a period of fifteen
(15) days from the date of such notice, and the Award shall terminate upon the
expiration of such period. For the purposes of this Section 11.3(c), an Award
shall be considered assumed if, following the Change in Control, the Award
confers the right to purchase or receive, for each share of Common Stock subject
to the Award immediately prior to the Change in Control, the consideration
(whether stock, cash, or other securities or property) received in the Change in
Control 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 Change in Control
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 Award, for each share
of Common Stock subject to an Award, 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 Change in Control.
(d) Subject to Sections 11.3(e) and 3.2, 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 Covered
Employees 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
24
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 down 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 stockholders 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.
(g) No action shall be taken under this Section 11.3 which
shall cause an Award to fail to comply with Section 409A of the Code or the
Treasury Regulations thereunder, to the extent applicable to such Award.
11.4. Approval of Plan by Stockholders. The Plan will be submitted
for the approval of the Company's stockholders within twelve (12) months after
the date of the Board's initial adoption of the Plan.
11.5. Tax Withholding. The Company or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Holder to remit to
the Company, an amount sufficient to satisfy federal, state, local and foreign
taxes (including the Holder's FICA obligation) required by law to be withheld
with respect to any taxable event concerning a Holder arising as a result of
this Plan. The Administrator may in its discretion and in satisfaction of the
foregoing requirement allow a Holder to elect to have the Company withhold
shares of Common Stock otherwise issuable under an 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 in order to satisfy the Holder's federal, state, local and
foreign 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, state, local and foreign income tax and payroll
tax purposes that are applicable to such supplemental taxable income.
11.6. Prohibition on Repricing. Subject to Section 11.3, the
Administrator shall not, without the approval of the stockholders of the
Company, (i) authorize the amendment of
25
any outstanding Award to reduce its price per share, (ii) authorize the
cancellation of any outstanding Award in exchange for the grant of an Award
having a lesser price per share, or (iii) authorize the cancellation of any
outstanding Option or SAR in exchange for Restricted Stock or any other Award.
Subject to Section 11.2, the Administrator shall have the authority, without the
approval of the stockholders of the Company, to amend any outstanding Option or
SAR to increase its price per share or to cancel and replace an Option or SAR
with the grant of a Option or SAR having a price per share that is greater than
or equal to the price per share of the original Option or SAR.
11.7. Conditions to Issuance of Shares and Stock Certificates. The
Company shall not be required to issue any shares of Common Stock or deliver any
certificate or certificates for shares of Common Stock purchased upon the
exercise of any Award or portion thereof prior to fulfillment of all of the
following conditions:
(a) The admission of such shares to listing on all stock
exchanges and quotation systems on which such class of stock is then
listed or traded;
(b) The completion of any registration or other qualification
of such shares under any local, state, federal or foreign law, or under
the rulings or regulations of the Securities and Exchange Commission or
any other local, state, federal or foreign 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
local, state, federal or foreign 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
specified in Section 6.2(d).
11.8. Additional Limitations on Payment, Settlement or Exercise of
an Award. Holders may be required to comply with any timing or other
restrictions with respect to the payment, settlement or exercise of an Award,
including a window-period limitation, as may be imposed in the discretion of the
Administrator.
11.9. 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 without limitation, the grant or assumption of options in
connection with the acquisition by purchase,
26
lease, merger, consolidation or otherwise, of the business, stock or assets of
any corporation, partnership, limited liability company, firm or association.
11.10. 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, state and
foreign 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.
11.11. Titles. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of the Plan.
11.12. Governing Law. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
11.13. Section 409A. To the extent that the Administrator determines
that any Award granted under the Plan is subject to Section 409A of the Code,
the Award Agreement evidencing such Award shall incorporate the terms and
conditions required by Section 409A of the Code. To the extent applicable, the
Plan and Award Agreements shall be interpreted in accordance with Section 409A
of the Code and Department of Treasury regulations and other interpretive
guidance issued thereunder, including without limitation any such regulations or
other guidance that may be issued after the Effective Date. Notwithstanding any
provision of the Plan to the contrary, in the event that following the Effective
Date the Administrator determines that any Award may be subject to Section 409A
of the Code and related Department of Treasury guidance (including such
Department of Treasury guidance as may be issued after the Effective Date), the
Administrator may adopt such amendments to the Plan and the applicable Award
Agreement or adopt other policies and procedures (including amendments, policies
and procedures with retroactive effect), or take any other actions, that the
Administrator determines are necessary or appropriate to (a) exempt the Award
from Section 409A of the Code and/or preserve the intended tax treatment of the
benefits provided with respect to the Award, or (b) comply with the requirements
of Section 409A of the Code and related Department of Treasury guidance.
27
* * * * *
I hereby certify that the foregoing Skilled Healthcare Group, Inc.
2007 Incentive Award Plan was duly adopted by the Board of Directors of Skilled
Healthcare Group, Inc. on April 19, 2007.
* * * * *
I hereby certify that the foregoing Skilled Healthcare Group, Inc.
2007 Incentive Award Plan was approved by the stockholders of Skilled Healthcare
Group, Inc. on April 26, 2007.
Executed on this 26th day of April, 2007.
/s/ Roland G. Rapp
---------------------------
Roland G. Rapp
General Counsel, Secretary
and Chief Administrative
Officer
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