Exhibit 10.1
BADGER PAPER MILLS, INC.
1998 STOCK OPTION PLAN
Section 1. Purpose
The purpose of the Badger Paper Mills, Inc. Stock Option Plan (the
"Plan") is to promote the best interests of Badger Paper Mills, Inc. (together
with any successor thereto (the "Company"), its holders and its Subsidiaries as
defined in the Internal Revenue Code of 1986, as amended (the "Code"), and any
entities of which at least 20% of the equity interest is held directly or
indirectly by the Company (together "Affiliates"), by encouraging and providing
for the acquisition of an equity interest in the success of the Company by
officers and key employees and by enabling the Company and its Affiliates to
attract and retain the services of officers and key employees upon whose
judgment, interest, skills, and special effort the successful conduct of their
operations is largely dependent.
Section 2. Effective Date
The Plan shall become effective on May 12, 1998 subject, however,
to the approval of the Plan by the stockholders of the Company at the next
annual meeting of stockholders within twelve months following the date of
adoption of the Plan by the Board of Directors of the Company (the "Board").
Section 3. Administration
The Plan shall be administered by a committee (the "Committee") of
the Board, consisting of not less than two directors, each of whom shall qualify
as a "non-employee director" within the meaning of Rule 16b-3 ("Rule 16b-3")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
as an "outside director" under Section 162(m)(4)(C) of the Code or any successor
provisions thereto. If at any time the Committee shall not be in existence, the
Board shall administer the Plan. To the extent permitted by applicable law, the
Board may delegate to another committee of the Board or to one or more senior
officers of the Company any or all of the authority and responsibility of the
Committee with respect to the Plan, other than with respect to participants who
are subject to Section 16 of the Exchange Act ("Section 16 participants"). To
the extent that the Board has delegated to such other committee or one or more
officers the authority and responsibility of the Committee, all references to
the Committee herein shall include such other committee or one or more officers.
Subject to the terms of the Plan and applicable law, the Committee
shall have full power and authority to interpret and administer the Plan and any
instrument or agreement relating to, or made under, the Plan, establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan, and make any other
determination and take any other action that the Committee
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deems necessary or desirable for the administration of the Plan. The Committee's
decisions and determinations under the Plan need not be uniform and may be made
selectively among participants, whether or not they are similarly situated. A
majority of the members of the Committee shall constitute a quorum and all
determinations of the Committee shall be made by a majority of its members. Any
determination of the Committee under the Plan may be made without notice or
meeting of the Committee by a writing signed by a majority of the Committee
members.
Section 4. Eligibility and Participation
Participants in the Plan shall be selected by the Committee from
among those officers and other key employees of the Company and its Affiliates,
as the Committee may designate from time to time. The Committee shall consider
such factors as it deems appropriate in selecting participants and in
determining the type and amount of their respective benefits. The Committee's
designation of a participant in any year shall not require the Committee to
designate such person to receive a benefit in any other year.
Section 5. Stock Subject to Plan
5.1 Number. Subject to adjustment as provided in Section 5.3, the
total number of shares of Common Stock of the Company, no par value (the
"Stock"), which may be issued under the Plan shall be 130,000. The shares to be
delivered under the Plan may consist, in whole or in part, of authorized but
unissued Stock or treasury Stock. No participant shall be granted benefits under
the Plan that could result in such participant (i) receiving in any single
fiscal year of the Company options for more than 70,000 shares of Stock; or (ii)
receiving benefits in any single fiscal year of the Company relating to more
than 20,000 shares of Stock as restricted stock. Such number of shares of Stock
as specified in the preceding sentence shall be subject to adjustment in
accordance with the terms of Section 5.3 hereof. In all cases, determinations
under this Section 5 shall be made in a manner that is consistent with the
exemption for performance-based compensation provided by Section 162(m) of the
Code (or any successor provision thereto) and any regulations promulgated
thereunder.
5.2 Unused Stock: Unexercised Rights. If, after the effective date
of the Plan, any shares of Stock covered by an award granted under the Plan, or
to which any award relates, are forfeited or if an award otherwise terminates,
expires or is canceled prior to the delivery of all of the shares of Stock or of
other consideration issuable or payable pursuant to such award, then the number
of shares of Stock counted against the number of shares available under the Plan
in connection with the grant of such award, shall again be available for the
granting of additional awards under the Plan to the extent determined to be
appropriate by the Committee.
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5.3 Adjustment in Capitalization. In the event that the Committee
shall determine that any dividend or other distribution (whether in the form of
cash, Stock, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Stock or other securities of the Company,
issuance of warrants or other rights to purchase Stock or other securities of
the Company, or other similar corporate transaction or event affects the Stock
such that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee may, in such
manner as it may deem equitable, adjust any or all of (i) the number and type of
shares of Stock subject to the Plan and which thereafter may be made the subject
of awards under the Plan; (ii) the number and type of shares of Stock subject to
outstanding awards; and (iii) the grant, purchase or exercise price with respect
to any award, or, if deemed appropriate, make provision for a cash payment to
the holder of an outstanding award; provided, however, in each case, that with
respect to awards of incentive stock options no such adjustment shall be
authorized to the extent that such authority would cause such options to cease
to be treated as incentive stock options; and provided further, however, that
the number of shares of Stock subject to any award payable or denominated in
Stock shall always be a whole number.
Section 6. Term of the Plan
No award shall be granted under the Plan after May 1, 2008.
However, unless otherwise expressly provided in the Plan or in an applicable
award agreement, any award theretofore granted may extend beyond such date and,
to the extent set forth in the Plan, the authority of the Committee to amend,
alter, adjust, suspend, discontinue or terminate any such award, or to waive any
conditions or restrictions with respect to any such award, and the authority of
the Board to amend the Plan, shall extend beyond such date.
Section 7. Stock Options
7.1 Grant of Options. Options may be granted to participants at any
time and from time to time as shall be determined by the Committee. The
Committee shall have complete discretion in determining the number, terms and
conditions of options granted to a participant. The Committee also shall
determine whether an option is to be an incentive stock option within the
meaning of Section 422 of the Code or a nonqualified stock option.
7.2 Incentive Stock Options. Incentive stock options will be
exercisable at purchase prices of not less than One Hundred percent (100%) of
the fair market value of the Stock on the date of grant, as such fair market
value is determined by such methods or procedures as shall be established from
time to time by the Committee ("Fair Market Value"). Incentive stock options
will be exercisable over not more than ten (10) years after date of grant and
shall terminate not later than three (3) months after termination of employment
for any reason other than death or disability, except as otherwise provided by
the Committee. If the participant should die or become disabled within the
meaning of Code Section 22(e)(3) while employed, then the right of the
participant's successor in interest to exercise an incentive stock
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option shall terminate not later than twelve (12) months after the date of death
or the date of termination due to disability, except as otherwise provided by
the Committee. In all other respects, the terms of any incentive stock option
granted under the Plan shall comply with the provisions of Section 422 of the
Code (or any successor provision thereto) and any regulations promulgated
thereunder.
7.3 Nonqualified Stock Options. Nonqualified stock options will be
exercisable at purchase prices of not less than One Hundred percent (100%) of
the Fair Market Value of the Stock on the date of grant, unless otherwise
determined by the Committee. Nonqualified stock options will be exercisable as
determined by the Committee over not more than ten (10) years after the date of
grant and shall terminate at such time as the Committee shall determine.
7.4 Award Agreement. Each option shall be evidenced by an award
agreement that shall specify the type of option granted, the option price, the
duration of the option, the number of shares of Stock to which the option
pertains and such other provisions as the Committee shall determine.
7.5 Fair Market Value. The Fair Market Value of the Stock shall be
determined by such methods or procedures as shall be established from time to
time by the Committee; provided, however, that the Fair Market Value shall not
be less than the par value of the Stock; and provided further, that so long as
the Stock is traded on a public market, Fair Market Value means the average of
the high and low prices of a share of Stock on the relevant date as reported on
the composite list used by the Wall Street Journal for reporting stock prices,
or if no such sale shall have been made on that day, on the last preceding day
on which there was such a sale.
7.6 Payment. The Committee shall determine the methods and the
forms for payment of the purchase price of options, including (a) by delivery of
cash or other shares or securities of the Company having a then Fair Market
Value equal to the purchase price of such shares; or (b) by delivery (including
by fax) to the Company or its designated agent of an executed irrevocable option
exercise form together with irrevocable instructions to a broker-dealer to sell
or margin a sufficient portion of the Stock and deliver the sale or margin loan
proceeds directly to the Company to pay the purchase price.
Section 8. Restricted Stock
8.1 Awards. The Committee is hereby authorized to issue restricted
stock to participants, with or without payment therefor, as additional
compensation, or in lieu of other compensation, for their services to the
Company and/or any Affiliate. Restricted stock shall be subject to such terms
and conditions as the Committee determines appropriate, including, without
limitation, restrictions on sale or other disposition and rights of the Company
to reacquire such restricted stock upon termination of the Participant's
employment within specified periods, as prescribed by the Committee.
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8.2 Other Restrictions. Without limitation, such terms and
conditions may provide that restricted stock shall be subject to forfeiture if
the Company or the participant fails to achieve certain goals established by the
Committee over a designated period of time. The goals established by the
Committee may relate to any one or more of the following: revenues, earnings per
share, return on shareholder equity, return on average total capital employed,
return on net assets employed before interest and taxes, economic value added
and/or such other goals as may be established by the Committee in its
discretion. In the event the minimum goal established by the Committee is not
achieved at the conclusion of a period, all shares of restricted stock shall be
forfeited. In the event the maximum goal is achieved, no shares of restricted
stock shall be forfeited. Partial achievement of the maximum goal may result in
forfeiture corresponding to the degree of nonachievement to the extent specified
in writing by the Committee when the grant is made. The Committee shall certify
in writing as to the degree of achievement after completion of the performance
period.
8.3 Registration. Any restricted stock granted under the Plan to a
participant may be evidenced in such manner as the Committee may deem
appropriate, including, without limitation, book-entry registration or issuance
of a stock certificate or certificates. In the event any stock certificate is
issued in respect of shares of restricted stock granted under the Plan to a
participant, such certificate shall be registered in the name of the participant
and shall bear an appropriate legend (as determined by the Committee) referring
to the terms, conditions and restrictions applicable to such restricted stock.
8.4 Other Rights. Unless otherwise determined by the Committee,
during the period of restriction, participants holding shares of restricted
stock granted hereunder may exercise full voting rights with respect to those
shares and shall be entitled to receive all dividends and other distributions
paid or made with respect to those shares while they are so held; provided,
however, that the Committee may provide in any grant of shares of restricted
stock that payment of dividends thereon may be deferred until termination of the
period of restriction and may be made subject to the same restrictions regarding
forfeiture as apply to such shares of restricted stock. If any such dividends or
distributions are paid in shares of Stock, the shares shall be subject to the
same restrictions on transferability as the shares of restricted stock with
respect to which they were paid.
8.5 Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment of a participant with the Company (as determined
under criteria established by the Committee) for any reason during the
applicable period of restriction, all shares of restricted stock still subject
to restriction shall be forfeited by the participant to the Company; provided,
however, that the Committee may, when it finds that a waiver would be in the
best interests of the Company, waive in whole or in part any or all remaining
restrictions with respect to shares of restricted stock held by a participant.
Section 9. Transferability
Each award granted under the Plan shall not be transferable other
than by will or the laws of descent and distribution, except that a participant
may, to the extent allowed by
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the Committee and in a manner specified by the Committee (a) designate in
writing a beneficiary to exercise the award after the participant's death; or
(b) transfer any award; provided, however, that in no event may incentive stock
options be transferred other than by will or the laws of descent and
distribution.
Section 10. Rights of Employees
Nothing in the Plan shall interfere with or limit in any way the
right of the Company or any Affiliate to terminate any participant's employment
at any time nor confer upon any participant any right to continue in the employ
of the Company or any Affiliate.
Section 11. Change of Control
(a) In the event of a "Change of Control" (as hereinafter defined):
(i) each holder of an option (A) shall have the right
at any time thereafter to exercise the option in full whether or
not the option was theretofore exercisable; and (B) shall have the
right, exercisable by written notice to the Company within 60 days
after the Change of Control, to receive, in exchange for the
surrender of the option or any portion thereof to the extent the
option is then exercisable in accordance with clause (A), the
highest of (1) an amount of cash equal to the difference between
the Fair Market Value of the Stock covered by the option or portion
thereof that is so surrendered on the date of the Change of Control
and the purchase price of such Stock under the option, (2) an
amount of cash equal to the difference between the highest price
per share of Stock paid in the transaction giving rise to the
Change of Control and the purchase price per share of Stock under
the option multiplied by the number of shares of Stock covered by
the Option, or (3) an amount of cash equal to the difference
between the Fair Market Value of the Stock covered by the option or
portion thereof that is so surrendered, calculated on the date of
surrender, and the purchase price of such Stock under the option;
provided that the right described in this clause (B) shall be
exercisable only if a positive amount would be payable to the
holder pursuant to the formula specified in this clause (B); and
(ii) Restricted stock that is not then vested shall
vest upon the date of the Change of Control and each holder of such
restricted stock shall have the right, exercisable by written
notice to the Company within sixty (60) days after the Change of
Control, to receive, in exchange for the surrender of such
restricted stock, an amount of cash equal to the highest of (A) the
Fair Market Value of such restricted stock on the date of
surrender, (B) the highest price per share of Stock paid in the
transaction giving rise to the Change of Control multiplied by the
number of shares of restricted stock surrendered, or (C) the Fair
Market Value of such restricted stock on the effective date of the
Change of Control.
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(b) A "Change of Control" of the Company shall be deemed to have
occurred for purposes of this Section 11 if the event set forth in any one of
the following paragraphs shall have occurred:
(i) any "Person" (as such term is defined in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d)
and 14(d) thereof, except that for purposes of this Section 11, the
term "Person" shall not include (1) the Company or any of its
subsidiaries, (2) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
subsidiaries, (3) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (4) a corporation
owned, directly or indirectly, by the shareholders of the Company
in substantially the same proportions as their ownership of stock
in the Company) is or becomes the "Beneficial Owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Company or its affiliates) representing 30% or more of
either the then outstanding shares of Stock of the Company or the
combined voting power of the Company's then outstanding voting
securities; or
(ii) the shareholders of the Company approve a merger
or consolidation of the Company with any other corporation or
approve the issuance of voting securities of the Company in
connection with a merger or consolidation of the Company (or any
direct or indirect subsidiary of the Company) pursuant to
applicable stock exchange requirements, other than (1) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least 30% of the
combined voting power of the voting securities of the Company or
such surviving entity or any parent thereof outstanding immediately
after such merger or consolidation, or (2) a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its
Affiliates) representing 30% or more of either the then outstanding
shares of common stock of the Company or the combined voting power
of the Company's then outstanding voting securities; or
(iii) the shareholders of the Company approve a plan
of complete liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (in one transaction or a
series of related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least
75% of the combined
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voting power of the voting securities of which are owned by Persons
in substantially the same proportions as their ownership of the
Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change of Control" shall be deemed to have
occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of the Stock of the
Company immediately prior to such transaction or series of transactions continue
to have substantially the same proportionate ownership in an entity which owns
all or substantially all of the assets of the Company immediately following such
transaction or series of transactions.
(c) The Committee may, in its sole and absolute discretion, amend,
modify or rescind the provisions of this Section 11 if it determines that the
operation of this Section 11 may prevent a transaction in which the Company or
any Affiliate is a party from being accounted for on a pooling-of-interests
basis.
Section 12. Amendment, Modification and Termination of Plan
12.1 Amendments and Termination. The Board may at any time amend,
alter, suspend, discontinue or terminate the Plan; provided, however, that
stockholder approval of any amendment of the Plan shall be obtained if otherwise
required by (i) the Code or any rules promulgated thereunder (in order to allow
for incentive stock options to be granted under the Plan or to enable the
Company to comply with the provisions of Section 162(m) of the Code so that the
Company can deduct compensation in excess of the limitation set forth therein),
or (ii) the listing requirements of the principal securities exchange or market
on which the Stock is then traded (in order to maintain the listing or quotation
of the Stock thereon). To the extent permitted by applicable law, the Committee
may also amend the Plan, provided that any such amendments shall be reported to
the Board. Termination of the Plan shall not affect the rights of participants
with respect to awards previously granted to them, and all unexpired awards
shall continue in force and effect after termination of the Plan except as they
may lapse or be terminated by their own terms and conditions.
12.2 Waiver of Conditions. The Committee may, in whole or in part,
waive any conditions or other restrictions with respect to any award granted
under the Plan.
Section 13. Taxes
The Company shall be entitled to withhold the amount of any tax
attributable to any amount payable or shares of Stock deliverable under the Plan
after giving the person entitled to receive such amount or shares of Stock
notice as far in advance as practicable, and the Company may defer making
payment or delivery if any such tax may be pending unless and until indemnified
to its satisfaction. The Committee may, in its discretion and subject to such
rules as it may adopt, permit a participant to pay all or a portion of the
federal, state and local withholding taxes arising in connection with an award
under the plan by electing to (i) have the Company withhold shares of Stock,
(ii) tender back shares of Stock received in
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connection with such benefit, or (iii) deliver other previously owned shares of
Stock, having a Fair Market Value equal to the amount to be withheld; provided,
however, that the amount to be withheld shall not exceed the participant's
estimated total federal, state and local tax obligations associated with the
transaction. The election must be made on or before the date as of which the
amount of tax to be withheld is determined and otherwise as required by the
Committee. The Fair Market Value of fractional shares of Stock remaining after
payment of the withholding taxes shall be paid to the participant in cash.
Section 14. Miscellaneous
14.1 Stock Transfer Restrictions.
(a) Shares of Stock purchased under the Plan may not be sold or
otherwise disposed of except (i) pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Act"), or in a transaction
which, in the opinion of counsel for the Company, is exempt from registration
under the Act; and (ii) in compliance with state securities laws. The Committee
may waive the foregoing restrictions, in whole or in part, in any particular
case or cases or may terminate such restrictions whenever the Committee
determines that such restrictions afford no substantial benefit to the Company.
(b) All certificates for shares delivered under the Plan pursuant
to any award or the exercise thereof shall be subject to such stock transfer
orders and other restrictions as the Committee may deem advisable under the Plan
and any applicable federal or state securities laws, and the Committee may cause
a legend or legends to be put on any such certificates to make appropriate
references to such restrictions.
14.2 Other Provisions. The grant of any award under the Plan may
also be subject to other provisions (whether or not applicable to the benefit
awarded to any other participant) as the Committee determines appropriate,
including, without limitation, provisions for (a) one or more means to enable
participants to defer recognition of taxable income relating to awards or cash
payments derived therefrom, which means may provide for a return to a
participant on amounts deferred as determined by the Committee (provided that no
such deferral means may result in an increase in the number of shares of Stock
issuable hereunder); (b) the purchase of Stock under options in installments;
(c) the financing of the purchase of Stock under the options in the form of a
promissory note issued to the Company by a participant on such terms and
conditions as the Committee determines; (d) restrictions on resale or other
disposition; and (e) compliance with federal or state securities laws and stock
exchange or market requirements.
14.3 Award Agreement. No person shall have any rights under any
award granted under the Plan unless and until the Company and the participant to
whom the award was granted shall have executed an award agreement in such form
as shall have been approved by the Committee.
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Section 15. Legal Construction
15.1 Requirements of Law. The granting of awards under the Plan and
the issuance of shares of Stock in connection with an award, shall be subject to
all applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
15.2 Governing Law. The Plan, and all agreements hereunder, shall
be construed in accordance with and governed by the laws of the State of
Wisconsin.
15.3 Severability. If any provision of the Plan or any award
agreement or any award is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction, or as to any person or award, or would
disqualify the Plan, any award agreement or any award 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 so construed or deemed amended
without, in the determination of the Committee, materially altering the intent
of the Plan, any award agreement or the award, such provision shall be stricken
as to such jurisdiction, person or award, and the remainder of the Plan, any
such award agreement and any such award shall remain in full force and effect.
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