EXHIBIT 10.1
CREE RESEARCH, INC.
AMENDED AND RESTATED
EQUITY COMPENSATION PLAN
(formerly the Cree Research, Inc.
Employee Stock Option Plan)
(As amended June 28, 1999)
ARTICLE I - GENERAL PROVISIONS
1.1 The Plan is designed, for the benefit of the Company, to attract and
retain for the Company personnel of exceptional ability; to motivate such
personnel through added incentives to make a maximum contribution to the
Company; to develop and maintain a highly competent management team; and
to be competitive with other companies with respect to executive
compensation.
1.2 Awards under the Plan may be made to Participants in the form of (i)
Incentive Stock Options; (ii) Nonqualified Stock Options; (iii) Restricted
Stock; and (iv) Other Stock-Based Awards and such other forms of
equity-based compensation as may be provided and are permissible under
this Plan and the law.
1.3 The Cree Research, Inc. Employee Stock Option Plan was initially adopted
effective August 2, 1989, was amended and restated in the form of the Plan
effective as of July 1, 1995 (the "Effective Date"), and was subsequently
amended or amended and restated September 17, 1996, September 1, 1997,
December 7, 1998, March 31, 1999 and June 28, 1999.
ARTICLE II - DEFINITIONS
Except where the context otherwise indicates, the following definitions
apply:
2.1 "Act" means the Securities Exchange Act of 1934, as now in effect or as
hereafter amended. All citations to sections of the Act or rules
thereunder are to such sections or rules as they may from time to time be
amended or renumbered.
2.2 "Agreement" means the written agreement evidencing each Award granted to a
Participant under the Plan.
2.3 "Award" means an award granted to a Participant in accordance with the
provisions of the Plan, including, but not limited to, a Stock Option,
Restricted Stock, Other Stock-Based Awards, or any combination of the
foregoing.
2.4 "Board" means the Board of Directors of Cree Research, Inc.
2.5 "Change in Control" means the occurrence of an event defined in Section
9.1 of the Plan.
2.6 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended. All citations to sections of the Code are to such
sections as they may from time to time be amended or renumbered.
2.7 "Committee" means the Compensation Committee of the Board or such other
committee consisting of two or more members of the Board as may be
appointed by the Board to administer this Plan pursuant to Article III.
Committee members may also be appointed for such limited purposes as may
be provided by the Board.
2.8 "Company" means Cree Research, Inc., a North Carolina corporation, and its
successors and assigns. The term "Company" shall include any corporation
which is a member of a controlled group of corporations (as defined in
Section 414(b) of the Code, as modified by Section 415(h) of the Code)
which includes the Company; any trade or business (whether or not
incorporated) which is under common control (as defined in Section 414(c)
of the Code, as modified by Section 415(h) of the Code) with the Company;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Section 414(m) of the Code) which
includes the Company; and any other entity required to be aggregated with
the Company pursuant to regulations under Section 414(o) of the Code. With
respect to all purposes of the Plan, including, but not limited to, the
establishment, amendment, termination, operation and administration of the
Plan, Cree Research, Inc. shall be authorized to act on behalf of all
other entities included within the definition of "Company".
2.9 "Disability" means (I) with respect to a Participant who is eligible to
participate in the Company's program of long-term disability insurance, a
condition with respect to which the Participant is entitled to commence
benefits under such program of long-term disability insurance, and (ii)
with respect to any Participant (including a Participant who is eligible
to participate in the Company's program of long-term disability
insurance), a disability as determined under procedures established by the
Committee or in any Award.
2.10 "Discount Stock Options" means Nonqualified Stock Options which provide
for an exercise price of less than the Fair Market Value of the Stock at
the date of the Award.
2.11 "Early Retirement" shall mean retirement from active employment with the
Company, with the express consent of the Committee, pursuant to early
retirement provisions established by the Committee or in any Award.
2.12 "Eligible Participant" means any employee of the Company, as shall be
determined by the Committee, as well as any other person, including
directors, whose participation the Committee determines is in the best
interest of the Company, subject to limitations as may be provided by the
Code, the Act or the Committee.
2.13 "Fair Market Value" means, with respect to any given day, the following:
(i) If the Stock is not listed for trading on a national securities
exchange but is listed on the NASDAQ National Market System or the
NASDAQ Small-Cap Market System, then the Fair Market Value shall be
the last sale price of the Stock on the date of reference if a minimum
of 100 shares are traded on such date or, if less than 100 shares are
traded on such date, then the last sale price of the Stock as of the
last date on which at least 100
shares were traded, in either case as reported by the NASDAQ National
Market System or the NASDAQ Small-Cap Market System, as the case may
be.
(ii) If the Stock is listed for trading on any national securities
exchange, then the Fair Market Value shall be the closing price of
the Stock on such exchange on the date of reference if a minimum of
100 shares are traded on such date or, if less than 100 shares are
traded on such date, then the closing price of the Stock on such
exchange as of the last date on which at least 100 shares were
traded.
The Committee may establish an alternative method of determining Fair Mar-
ket Value.
2.14 "Incentive Stock Option" means a Stock Option granted under Article IV of
the Plan, and as defined in Section 422 of the Code.
2.15 "Nonqualified Stock Option" means a Stock Option granted under Article V
of the Plan.
2.16 "Normal Retirement" shall mean retirement from active employment with the
Company on or after age 65, or pursuant to such other requirements as may
be established by the Committee or in any Award.
2.17 "Option Grant Date" means, as to any Stock Option, the latest of:
(a) the date on which the Committee takes action to grant the Stock
Option to the Participant;
(b) the date the Participant receiving the Stock Option becomes an
employee of the Company, to the extent employment status is a
condition of the grant or a requirement of the Code or the Act; or
(c) such other date (later than the dates described in (a) and (b)
above) as the Committee may designate.
2.18 "Participant" means an Eligible Participant to whom an Award has been
granted and who has entered into an Agreement evidencing the Award.
2.19 "Plan" means the Cree Research, Inc. Equity Compensation Plan as set forth
herein, and, as further amended or amended and restated from time to time.
2.20 "Restricted Stock" means an Award of Stock under Article VII of the Plan,
which Stock is issued with the restriction that the holder may not sell,
transfer, pledge, or assign such Stock and with such other restrictions as
the Committee, in its sole discretion, may impose, including without
limitation, any restriction on the right to vote such Stock, and the right
to receive any cash dividends, which restrictions may lapse separately or
in combination at such time or times, in installments or otherwise, as the
Committee may deem appropriate.
2.21 "Restriction Period" means the period commencing on the date an Award of
Restricted Stock is granted and ending on such date as the Committee shall
determine.
2.22 "Retirement" shall mean Early Retirement or Normal Retirement.
2.23 "Stock" means shares of the Common Stock of Cree Research, Inc., par value
$.0025 per share, as may be adjusted pursuant to the provisions of Section
3.10.
2.24 "Stock Option" means an Award under Article IV or V of the Plan of an
option to purchase Stock. A Stock Option may be either an Incentive Stock
Option or a Nonqualified Stock Option.
2.25 "Termination of Employment" means the discontinuance of employment of a
Participant with the Company for any reason. The determination of whether
a Participant has discontinued employment shall be made by the Committee
in its discretion. In determining whether a Termination of Employment has
occurred, the Committee may provide that service as a consultant or
service with a business enterprise in which the Company has a significant
ownership interest shall be treated as employment with the Company. The
Committee shall have the discretion, exercisable either at the time the
Award is granted or at the time the Participant terminates employment, to
establish as a provision applicable to the exercise of one or more Awards
that during the limited period of exercisability following Termination of
Employment, the Award may be exercised not only with respect to the number
of shares of Stock for which it is exercisable at the time of the
Termination of Employment but also with respect to one or more subsequent
installments for which the Award would have become exercisable had the
Termination of Employment not occurred.
ARTICLE III - ADMINISTRATION
3.1 This Plan shall be administered by the Committee. The Committee, in its
discretion, may delegate to one or more of its members such of its powers
as it deems appropriate. The Committee also may limit the power of any
member to the extent necessary to comply with any law. Members of the
Committee shall be appointed originally, and as vacancies occur, by the
Board, to serve at the pleasure of the Board. The Board may serve as the
Committee, if by the terms of the Plan all Board members are otherwise
eligible to serve on the Committee.
3.2 The Committee shall meet at such times and places as it determines. A
majority of its members shall constitute a quorum, and the decision of a
majority of those present at any meeting at which a quorum is present
shall constitute the decision of the Committee. A memorandum signed by all
of its members shall constitute the decision of the Committee without
necessity, in such event, for holding an actual meeting.
3.3 The Committee shall have the exclusive right to interpret, construe and
administer the Plan, to select the persons who are eligible to receive an
Award, and to act in all matters pertaining to the granting of an Award
and the contents of the Agreement evidencing the Award, including without
limitation, the determination of the number of Stock Options, shares of
Stock subject to an Award, and the form, terms, conditions and duration of
each Award, and any amendment thereof consistent with the provisions of
the Plan. All acts, determinations and decisions of the Committee made or
taken pursuant to grants of authority under the Plan or with respect to
any questions arising in connection with the administration and
interpretation of the Plan, including the severability of any and all of
the provisions thereof, shall be conclusive, final and binding upon all
Participants, Eligible Participants and their beneficiaries.
3.4 The Committee may adopt such rules, regulations and procedures of general
application for the administration of this Plan, as it deems appropriate.
3.5 The number of shares of Stock which are available for Award under the Plan
shall be Five Million Four Hundred Eighty Thousand (5,480,000) shares* or
any larger number of shares of Stock that, subsequent to the date this
Plan is adopted, may be authorized for issuance by the Company. Such
shares of Stock shall be made available from authorized and unissued
shares. If, for any reason, any shares of Stock awarded or subject to
purchase under the Plan are not delivered or purchased, or are reacquired
by the Company, for reasons including, but not limited to, a forfeiture of
Restricted Stock or termination, expiration or cancellation of a Stock
Option, or any other termination of an Award without payment being made in
the form of Stock, whether or not Restricted Stock, such shares of Stock
shall not be charged against the aggregate number of shares of Stock
available for Awards under the Plan, and may again be available for Award
under the Plan. (*As adjusted for stock split effective July 26, 1999.)
3.6 Each Award granted under the Plan shall be evidenced by a written
Agreement. Each Agreement shall be subject to and incorporate, by
reference or otherwise, the applicable terms and conditions of the Plan,
and any other terms and conditions, not inconsistent with the Plan, as may
be imposed by the Committee.
3.7 The Company shall not be required to issue or deliver any certificates for
shares of Stock prior to:
(a) the listing of such shares on any stock exchange on which the
Stock may then be listed; and
(b) the completion of any registration or qualification of such shares
of Stock under any federal or state law, or any ruling or regulation
of any government body which the Company shall, in its discretion,
determine to be necessary or advisable.
3.8 All certificates for shares of Stock delivered under the Plan shall also
be subject to such stop-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then listed and any applicable federal or state
laws, and the Committee may cause a legend or legends to be placed on any
such certificates to make appropriate reference to such restrictions. In
making such determination, the Committee may rely upon an opinion of
counsel for the Company.
3.9 Subject to the restrictions on Restricted Stock, as provided in Article
VII of the Plan and in the Restricted Stock Agreement, each Participant
who receives an Award of Restricted Stock shall have all of the rights of
a shareholder with respect to such shares of Stock, including the right to
vote the shares to the extent, if any, such shares possess voting rights
and receive dividends and other distributions. Except as provided
otherwise in the Plan or in an Agreement, no Participant awarded a Stock
Option shall have any right as a shareholder with respect to any shares of
Stock covered by his or her Stock Option prior to the date of issuance to
him or her of a certificate or certificates for such shares of Stock.
3.10 If any reorganization, recapitalization, reclassification, stock split-up,
stock dividend, or consolidation of shares of Stock, merger or
consolidation of the Company or sale or other
disposition by the Company of all or a portion of its assets, any other
change in the Company's corporate structure, or any distribution to share-
holders other than a cash dividend results in the outstanding shares of
Stock, or any securities exchanged therefor or received in their place,
being exchanged for a different number or class of shares of Stock or other
securities of the Company, or for shares of Stock or other securities of
any other corporation; or new, different or additional shares or other
securities of the Company or of any other corporation being received by the
holders of outstanding shares of Stock, then equitable adjustments shall be
made by the Committee in:
(a) the limitation on the aggregate number of shares of Stock that may
be awarded as set forth in Section 3.5 of the Plan;
(b) the number and class of Stock that may be subject to an Award, and
which have not been issued or transferred under an outstanding
Award;
(c) the purchase price to be paid per share of Stock under outstanding
Stock Options; and
(d) the terms, conditions or restrictions of any Award and Agreement,
including the price payable for the acquisition of Stock; provided,
however, that all adjustments made as the result of the foregoing in
respect of each Incentive Stock Option shall be made so that such
Stock Option shall continue to be an Incentive Stock Option, as
defined in Section 422 of the Code.
3.11 In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee
shall be indemnified by the Company against reasonable expenses, including
attorney's fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any
appeal therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with the Plan or
any Award granted thereunder, and against all amounts paid by them in
settlement thereof, provided such settlement is approved by independent
legal counsel selected by the Company, or paid by them in satisfaction of
a judgment or settlement in any such action, suit or proceeding, except as
to matters as to which the Committee member has been negligent or engaged
in misconduct in the performance of his duties; provided, that within 60
days after institution of any such action, suit or proceeding, a Committee
member shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
3.12 The Committee may require each person purchasing shares of Stock pursuant
to a Stock Option or other Award under the Plan to represent to and agree
with the Company in writing that he is acquiring the shares of Stock
without a view to distribution thereof and/or that he has met such other
requirements as the Committee determines may be applicable to such
purchase. The certificates for such shares of Stock may include any legend
which the Committee deems appropriate to reflect any restrictions on
transfer.
3.13 The Committee shall be authorized to make adjustments in performance based
criteria or in the terms and conditions of other Awards in recognition of
unusual or nonrecurring events affecting the Company or its financial
statements or changes in applicable laws, regulations or accounting
principles. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Agreement in the manner and
to the extent it shall deem desirable to carry it into effect. In the
event the Company shall assume outstanding employee benefit awards
or the right or obligation to make future such awards in connection with
the acquisition of another corporation or business entity, the Committee
may, in its discretion, make such adjustments in the terms of Awards under
the Plan as it shall deem appropriate.
3.14 The Committee shall have full power and authority to determine whether, to
what extent and under what circumstances, any Award shall be canceled or
suspended if (a) the Participant, without the consent of the Committee,
while employed by the Company or after termination of such employment,
becomes associated with, employed by, renders services to, or owns any
interest in, other than any insubstantial interest, as determined by the
Committee, any business that is in competition with the Company as
determined by the Committee in its discretion; or (b) is terminated for
cause as determined by the Committee in its discretion.
ARTICLE IV - INCENTIVE STOCK OPTIONS
4.1 Each provision of this Article IV and of each Incentive Stock Option
granted hereunder shall be construed in accordance with the provisions of
Section 422 of the Code, and any provision hereof that cannot be so
construed shall be disregarded.
4.2 Incentive Stock Options shall be granted only to Eligible Participants who
are in the active employment of the Company, each of whom may be granted
one or more such Incentive Stock Options for a reason related to his
employment at such time or times determined by the Committee following the
Effective Date through the date which is ten (10) years following the
Effective Date, subject to the following conditions:
(a) The Incentive Stock Option price per share of Stock shall be set
in the Agreement, but shall not be less than 100% of the Fair
Market Value of the Stock on the Option Grant Date. If the
Eligible Participant owns more than 10% of the outstanding Stock
(as determined pursuant to Section 424(d) of the Code) on the
Option Grant Date, the Incentive Stock Option price per share
shall not be less than 110% of the Fair Market Value of the Stock
on the Option Grant Date.
(b) Subject to any conditions on exercise set forth in the
corresponding Agreement, the Incentive Stock Option may be
exercised in whole or in part from time to time within ten (10)
years from the Option Grant Date (five (5) years if the Eligible
Participant owns more than 10% of the Stock on the Option Grant
Date), or such shorter period as may be specified by the
Committee in the Award; provided, that in any event, the
Incentive Stock Option shall lapse and cease to be exercisable
upon a Termination of Employment or within such period following
a Termination of Employment as shall have been specified in the
Incentive Stock Option Agreement, which period shall not exceed
three months unless:
(i) employment shall have terminated as a result of death or
Disability, in which event such period shall not exceed one
year after the date of death or Disability; or
(ii) death shall have occurred following a Termination of
Employment and while the Incentive Stock Option was still
exercisable, in which event such period shall not exceed one
year after the date of death;
provided, further, that such period following a Termination of
Employment shall in no event extend the original exercise period of
the Incentive Stock Option.
(c) To the extent the aggregate Fair Market Value, determined as of the
Option Grant Date, of the shares of Stock with respect to which
Incentive Stock Options (determined without regard to this
subsection) are first exercisable during any calendar year by any
Eligible Participant exceeds $100,000, such options shall be treated
as Nonqualified Stock Options granted under Article V.
(d) The Committee may adopt any other terms and conditions which it
determines should be imposed for the Incentive Stock Option to
qualify under Section 422 of the Code, as well as any other terms
and conditions not inconsistent with this Article IV as
determined by the Committee. If, for any reason, an Incentive
Stock Option fails to meet the requirements of Section 422 of the
Code, the Option shall automatically be deemed a Nonqualified
Stock Option granted under Article V herein.
(e) The maximum number of shares of Stock subject to Incentive Stock
Option Awards hereunder shall be the total number of shares
authorized for issuance under the Plan pursuant to Section 3.5.
4.3 The Committee may at any time offer to buy out for a payment in cash,
Stock or Restricted Stock an Incentive Stock Option previously granted,
based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made.
4.4 If the Incentive Stock Option Agreement so provides, the Committee may
require that all or part of the shares of Stock to be issued upon the
exercise of an Incentive Stock Option shall take the form of Restricted
Stock, which shall be valued on the date of exercise, as determined by the
Committee, on the basis of the Fair Market Value of such Restricted Stock
determined without regard to the deferral limitations and/or forfeiture
restrictions involved.
ARTICLE V - NONQUALIFIED STOCK OPTIONS
5.1 One or more Stock Options may be granted as Nonqualified Stock Options to
Eligible Participants to purchase shares of Stock at such time or times
determined by the Committee, following the Effective Date, subject to the
terms and conditions set forth in this Article V.
5.2 The Nonqualified Stock Option price per share of Stock shall be
established in the Agreement and may be less than or greater than 100% of
the Fair Market Value at the time of the grant.
5.3 The Nonqualified Stock Option may be exercised in full or in part from
time to time within such period as may be specified by the Committee or in
the Agreement; provided, that, in any event, the Nonqualified Stock Option
shall lapse and cease to be exercisable upon a Termination of Employment
or within such period following a Termination of Employment as shall have
been specified in the Nonqualified Stock Option Agreement, which period
shall not exceed three months unless:
(i) employment shall have terminated as a result of death or Disability,
in which event such period shall not exceed one year after the date
of death or Disability; or
(ii) death shall have occurred following a Termination of Employment and
while the Nonqualified Stock Option was still exercisable, in which
event such period shall not exceed one year after the date of death;
provided, further, that such period following a Termination of Employment
shall in no event extend the original exercise period of the Nonqualified
Stock Option.
5.4 The Nonqualified Stock Option Agreement may include any other terms and
conditions not inconsistent with this Article V or in Article VI, as
determined by the Committee.
ARTICLE VI - INCIDENTS OF STOCK OPTIONS
6.1 Each Stock Option shall be granted subject to such terms and conditions,
if any, not inconsistent with this Plan, as shall be determined by the
Committee, including any provisions as to continued employment as
consideration for the grant or exercise of such Stock Option and any
provisions which may be advisable to comply with applicable laws,
regulations or rulings of any governmental authority.
6.2 Except as provided below, a Stock Option shall be exercisable during the
lifetime of the Participant only by him or his guardian or legal
representative and shall not be transferable by the Participant other than
(i) by will or by the laws of descent and distribution, or (ii) to the
extent otherwise allowed by applicable law, pursuant to a qualified
domestic relations order as defined by the Code and the Employee
Retirement Income Security Act of 1974, as amended, or the rules
thereunder. However, the Committee may, in its sole discretion, either
pursuant to an Agreement or otherwise, permit a Participant to transfer a
Nonqualified Stock Option by gift or other donative transfer without
payment of consideration, conditioned upon and subject to compliance with
all applicable law (including, but not limited to, securities law).
6.3 Shares of Stock purchased upon exercise of a Stock Option shall be paid
for in such amounts, at such times and upon such terms as shall be
determined by the Committee, subject to limitations set forth in the Stock
Option Agreement. Without limiting the foregoing, the Committee may
establish payment terms for the exercise of Stock Options which permit the
Participant to deliver shares of Stock, or other evidence of ownership of
Stock satisfactory to the Company, with a Fair Market Value equal to the
Stock Option price as payment.
6.4 No cash dividends shall be paid on shares of Stock subject to unexercised
Stock Options. The Committee may provide, however, that a Participant to
whom a Stock Option has been granted which is exercisable in whole or in
part at a future time for shares of Stock shall be entitled to receive an
amount per share equal in value to the cash dividends, if any, paid per
share on issued and outstanding Stock, as of the dividend record dates
occurring during the period between the date of the grant and the time
each such share of Stock is delivered pursuant to exercise of such Stock
Option. Such amounts (herein called "dividend equivalents") may, in the
discretion of the Committee, be:
(a) paid in cash or Stock either from time to time prior to, or at the
time of the delivery of, such Stock, or upon expiration of the Stock
Option if it shall not have been fully exercised; or
(b) converted into contingently credited shares of Stock, with respect
to which dividend equivalents may accrue, in such manner, at such
value, and deliverable at such time or times, as may be determined
by the Committee.
Such Stock, whether delivered or contingently credited, shall be charged
against the limitations set forth in Section 3.5.
6.5 The Committee, in its sole discretion, may authorize payment of interest
equivalents on dividend equivalents which are payable in cash at a future
time.
6.6 In the event of Disability or death, the Committee, with the consent of
the Participant or his legal representative, may authorize payment, in
cash or in Stock, or partly in cash and partly in Stock, as the Committee
may direct, of an amount equal to the difference at the time between the
Fair Market Value of the Stock subject to a Stock Option and the option
price in consideration of the surrender of the Stock Option.
6.7 If a Participant is required to pay to the Company an amount with respect
to income and employment tax withholding obligations in connection with
exercise of a Nonqualified Stock Option, and/or with respect to certain
dispositions of Stock acquired upon the exercise of an Incentive Stock
Option, the Committee, in its discretion and subject to such rules as it
may adopt, may permit the Participant to satisfy the obligation, in whole
or in part, by making an irrevocable election that a portion of the total
Fair Market Value of the shares of Stock subject to the Nonqualified Stock
Option and/or with respect to certain dispositions of Stock acquired upon
the exercise of an Incentive Stock Option, be paid in the form of cash in
lieu of the issuance of Stock and that such cash payment be applied to the
satisfaction of the withholding obligations. The amount to be withheld
shall not exceed the statutory minimum federal and state income and
employment tax liability arising from the Stock Option exercise
transaction.
6.8 The Committee may permit the voluntary surrender of all or a portion of
any Stock Option granted under the Plan to be conditioned upon the
granting to the Participant of a new Stock Option for the same or a
different number of shares of Stock as the Stock Option surrendered, or
may require such surrender as a condition precedent to a grant of a new
Stock Option to such Participant. Subject to the provisions of the Plan,
such new Stock Option shall be exercisable at the such price, during such
period and on such other terms and conditions as are specified by the
Committee at the time the new Stock Option is granted. Upon surrender, the
Stock Options surrendered shall be canceled and the shares of Stock
previously subject to them shall be available for the grant of other Stock
Options.
ARTICLE VII - RESTRICTED STOCK
7.1 Restricted Stock Awards may be made to certain Participants as an
incentive for the performance of future services that will contribute
materially to the successful operation of the Company. Awards of
Restricted Stock may be made either alone, in addition to or in tandem
with other Awards granted under the Plan and/or cash payments made outside
of the Plan.
7.2 With respect to Awards of Restricted Stock, the Committee shall:
(a) determine the purchase price, if any, to be paid for such Restricted
Stock, which may be equal to or less than par value and may be zero,
subject to such minimum consideration as may be required by
applicable law;
(b) determine the length of the Restriction Period;
(c) determine any restrictions applicable to the Restricted Stock such
as service or performance, other than those set forth in this
Article VII;
(d) determine if the restrictions shall lapse as to all shares of
Restricted Stock at the end of the Restriction Period or as to a
portion of the shares of Restricted Stock in installments during the
Restriction Period; and
(e) determine if dividends and other distributions on the Restricted
Stock are to be paid currently to the Participant or paid to the
Company for the account of the Participant.
7.3 Awards of Restricted Stock must be accepted within a period of 60 days, or
such shorter period as the Committee may specify, by executing a
Restricted Stock Agreement and paying whatever price, if any, is required.
The prospective recipient of a Restricted Stock Award shall not have any
rights with respect to such Award, unless such recipient has executed a
Restricted Stock Agreement and has delivered a fully executed copy thereof
to the Committee, and has otherwise complied with the applicable terms and
conditions of such Award.
7.4 Except when the Committee determines otherwise, or as otherwise provided
in the Restricted Stock Agreement, if a Participant terminates employment
with the Company for any reason before the expiration of the Restriction
Period, all shares of Restricted Stock still subject to restriction shall
be forfeited by the Participant and shall be reacquired by the Company.
7.5 Except as otherwise provided in this Article VII or in the corresponding
Agreement, no shares of Restricted Stock received by a Participant shall
be sold, exchanged, transferred, pledged, hypothecated or otherwise
disposed of during the Restriction Period.
7.6 To the extent not otherwise provided in a Restricted Stock Agreement, in
cases of death, Disability or Retirement or in cases of special
circumstances, the committee, if it finds that a waiver would be
appropriate, may elect to waive any or all remaining restrictions with
respect to such Participant's Restricted Stock.
7.7 In the event of hardship or other special circumstances of a Participant
whose employment with the Company is involuntarily terminated, the
Committee may waive in whole or in part any or all remaining restrictions
with respect to any or all of the Participant's Restricted Stock, based on
such factors and criteria as the Committee may deem appropriate.
7.8 The certificates representing shares of Restricted Stock may either:
(a) be held in custody by the Company until the Restriction Period
expires or until restrictions thereon otherwise lapse, and the
Participant shall deliver to the Company a stock power endorsed in
blank relating to the Restricted Stock; and/or
(b) be issued to the Participant and registered in the name of the
Participant, and shall bear an appropriate restrictive legend and
shall be subject to appropriate stop-transfer orders.
7.9 Except as provided in this Article VII, a Participant receiving a
Restricted Stock Award shall have, with respect to the shares of
Restricted Stock covered by any Award, all of the rights of a shareholder
of the Company, including the right to vote the shares to the extent, if
any, such shares possess voting rights and the right to receive any
dividends; provided, however, the Committee may require that any dividends
on such shares of Restricted Stock shall be automatically deferred and
reinvested in additional Restricted Stock subject to the same restrictions
as the underlying Award, or may require that dividends and other
distributions on Restricted Stock shall be paid to the Company for the
account of the Participant. The Committee shall determine whether interest
shall be paid on such amounts, the rate of any such interest, and the
other terms applicable to such amounts.
7.10 If and when the Restriction Period expires without a prior forfeiture of
the Restricted Stock subject to such Restriction Period, unrestricted
certificates for such shares shall be delivered to the Participant;
provided, however, that the Committee may cause such legend or legends to
be placed on any such certificates as it may deem advisable under the
rules, regulations and other requirements of the Securities and Exchange
Commission and any applicable federal or state law.
7.11 In order to better ensure that Award payments actually reflect the
performance of the Company and the service of the Participant, the
Committee may provide, in its sole discretion, for a tandem
performance-based or other Award designed to guarantee a minimum value,
payable in cash or Stock to the recipient of a Restricted Stock Award,
subject to such performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
ARTICLE VIII - OTHER STOCK-BASED AWARDS
8.1 Other awards that are valued in whole or in part by reference to, or are
otherwise based on, Stock ("Other Stock-Based Awards"), including without
limitation, convertible preferred stock, convertible debentures, exchange-
able securities, phantom stock and Stock awards or options valued by ref-
erence to book value or performance, may be granted either alone or in
addition to or in tandem with Stock Options or Restricted Stock granted
under the Plan and/or cash awards made outside of the Plan.
Subject to the provisions of the Plan, the Committee shall have authority
to determine the Eligible Participants to whom and the time or times at
which such Awards shall be made, the number of shares of Stock subject to
such Awards, and all other conditions of the Awards. The Committee also
may provide for the grant of shares of Stock upon the completion of a
specified Performance Period.
The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.
8.2 Other Stock-Based Awards made pursuant to this Article VIII shall be
subject to the following terms and conditions:
(a) Subject to the provisions of this Plan and the Agreement, shares of
Stock subject to Awards made under this Article VIII may not be
sold, assigned, transferred, pledged or otherwise encumbered prior
to the date on which the shares are issued, or, if later, the date
on which any applicable restriction, performance or deferral period
lapses.
(b) Subject to the provisions of this Plan and the Agreement and
unless otherwise determined by the Committee at the time of the
Award, the recipient of an Award under this Article VIII shall be
entitled to receive, currently or on a deferred basis, interest
or dividends or interest or dividend equivalents with respect to
the number of shares covered by the Award, as determined at the
time of the Award by the Committee, in its sole discretion, and
the Committee may provide that such amounts, if any, shall be
deemed to have been reinvested in additional Stock or otherwise
reinvested.
(c) Any Award under this Article VIII and any Stock covered by any such
Award shall vest or be forfeited to the extent so provided in the
Agreement, as determined by the Committee, in its sole discretion.
(d) Upon the Participant's Retirement, Disability or death, or in cases
of special circumstances, the Committee may, in its sole discretion,
waive in whole or in part any or all of the remaining limitations
imposed hereunder, if any, with respect to any or all of an Award
under this Article VIII.
(e) Each Award under this Article VIII shall be confirmed by, and
subject to the terms of, an Agreement.
(f) Stock, including securities convertible into Stock, issued on a
bonus basis under this Article VIII may be issued for no cash
consideration.
8.3 Other Stock-Based Awards may include a phantom stock Award, which is
subject to the following terms and conditions:
(a) The Committee shall select the Eligible Participants who may receive
phantom stock Awards. The Eligible Participant shall be awarded a
phantom stock unit, which shall be the equivalent to a share of
Stock.
(b) Under an Award of phantom stock, payment shall be made on the dates
or dates as specified by the Committee or as stated in the Agreement
and phantom stock Awards may be settled in cash, Stock, or some
combination thereof as determined by the Committee in its sole
discretion.
(c) The Committee shall determine such other terms and conditions of
each Award as it deems necessary in its sole discretion.
ARTICLE IX - CHANGE IN CONTROL
9.1 A "Change in Control" shall be deemed to have occurred upon the happening
of any of the following events:
(a) Any "Person" as defined in Section 3(a)(9) of the Act, including
a "group" (as that term is used in Sections 13(d)(3) and 14(d)(2)
of the Act), but excluding the Company (as defined in Section 2.8
of this Plan) and any employee benefit plan sponsored or
maintained by the Company (including any trustee of such plan
acting as trustee), who together with its "affiliates" and
"associates" (as those terms are defined in Rule 12b-2 under the
Act) becomes the "Beneficial Owner" (within the meaning of Rule
13d-3 under the Act) of 20% or more of the then-outstanding
shares of Stock or the combined voting power of the
then-outstanding securities of the Company entitled to vote
generally in the election of its directors. For purposes of
calculating the number of shares or voting power held by such
Person and its affiliates and associates under this Section
9.1(a), there shall be excluded any securities acquired by such
Person or its affiliates or associates directly from the Company.
(b) A sale or other disposition of all or substantially all of the
Company's assets is consummated, other than such a sale or
disposition that would not have constituted a Change of Control
under subsection (d) below had it been structured as a merger or
consolidation.
(c) The shareholders of the Company approve a definitive agreement or
plan to liquidate the Company.
(d) A merger or consolidation of the Company with and into another
entity is consummated, unless immediately following such
transaction (1) more than 50% of the members of the governing
body of the surviving entity were Incumbent Directors (as defined
in subsection (e) below) at the time of execution of the initial
agreement providing for such transaction, (2) no "Person" (as
defined in Section 9.1(a) above), together with its "affiliates"
and "associates" (as defined in Section 9.1(a) above), is the
"Beneficial Owner" (as defined in Section 9.1(a) above), directly
or indirectly, of 20% or more of the then-outstanding equity
interests of the surviving entity or the combined voting power of
the then-outstanding equity interests of the surviving entity
entitled to vote generally in the election of members of its
governing body, and (3) more than 50% of the then-outstanding
equity interests of the surviving entity and the combined voting
power of the then-outstanding equity interests of the surviving
entity entitled to vote generally in the election of members of
its governing body is "Beneficially Owned", directly or
indirectly, by all or substantially all of the individuals and
entities who were the "Beneficial Owners" of the shares of Stock
immediately prior to such transaction in substantially the same
proportions as their ownership immediately prior to such
transaction.
(e) During any period of 24 consecutive months during the existence
of the Plan, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors") cease
for any reason other than death to constitute at least a majority
thereof; provided, however, that a director who was not a
director at the beginning of such 24 month period shall be deemed
to have satisfied such 24 month requirement, and be an Incumbent
Director, if such director was elected by, or on the
recommendation of or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either
actually, because they were directors at the beginning of such 24
month period, or by prior operation of this Section 9.1(e), but
excluding for this purpose any such individual whose initial
assumption of office is in connection with an actual or
threatened election context subject to Rule 14a-11 of Regulation
14A promulgated under the Act or other actual or threatened
solicitation of proxies or consents by or on behalf of a "Person"
(as defined in Section 9.1(a) above) other than the Board.
9.2 In the event of a Change in Control: (a) any or all then outstanding Stock
Options having an Option Grant Date on or before January 31, 1999, to the
extent not previously fully vested and exercisable, shall automatically
become fully vested and, except to the extent such Options are cashed out
pursuant to Section 9.4 below, exercisable effective immediately prior to
the Change in Control; and (b) outstanding Stock Options having an Option
Grant Date after January 31, 1999 shall vest and become exercisable only
to the extent and in such manner as is provided in the applicable
Agreement evidencing the Stock Option.
9.3 In the event of a Change in Control, the restrictions applicable to Awards
of Restricted Stock or Other Stock-Based Awards shall automatically lapse
effective immediately prior to the Change in Control, in which case,
subject to the requirements of applicable law, the Company shall remove
all restrictive legends and stop-transfer orders applicable to the
certificates for such shares of Stock and deliver such certificates to the
Participants in whose names they are registered.
9.4 Upon the occurrence of a Change in Control, the Committee may in its sole
discretion and consistent with the requirements of applicable law decide
to cash-out the value of all outstanding Stock Options, Restricted Stock
and Other Stock-Based Awards, in each case to the extent vested pursuant
to Sections 9.2 and/or 9.3 above or otherwise, on the basis of the "Change
in Control Price" (as defined in Section 9.5) less the exercise price
under such Award (if any) as of the date such Change in Control is
determined to have occurred or such other date prior to the Change in
Control as the Committee may determine.
9.5 For purposes of Section 9.4, "Change in Control Price" means the highest
price per share of Stock paid in any transaction reported on the exchange
on which the Stock is then traded or on the NASDAQ National Market System
or the NASDAQ Small-Cap Market System, as the case may be, or paid or
offered in any bona fide transaction related to a Change in Control, at
any time during the 120 day period immediately preceding the occurrence of
the Change in Control, as determined by the Committee.
9.6 The Committee is authorized to take such actions that are not inconsistent
with Sections 9.2, 9.3, 9.4 and 9.5 above as the Committee determines to
be necessary or advisable, and fair and equitable to Participants, with
respect to an Award in the event of a Change in Control. Such action may
include, but shall not be limited to, establishing, amending or waiving
the forms, terms, conditions and duration of an Award and the Agreement,
so as to provide for earlier, later, extended or additional times for
exercise or payment, differing methods for calculating payments and
alternate forms and amounts of payment. The Committee may take such
actions pursuant to this Section 9.6 by adopting rules and regulations of
general applicability to all Participants or to certain categories of
Participants, by including, amending or waiving terms and conditions in an
Award and the Agreement, or by taking action with respect to individual
Participants.
ARTICLE X - AMENDMENT AND TERMINATION
10.1 The Board, upon recommendation of the Committee, or otherwise, at any time
and from time to time, may amend or terminate the Plan. To the extent
required by Code Section 422, no amendment, without approval by the
Company's shareholders, shall:
(a) alter the group of persons eligible to participate in the Plan;
(b) except as provided in Section 3.5, increase the maximum number of
shares of Stock or Stock Options which are available for Awards
under the Plan;
(c) extend the period during which Incentive Stock Option Awards may be
granted beyond the date which is ten (10) years following the
Effective Date.
(d) limit or restrict the powers of the Committee with respect to the
administration of this Plan;
(e) change the definition of an Eligible Participant for the purpose of
an Incentive Stock Option or increase the limit or the value of
shares of Stock for which an Eligible Participant may be granted an
Incentive Stock Option;
(f) materially increase the benefits accruing to Participants under this
Plan;
(g) materially modify the requirements as to eligibility for
participation in this Plan; or
(h) change any of the provisions of this Article X.
10.2 No amendment to or discontinuance of this Plan or any provision thereof by
the Board or the shareholders of the Company shall, without the written
consent of the Participant, adversely affect, as shall be determined by
the Committee, any Award previously granted to such Participant under this
Plan; provided, however, the Committee retains the right and power to:
(a) annul any Award if the Participant is terminated for cause as
determined by the Committee;
(b) provide for the forfeiture of shares of Stock or other gain under an
Award as determined by the Committee for competing against the
Company; and
(c) convert any outstanding Incentive Stock Option to a Nonqualified
Stock Option.
10.3 If a Change in Control has occurred, no amendment or termination shall
impair the rights of any person with respect to an outstanding Award as
provided in Article IX.
ARTICLE XI - MISCELLANEOUS PROVISIONS
11.1 Nothing in the Plan or any Award granted hereunder shall confer upon any
Participant any right to continue in the employ of the Company, or to
serve as a director thereof, or interfere in any way with the right of the
Company to terminate his or her employment at any time. Unless
specifically provided otherwise, no Award granted under the Plan shall be
deemed salary or compensation for the purpose of computing benefits under
any employee benefit plan or other arrangement of the Company for the
benefit of its employees unless the Company shall determine otherwise. No
Participant shall have any claim to an Award until it is actually granted
under the Plan. To the extent that any person acquires a right to receive
payments from the Company under the Plan, such right shall, except as
otherwise provided by the Committee, be no greater than the right of an
unsecured general creditor of the Company. All payments to be made
hereunder shall be paid from the general funds of the company, and no
special or separate fund shall be established and no segregation of assets
shall be made to assure payment of such amounts, except as provided in
Article VII with respect to Restricted Stock and except as otherwise
provided by the Committee.
11.2 The Company may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of any taxes which the
Company is required by any law or regulation of any governmental
authority, whether federal, state or local, domestic or foreign, to
withhold in connection with any Stock Option or the exercise thereof, or
in connection with any other type of equity-based compensation provided
hereunder or the exercise thereof, including, but not limited to, the
withholding of payment of all or any portion of such Award or another
Award under this Plan until the Participant reimburses the Company for the
amount the Company is required to withhold with respect to such taxes, or
canceling any portion of such Award or another Award under this Plan in an
amount sufficient to reimburse itself for the amount it is required to so
withhold, or selling any property contingently credited by the Company for
the purpose of paying such Award or another Award under this Plan, in
order to withhold or reimburse itself for the amount it is required to so
withhold.
11.3 The Plan and the grant of Awards shall be subject to all applicable
federal and state laws, rules, and regulations and to such approvals by
any United States government or regulatory agency as may be required.
11.4 The terms of the Plan shall be binding upon the Company, and its
successors and assigns.
11.5 Neither a Stock Option, nor any other type of equity-based compensation
provided for hereunder, shall be transferable except as provided for
herein. Unless otherwise provided by the Committee or in an Agreement,
transfer restrictions shall only apply to Incentive Stock Options as
required in Article IV and to the extent otherwise required by federal or
state securities laws. If any Participant makes such a transfer in
violation hereof, any obligation of the Company shall forthwith terminate.
11.6 This Plan and all actions taken hereunder shall be governed by the laws of
the State of North Carolina.
11.7 The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor
of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver shares of Stock or payments in lieu of or with
respect to Awards hereunder; provided, however, that, unless the Committee
otherwise determines with the consent of the affected Participant, the
existence of such trusts or other arrangements is consistent with the
"unfunded" status of the Plan.
11.8 Each Participant exercising an Award hereunder agrees to give the
Committee prompt written notice of any election made by such Participant
under Section 83(b) of the Code, or any similar provision thereof.
11.9 If any provision of this Plan or an Agreement is or becomes or is deemed
invalid, illegal or unenforceable in any jurisdiction, or would disqualify
the Plan or any Agreement under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform
to applicable laws or if it cannot be construed or deemed amended without,
in the determination of the Committee, materially altering the intent of
the Plan or the Agreement, it shall be stricken and the remainder of the
Plan or the Agreement shall remain in full force and effect.