Exhibit 4.1
ITC LEARNING CORPORATION
1998 INCENTIVE STOCK PLAN
ARTICLE I. PURPOSE, ADOPTION AND TERM OF THE PLAN
1.01 PURPOSE. The purpose of the ITC Learning Corporation 1998
Incentive Stock Plan (hereinafter referred to as the "Plan") is to advance the
interests of the Company (as hereinafter defined) and its Subsidiaries (as
hereinafter defined), if any, by encouraging and providing for the acquisition
of an equity interest in the Company by non-employee directors, officers and key
employees through the grant of awards with respect to shares of Common Stock (as
hereinafter defined). The Plan will enable the Company to retain the services of
non-employee directors, officers and key employees upon whose judgment, interest
and special effort the successful conduct of its operations is largely dependent
and to compete effectively with other enterprises for the services of
non-employee directors, officers and key employees as may be needed for the
continued improvement of its business.
1.02 ADOPTION AND TERM. The Plan shall become effective on January 7,
1998 ("Effective Date"), subject to the approval of a simple majority of the
holders of Voting Stock (as hereinafter defined) represented, by person or by
proxy, and entitled to vote at the annual meeting of the holders of Voting Stock
held in 1998. The Plan shall terminate on January 7, 2008, or such earlier date
as shall be determined by the Board (as hereinafter defined); provided, however,
that, in the event the Plan is not approved by a simple majority of the holders
of Voting Stock at or before the Company's 1998 annual meeting of holders of
Voting Stock, the Plan shall terminate on such date and any Awards (as
hereinafter defined) made under the Plan prior to such date shall be void and of
no force and effect.
ARTICLE II. DEFINITIONS
For purposes of the Plan, capitalized terms shall have the following
meanings:
2.01 "ADMINISTRATOR" shall mean either the Board or the Committee.
2.02 "AWARD" means any grant to a Participant of any one or a
combination of Non-Qualified Stock Options or Incentive Stock Options described
in Article VI or Restricted Shares described in Article VII.
2.03 "AWARD AGREEMENT" means a written agreement between the Company
and a Participant or a written acknowledgment from the Company specifically
setting forth the terms and conditions of an Award granted to a Participant
under the Plan.
2.04 "BENEFICIARY" means an individual, trust or estate who or that, by
will or the laws of descent and distribution, succeeds to the rights and
obligations of the Participant under the Plan and an Award Agreement upon the
Participant's death.
2.05 "BOARD" means the Board of Directors of the Company.
2.06 "CAUSE" means, with respect to an Employee Participant,
termination for, as determined by the Administrator in its sole and absolute
discretion, (i) dishonest or fraudulent conduct relating to the Company or any
of its Subsidiaries or their businesses; (ii) conviction of any felony that, in
the judgment of the Administrator, involves moral turpitude or otherwise
reflects on the Company or any of its Subsidiaries in a significantly adverse
way; or (iii) gross neglect by the Participant in the performance of his or her
duties as an employee or any material breach by a Participant under any
employment agreement with the Company or any of its Subsidiaries.
2.07 "CHANGE IN CONTROL" shall mean the occurrence, after the Effective
Date, of any of the following events, directly or indirectly or in one or more
series of transactions:
(i) Approval of the Company's shareholders of a consolidation
or merger of the Company with any Third Party, unless the Company is
the entity surviving such merger or consolidation;
(ii) Approval of the Company's shareholders of a transfer of
all or substantially all of the assets of the Company to a Third Party
or a complete liquidation or dissolution of the Company;
(iii) A Third Party, directly or indirectly, through one or
more subsidiaries or transactions or acting in concert with one or more
persons or entities:
(A) acquires beneficial ownership of more than 35% of
the Voting Stock;
(B) acquires irrevocable proxies representing more
than 35% of the Voting Stock;
(C) acquires any combination of beneficial ownership
of Voting Stock and irrevocable proxies representing more than
35% of the Voting Stock;
(D) acquires the ability to control in any manner the
election of a majority of the directors of the Company; or
(E) acquires the ability to directly or indirectly
exercise a controlling influence over the management or
policies of the Company;
(iv) any election has occurred of persons to the Board that
causes a majority of the Board to consist of persons other than (A)
persons who were members of the Board on the Effective Date and/or (B)
persons who were nominated for election as members of the Board by the
Board (or a committee of the Board) at a time when the majority of the
Board (or of such committee) consisted of persons who were members of
the Board on the Effective Date; PROVIDED, HOWEVER, that any persons
nominated for election by the Board (or a committee of the Board), a
majority of whom are persons described in clauses (A) and/or (B), or
are persons who were themselves nominated by such Board (or a committee
of such Board), shall for this purpose be deemed to have been nominated
by a Board composed of persons described in clause (A); or
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(v) A determination is made by the SEC or any similar agency
having regulatory control over the Company that a change in control, as
defined in the securities laws or regulations then applicable to the
Company, has occurred.
Notwithstanding any provision contained herein, a Change in Control shall not
include any of the above described events if they are the result of a Third
Party's inadvertently acquiring beneficial ownership or irrevocable proxies or a
combination of both for 35% or more of the Voting Stock, and the Third Party as
promptly as practicable thereafter divests itself of beneficial ownership or
irrevocable proxies for a sufficient number of shares so that the Third Party no
longer has beneficial ownership or irrevocable proxies or a combination of both
for 35% or more of the Voting Stock.
2.08 "CODE" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto. References to a section of the Code
shall include that section and any comparable section or sections of any future
legislation that amends, supplements, or supersedes said section.
2.09 "COMMITTEE" means a committee of the Board as may be appointed,
from time to time, by the Board. The Board may, from time to time, appoint
members of the Committee in substitution for those members who were previously
appointed and may fill vacancies, however caused, in the Committee. The
Committee shall be composed solely of at least two directors of the Company,
each of whom is a "non-employee director" as defined in Rule 16b-3, as
promulgated by the SEC under the Exchange Act, and an "outside director" within
the meaning of Section 162(m).
2.10 "COMMON STOCK" means the Common Stock, par value $0.10 per share,
of the Company.
2.11 "COMPANY" means ITC Learning Corporation, a corporation organized
under the laws of the State of Maryland, and its successors.
2.12 "DATE OF GRANT" means the date designated by the Administrator as
the date as of which an Award is granted, which shall not be earlier than the
date on which the Administrator approves the granting of such Award.
2.13 "DISABILITY" means any physical or mental injury or disease of a
permanent nature that renders an Employee Participant incapable of meeting the
requirements of the employment or other work that Employee Participant performed
immediately before that disability commenced. The determination of whether an
Employee Participant is disabled and when an Employee Participant becomes
disabled shall be made by the Administrator in its sole and absolute discretion.
2.14 "DISABILITY DATE" means the date which is six months after the
date on which an Employee Participant is first absent from active employment or
work with the Company due to a Disability.
2.15 "EMPLOYEE PARTICIPANT" means a Participant who is an employee of
the Company or one of its Subsidiaries.
2.16 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
2.17 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
2.18 "FAIR MARKET VALUE" of a share of Common Stock means, as of any
given date, the closing sales price of a share of Common Stock on such date on
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the principal national securities exchange on which the Common Stock is then
traded or, if the Common Stock is not then traded on a national securities
exchange, the closing sales price or, if none, the average of the bid and asked
prices of the Common Stock on such date as reported on the National Association
of Securities Dealers Automated Quotation System ("Nasdaq"); PROVIDED, HOWEVER,
that, if there were no sales reported as of such date, Fair Market Value shall
be computed as of the last date preceding such date on which a sale was
reported; PROVIDED, FURTHER, that, if any such exchange or quotation system is
closed on any day on which Fair Market Value is to be determined, Fair Market
Value shall be determined as of the first date immediately preceding such date
on which such exchange or quotation system was open for trading. In the event
the Common Stock is not admitted to trade on a securities exchange or quoted on
Nasdaq, the Fair Market Value of a share of Common Stock as of any given date
shall be as determined by the Administrator in its sole and absolute discretion,
which determination may be based on, among other things, the opinion of one or
more independent and reputable appraisers qualified to value companies in the
Company's line of business. Notwithstanding the foregoing, the Fair Market Value
of a share of Common Stock shall never be less than par value per share.
2.19 "INCENTIVE STOCK OPTION" means an Option designated as an
incentive stock option and that meets the requirements of Section 422 of the
Code.
2.20 "NON-EMPLOYEE DIRECTOR" means each member of the Board or of the
Board of Directors of a Subsidiary who is not an employee of the Company or of
any of its Subsidiaries.
2.21 "NON-EMPLOYEE DIRECTOR OPTION" means an Option granted to a
Non-Employee Director.
2.22 "NON-QUALIFIED STOCK OPTION" means an Option that is not an
Incentive Stock Option.
2.23 "OPTION" means any option to purchase Common Stock granted to a
Participant pursuant to Article VI.
2.24 "PARTICIPANT" means any director or employee of the Company or any
of its Subsidiaries selected by the Administrator to receive an Option under the
Plan in accordance with Article VI and/or Restricted Shares under the Plan in
accordance with Article VII.
2.25 "PLAN" means the ITC Learning Corporation 1998 Incentive Stock
Plan as set forth herein, and as the same may be amended from time to time.
2.26 "RESTRICTED SHARES" means shares of Common Stock subject to
restrictions imposed in connection with Awards granted under Article VII.
2.27 "RULE 16B-3" means Rule 16b-3 promulgated by the SEC under Section
16 of the Exchange Act and any
successor rule.
2.28 "SEC" means the Securities and Exchange Commission.
2.29 "SECTION 162(M)" means Section 162(m) of the Code and the
regulations thereunder.
2.30 "SUBSIDIARY" means a company more than 50% of the equity interests
of which are beneficially owned, directly or indirectly, by the Company.
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2.31 "TEN PERCENT SHAREHOLDER" means a Participant who, at the time of
grant of an Option, owns (or is deemed to own under Section 424(d) of the Code)
more than 10% of the Voting Stock.
2.32 "TERMINATION OF EMPLOYMENT" means, with respect to an Employee
Participant, the voluntary or involuntary termination of a Participant's
employment with the Company or any of its Subsidiaries for any reason, including
death, Disability, retirement or as the result of the sale or other divestiture
of the Participant's employer or any similar transaction in which the
Participant's employer ceases to be the Company or one of its Subsidiaries.
Whether entering military or other government service shall constitute
Termination of Employment, and whether a Termination of Employment is a result
of Disability, shall be determined in each case by the Administrator in its sole
and absolute discretion.
2.33 "THIRD PARTY" includes a single person or a group of persons or
entities acting in concert not wholly owned directly or indirectly by the
Company.
2.34 "VOTING STOCK" means the classes of stock of the Company entitled
to vote generally in the election of directors of the Company.
ARTICLE III. ADMINISTRATION
3.01 ADMINISTRATOR. The Plan shall be administered by the
Administrator, which shall have exclusive and final authority in each
determination, interpretation, or other action affecting the Plan and its
Participants. The Administrator shall have the sole and absolute discretion to
interpret the Plan, to establish and modify administrative rules for the Plan,
to select the directors, officers and other key employees to whom Awards may be
granted, to determine the terms and provisions of the respective Award
Agreements (which need not be identical), to determine all claims for benefits
under the Plan, to impose such conditions and restrictions on Awards as it
determines appropriate, to determine whether the shares offered with respect to
an Award will be treasury shares or will be authorized but previously unissued
shares, and to take such steps in connection with the Plan and Awards granted
hereunder as it may deem necessary or advisable. No action of the Administrator
will be effective if it contravenes or amends the Plan in any respect. Both the
Board and the Committee may act as Administrator of the Plan and the Committee
may act as Administrator with respect to Options granted to members of the
Committee.
3.02 ACTIONS OF THE COMMITTEE. All determinations of the Committee
shall be made by a majority vote of its members. Any decision or determination
reduced to writing and signed by all of the members of the Committee shall be
fully as effective as if it had been made by a majority vote at a meeting duly
called and held. The Committee shall also have express authorization to hold
Committee meetings by conference telephone, or similar communication equipment
by means of which all persons participating in the meeting can hear each other.
ARTICLE IV. SHARES OF COMMON STOCK
4.01 NUMBER OF SHARES OF COMMON STOCK ISSUABLE. Subject to adjustments
as provided in Section 8.05, 200,000 shares of Common Stock shall be available
for Awards under the Plan. The Common Stock to be offered under the Plan shall
be authorized and unissued Common Stock, or issued Common Stock that shall have
been reacquired by the Company and held in its treasury.
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4.02 CALCULATION OF NUMBER OF SHARES OF COMMON STOCK AWARDED TO ANY
PARTICIPANT. In the event the purchase price of an Option is paid, or tax or
withholding payments relating to an Award are satisfied, in whole or in part
through the delivery of shares of Common Stock, a Participant will be deemed to
have received an Award with respect to those shares of Common Stock.
4.03 SHARES OF COMMON STOCK SUBJECT TO TERMINATED AWARDS. The Common
Stock covered by any unexercised portions of terminated Options, shares of
Common Stock forfeited as provided in Section 7.02(a) and shares of Common Stock
subject to Awards that are otherwise surrendered by the Participant without
receiving any payment or other benefit with respect thereto may again be subject
to new Awards under the Plan.
ARTICLE V. PARTICIPATION
5.01 ELIGIBLE PARTICIPANTS. Participants in the Plan shall include such
directors, officers and other key employees of the Company or its Subsidiaries
as the Administrator, in its sole and absolute discretion, may designate from
time to time. In making such designation, the Administrator may take into
account the nature of the services rendered by the directors, officers and key
employees, their present and potential contributions to the success of the
Company, and such other factors as the Administrator, in its sole and absolute
discretion, may deem relevant. The Administrator's designation of a Participant
in any year shall not require the Administrator to designate such person to
receive Awards in any other year. The Administrator shall consider such factors
as it deems pertinent in selecting Participants and in determining the type and
amount of their respective Awards. A Participant may hold more than one Award
granted under the Plan. During the term of the Plan, no Employee Participant may
receive Awards with respect to more than 150,000 shares of Common Stock.
ARTICLE VI. STOCK OPTIONS
6.01 GRANT OF OPTION. Any Option granted under this Article VI shall
have such terms as the Administrator may, from time to time, approve, and the
terms and conditions of Options need not be the same with respect to each
Participant. Under this Article VI, the Administrator may grant to any
Participant one or more Incentive Stock Options, Non-Qualified Stock Options or
both types of Options; PROVIDED, HOWEVER, that Incentive Stock Options may only
be granted to Employee Participants. To the extent any Option does not qualify
as an Incentive Stock Option (whether because of its provisions, the time or
manner of its exercise or otherwise), that Option or the portion thereof that
does not so qualify shall constitute a separate Non-Qualified Stock Option.
6.02 INCENTIVE STOCK OPTIONS. In the case of any grant of an Incentive
Stock Option, whenever possible, each provision hereof and in any Award
Agreement relating to such Option shall be interpreted to entitle the holder
thereof to the tax treatment afforded by Section 422 of the Code, except (a) in
connection with the exercise of Options following a Participant's Termination of
Employment, (b) in accordance with a specific determination of the Administrator
with the consent of the affected Participant or (c) to the extent that the
operation of Section 8.05 would cause an Option to no longer be entitled to such
treatment. If any provision hereof or that Award Agreement is held not to comply
with requirements necessary to entitle that Option to that tax treatment, then
except as otherwise provided in the preceding sentence: (i) that provision shall
be deemed to have contained from the outset such language as is necessary to
entitle the Option to the tax treatment afforded under Section 422 of the Code;
and (ii) all other provisions hereof and of that Award Agreement remain in full
force and effect. Except as otherwise specified in the first sentence of this
Section 6.02, if any Award Agreement covering an Option the Administrator
designates to be an Incentive Stock Option hereunder does not explicitly include
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any term required to entitle that Incentive Stock Option to the tax treatment
afforded by Section 422 of the Code, all such terms shall be deemed implicit in
the designation of that Option, and that Option shall be deemed to have been
granted subject to all such terms.
6.03 TERMS OF OPTIONS. Options granted under this Article VI shall be
subject to the following terms and conditions and shall be in such form and
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Administrator shall deem desirable:
(a) OPTION PRICE. The option price per share of Common Stock
purchasable under an Option shall be determined by the Administrator at
the time of grant but, if the Option is an Incentive Stock Option, the
option price per share shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the Date of Grant; PROVIDED,
HOWEVER, that, if an Incentive Stock Option is granted to a Ten Percent
Shareholder, the option price per share shall be at least 110% of the
Fair Market Value of a share of Common Stock on the Date of Grant and
PROVIDED, FURTHER, that, except as otherwise required under the Code
with respect to Incentive Stock Options and as required by Rule 16b-3
with respect to Options granted to persons subject to Section 16 of the
Exchange Act, no amendment of an Option shall be deemed to be the grant
of a new Option for purposes of this Section 6.03(a).
(b) OPTION TERM. The term of each Option shall be fixed by the
Administrator, but no Option shall be exercisable more than ten years
after its Date of Grant; PROVIDED, HOWEVER, that, if an Incentive Stock
Option is granted to a Ten Percent Shareholder, the Option shall not be
exercisable more than five years after its Date of Grant.
(c) EXERCISABILITY. An Award Agreement with respect to Options
may contain such performance targets, waiting periods, exercise dates,
restrictions on exercise (including, but not limited to, a requirement
that an Option is exercisable in periodic installments), and
restrictions on the transfer of the underlying shares of Common Stock,
if any, as may be determined by the Administrator at the time of grant.
To the extent not exercised, installments shall cumulate and be
exercisable, in whole or in part, at any time after becoming
exercisable, subject to the limitations set forth in Sections 6.03(b),
(g) and (h). If an Option is an Incentive Stock Option and if required
by Section 422 of the Code, the aggregate Fair Market Value of the
shares of Common Stock underlying such Option and all other incentive
stock options granted to the Employee Participant (determined at the
time the Option is granted) that become exercisable in any one calendar
year shall not exceed $100,000.
(d) METHOD OF EXERCISE. Subject to whatever installment
exercise and waiting period provisions that apply under Section 6.03(c)
above, Options may be exercised in whole or in part at any time during
the term of the Option, by giving written notice of exercise to the
Company specifying the number of shares of Common Stock to be
purchased. Such notice shall be accompanied by payment in full of the
purchase price in such form as the Administrator may accept (including
payment in accordance with a cashless exercise program approved by the
Administrator). If and to the extent the Administrator determines in
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its sole and absolute discretion at or after grant, payment in full or
in part may also be made in the form of shares of Common Stock already
owned by the Participant (and for which the Participant has good title,
free and clear of any liens or encumbrances) based on the Fair Market
Value of the shares of Common Stock on the date the Option is
exercised; PROVIDED, HOWEVER, that any already owned Common Stock used
for payment must have been held by the Participant for at least six
months. No Common Stock shall be issued on exercise of an Option until
payment, as provided herein, therefor has been made. A Participant
shall generally have the right to dividends or other rights of a
stockholder with respect to Common Stock subject to the Option only
when certificates for shares of Common Stock are issued to the
Participant.
(e) NON-TRANSFERABILITY OF OPTIONS. No Option shall be
transferable by the Participant otherwise than by will or the laws of
descent and distribution.
(f) ACCELERATION OR EXTENSION OF EXERCISE TIME. The
Administrator, in its sole and absolute discretion, shall have the
right (but shall not in any case be obligated) to permit purchase of
Common Stock subject to any Option granted to a Participant prior to
the time such Option would otherwise become exercisable under the terms
of the Award Agreement. In addition, the Administrator, in its sole and
absolute discretion, shall have the right (but shall not in any case be
obligated) to permit any Option granted to a Participant to be
exercised after its expiration date, subject, however to the limitation
set forth in Section 6.03(b).
(g) EXERCISE OF OPTIONS UPON TERMINATION OF EMPLOYMENT. The
following provisions apply to Options granted to Employee Participants:
(i) EXERCISE OF VESTED OPTIONS UPON TERMINATION OF
EMPLOYMENT.
(A) TERMINATION. Unless the Administrator,
in its sole and absolute discretion, provides for a
shorter or longer period of time in the Award
Agreement or a longer period of time in accordance
with Section 6.03(f), upon an Employee Participant's
Termination of Employment other than by reason of
death or Disability, an Employee Participant may,
within three months from the date of such Termination
of Employment, exercise all or any part of his or her
Options as were exercisable on the date of
Termination of Employment if such Termination of
Employment is not for Cause. If such Termination of
Employment is for Cause, the right of the Employee
Participant to exercise such Options shall terminate
on the date of Termination of Employment. In no
event, however, may any Option be exercised later
than the date determined pursuant to Section 6.03(b).
(B) DISABILITY. Unless the Administrator, in
its sole and absolute discretion, provides for a
shorter or longer period of time in the Award
Agreement or a longer period of time in accordance
with Section 6.03(f), upon an Employee Participant's
Disability Date, the Employee Participant may, within
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one year after the Disability Date, exercise his or
her Options, but only to the extent such Options were
exercisable on the Disability Date and only to the
extent not previously exercised. In no event,
however, may any Option be exercised later than the
date determined pursuant to Section 6.03(b).
(C) DEATH. Unless the Administrator, in its
sole and absolute discretion, provides for a shorter
or longer period of time in the Award Agreement or a
longer period of time in accordance with Section
6.03(f), in the event of the death of an Employee
Participant while employed by the Company or a
Subsidiary, the right of the Employee Participant's
Beneficiary to exercise his or her Options (but only
to the extent the Options were exercisable as of the
date of death of the Employee Participant and only to
the extent not previously exercised) shall expire
upon the expiration of one year from the date of the
Employee Participant's death or on the date of
expiration of the Option determined pursuant to
Section 6.03(b), whichever is earlier.
(ii) EXPIRATION OF UNVESTED OPTIONS UPON TERMINATION
OF EMPLOYMENT. Subject to Sections 6.03(f) and 6.03(g)(i)(B)
and (C), to the extent all or any part of an Option granted to
an Employee Participant was not exercisable as of the date of
Termination of Employment, such right shall expire at the date
of such Termination of Employment. Notwithstanding the
foregoing, the Administrator, in its sole and absolute
discretion and under such terms as it deems appropriate, may
permit an Employee Participant who will continue to render
significant services to the Company or a Subsidiary after his
or her Termination of Employment to continue to accrue service
with respect to the right to exercise his or her Options
during the period in which the individual continues to render
such services.
(h) EXERCISE OF OPTIONS FOLLOWING TERMINATION OF SERVICE AS A
NON-EMPLOYEE DIRECTOR. Unless the Administrator, in its sole and
absolute discretion, provides for a shorter or longer period of time in
the Award Agreement or a longer period of time in accordance with
Section 6.03(f), (A) if a Non-Employee Director's service with the
Company or a Subsidiary terminates by reason of death, any Option held
by such Non-Employee Director may be exercised for a period of one year
from the date of death or until the expiration of the Option, whichever
is shorter, and (B) if a Non-Employee Director's service with the
Company or a Subsidiary terminates other than by reason of death, any
Option held by such Non-Employee Director may be exercised for a period
of three months from the date of such termination or until the
expiration of the stated term of the Option, whichever is shorter.
Unless the Administrator, in its sole and absolute discretion, provides
otherwise in an Award Agreement, all or any part of an Option granted
to a Non-Employee Director that was not exercisable as of the date such
Non-Employee Director's service with the Company or a Subsidiary
terminates for any reason shall expire at the date of such termination
of service.
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ARTICLE VII. RESTRICTED SHARES
7.01 RESTRICTED SHARE AWARDS. Restricted Shares may be issued either
alone or in addition to other Awards granted under the Plan. The Administrator
may grant to any Employee Participant an Award of shares of Common Stock in such
number, and subject to such terms and conditions relating to forfeitability and
restrictions on delivery and transfer (whether based on performance standards,
periods of service or otherwise) as the Administrator shall establish. The terms
of any Restricted Share Award granted under the Plan shall be set forth in an
Award Agreement, which shall contain provisions determined by the Administrator
and not inconsistent with the Plan. The provisions of Restricted Share Awards
need not be the same for each Participant receiving such Awards.
(a) ISSUANCE OF RESTRICTED SHARES. As soon as practicable
after the Date of Grant of a Restricted Share Award by the
Administrator, the Company shall cause to be transferred on the books
of the Company shares of Common Stock, registered on behalf of the
Participant in nominee form, evidencing the Restricted Shares covered
by the Award, but subject to forfeiture to the Company retroactive to
the Date of Grant if an Award Agreement delivered to the Participant by
the Company with respect to the Restricted Shares covered by the Award
is not duly executed by the Participant and timely returned to the
Company. Each Participant, as a condition to the receipt of a
Restricted Share Award, shall pay to the Company in cash the par value
of a share of Common Stock multiplied by the number of shares of Common
Stock covered by such Restricted Share Award. All shares of Common
Stock covered by Awards under this Article VII shall be subject to the
restrictions, terms and conditions contained in the Plan and the Award
Agreement entered into by and between the Company and the Participant.
Until the lapse or release of all restrictions applicable to an Award
of Restricted Shares, the stock certificates representing such
Restricted Shares shall be held in custody by the Company or its
designee. Upon the lapse or release of all restrictions with respect to
an Award as described in Section 7.01(d), one or more stock
certificates, registered in the name of the Participant, for an
appropriate number of shares of Common Stock as provided in Section
7.01(d), free of any restrictions set forth in the Plan and the Award
Agreement, shall be delivered to the Participant.
(b) SHAREHOLDER RIGHTS. Beginning on the Date of Grant of the
Restricted Share Award and subject to execution of the Award Agreement
as provided in Section 7.01(a), the Participant shall become a
shareholder of the Company with respect to all shares of Common Stock
subject to the Award Agreement and shall have all of the rights of a
shareholder, including, but not limited to, the right to vote such
shares of Common Stock and, except as otherwise determined by the
Administrator and specified in the applicable Award Agreement, the
right to receive dividends (or dividend equivalents); PROVIDED,
HOWEVER, that any shares of Common Stock distributed as a dividend or
otherwise with respect to any Restricted Shares as to which the
restrictions have not yet lapsed shall be subject to the same
restrictions as such Restricted Shares and shall be held in custody by
the Company as prescribed in Section 7.01(a).
(c) RESTRICTION ON TRANSFERABILITY. None of the Restricted
Shares may be assigned or transferred (other than by will or the laws
of descent and distribution), pledged or sold prior to lapse or release
of the restrictions applicable thereto.
(d) DELIVERY OF SHARES OF COMMON STOCK UPON RELEASE OF
RESTRICTIONS. Upon expiration or earlier termination of the forfeiture
period without a forfeiture and the satisfaction of or release from any
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other conditions prescribed by the Administrator, the restrictions
applicable to the Restricted Shares shall lapse. As promptly as
administratively feasible thereafter, subject to the requirements of
Section 8.04, the Company shall deliver to the Participant or, in case
of the Participant's death, to the Participant's Beneficiary, one or
more stock certificates for the appropriate number of shares of Common
Stock, free of all such restrictions, except for any restrictions that
may be imposed by law.
7.02 TERMS OF RESTRICTED SHARES.
(a) FORFEITURE OF RESTRICTED SHARES. Subject to Section
7.02(b), all Restricted Shares shall be forfeited and returned to the
Company and all rights of the Participant with respect to such
Restricted Shares shall terminate unless the Participant continues in
the service of the Company or any Subsidiary of the Company as an
employee until the expiration of the forfeiture period for such
Restricted Shares and satisfies any and all other conditions set forth
in the Award Agreement. The Administrator, in its sole and absolute
discretion, shall determine the forfeiture period (which may, but need
not, lapse in installments) and any other terms and conditions
applicable with respect to any Restricted Share Award.
(b) WAIVER OF FORFEITURE PERIOD. Notwithstanding anything
contained in this Article VII to the contrary, the Administrator may,
in its sole and absolute discretion, waive the forfeiture period and
any other conditions set forth in any Award Agreement under appropriate
circumstances (including the death, Disability or retirement of the
Participant or a material change in circumstances arising after the
Date of Grant of an Award) and subject to such terms and conditions
(including forfeiture of a proportionate number of Restricted Shares)
as the Administrator shall deem appropriate, provided that the
Participant shall at that time have completed at least one year of
employment after the Date of Grant.
ARTICLE VIII. TERMS APPLICABLE TO ALL AWARDS GRANTED UNDER THE PLAN
8.01 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
such Award shall have been granted shall have executed and delivered an Award
Agreement authorized by the Administrator expressly granting the Award to such
person and containing provisions setting forth the terms of the Award.
8.02 PLAN PROVISIONS CONTROL AWARD TERMS. The terms of the Plan shall
govern all Awards granted under the Plan, and in no event shall the
Administrator have the power to grant to a Participant any Award under the Plan
that is contrary to any provisions of the Plan. If any provision of any Award
shall conflict with any of the terms in the Plan as constituted on the Date of
Grant of such Award, the terms in the Plan as constituted on the Date of Grant
of such Award shall control.
8.03 MODIFICATION OF AWARD AFTER GRANT. Except as provided by the
Administrator, in its sole and absolute discretion, in the Award Agreement or as
provided in Section 8.05, no Award granted under the Plan to a Participant may
be modified (unless such modification does not materially decrease the value of
the Award) after the Date of Grant except by express written agreement between
the Company and the Participant, provided that any such change (a) shall not be
inconsistent with the terms of the Plan, and (b) shall be approved by the
Administrator.
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8.04 TAXES. The Company shall be entitled, if the Administrator deems
it necessary or desirable, to withhold (or secure payment from the Participant
in lieu of withholding) the amount of any withholding or other tax required by
law to be withheld or paid by the Company with respect to any Award. The Company
may defer issuance of Common Stock under an Award unless indemnified to its
satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Administrator or its
delegate and shall be payable by the Participant at such time as the
Administrator determines. A Participant shall be permitted to satisfy his or her
tax or withholding obligation by (a) having cash withheld from the Participant's
salary or other compensation payable by the Company or a Subsidiary, (b) the
payment of cash by the Participant to the Company, (c) the payment in shares of
Common Stock already owned by the Participant valued at Fair Market Value,
and/or (d) the withholding from the Award, at the appropriate time, of a number
of shares of Common Stock sufficient, based upon the Fair Market Value of such
Common Stock, to satisfy such tax or withholding requirements. The Administrator
shall be authorized, in its sole and absolute discretion, to establish rules and
procedures relating to any such withholding methods it deems necessary or
appropriate (including, without limitation, rules and procedures relating to
elections by Participants who are subject to the provisions of Section 16 of the
Exchange Act to have shares of Common Stock withheld from an Award to meet those
withholding obligations).
8.05 ADJUSTMENTS TO REFLECT CAPITAL CHANGES; CHANGE IN CONTROL.
(a) RECAPITALIZATION. The number and kind of shares subject to
outstanding Awards, the limit set forth in the last sentence of Section
5.01, and the number and kind of shares available for Awards
subsequently granted under the Plan shall be appropriately adjusted to
reflect any stock dividend, stock split, combination or exchange of
shares, merger, consolidation or other change in capitalization with a
similar substantive effect upon the Plan or the Awards granted under
the Plan. The Administrator shall have the power and sole and absolute
discretion to determine the nature and amount of the adjustment to be
made in each case. In no event shall any adjustments be made under the
provisions of this Section 8.05(a) to any outstanding Restricted Share
Award if an adjustment has been or will be made to the shares of Common
Stock awarded to a Participant in such person's capacity as a
stockholder.
(b) SALE OR REORGANIZATION. After any reorganization, merger
or consolidation in which the Company is or is not the surviving
entity, each Participant shall, at no additional cost, be entitled upon
the exercise of an Option outstanding prior to such event to receive
(subject to any required action by stockholders), in lieu of the number
of shares of Common Stock receivable on exercise pursuant to such
Option, the number and class of shares of stock or other securities to
which such Participant would have been entitled pursuant to the terms
of the reorganization, merger or consolidation if, at the time of such
reorganization, merger or consolidation, such Participant had been the
holder of record of a number of shares of Common Stock equal to the
number of shares of Common Stock receivable on exercise of such Option.
Comparable rights shall accrue to each Participant in the event of
successive reorganizations, mergers or consolidations of the character
described above.
(c) OPTIONS TO PURCHASE STOCK OF ACQUIRED COMPANIES. After any
reorganization, merger, or consolidation in which the Company shall be
a surviving entity, the Administrator may grant substituted Options
under the provisions of the Plan, replacing old options granted under a
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plan of another party to the reorganization, merger or consolidation
whose stock subject to the old options may no longer be issued
following such reorganization, merger or consolidation. The foregoing
adjustments and manner of application of the foregoing provisions shall
be determined by the Administrator in its sole and absolute discretion.
Any such adjustments may provide for the elimination of any fractional
shares of Common Stock that might otherwise become subject to any
Options.
(d) CHANGE IN CONTROL. Upon a Change in Control, unless
otherwise specifically prohibited by Rule 16b-3:
(1) Any and all Options shall become exercisable
as of the date of the Change in Control; and
(2) The restrictions on vesting on all Restricted
Share Awards shall be deemed to have satisfied as of the date
of the Change in Control.
(e) EXISTENCE OF AWARDS. The existence of outstanding Awards
shall not affect the right of the Company or its stockholders to make
or authorize any and all adjustments, recapitalizations,
reclassifications, reorganizations and other changes in the Company's
capital structure, the Company's business, any merger or consolidation
of the Company, any issue of bonds, debentures or preferred stock of
the Company, the Company's liquidation or dissolution, any sale or
transfer of all or any part of the Company's assets or business, or any
other corporate act or proceeding, whether of a similar nature or
otherwise.
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8.06 SURRENDER OF AWARDS. Any Award granted to a Participant under the
Plan may be surrendered to the Company for cancellation on such terms as the
Administrator and holder approve.
8.07 NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT. No director, officer,
employee or other person shall have any claim or right to be granted an Award.
Neither the Plan nor any action taken hereunder shall be construed as giving any
director, officer or employee any right to be retained by the Company or any of
its Subsidiaries.
8.08 AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES. Income recognized by a
Participant pursuant to the provisions of the Plan shall not be included in the
determination of benefits under any employee pension benefit plan (as such term
is defined in Section 3(2) of ERISA) or group insurance or other benefit plans
applicable to the Participant that are maintained by the Company or any of its
Subsidiaries, except as may be provided under the terms of such plans or
determined by resolution of the Board.
8.09 GOVERNING LAW. The Plan and all determinations made and actions
taken pursuant to the Plan shall be governed by the laws of the State of
Maryland other than the conflict of laws provisions of such laws, and shall be
construed in accordance therewith.
8.10 NO STRICT CONSTRUCTION. No rule of strict construction shall be
implied against the Company, the Administrator, or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the Plan
or any rule or procedure established by the Administrator.
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8.11 COMPLIANCE WITH RULE 16B-3 AND SECTION 162(M). It is intended that
the Plan be applied and administered in compliance with Rule 16b-3 and with
Section 162(m). If any provision of the Plan would be in violation of Section
162(m) if applied as written, such provision shall not have effect as written
and shall be given effect so as to comply with Section 162(m) as determined by
the Administrator in its sole and absolute discretion. The Board is authorized
to amend the Plan and to make any such modifications to Award Agreements to
comply with Rule 16b-3 and Section 162(m), as they may be amended from time to
time, and to make any other such amendments or modifications deemed necessary or
appropriate to better accomplish the purposes of the Plan in light of any
amendments made to Rule 16b-3 or Section 162(m). Notwithstanding the foregoing,
the Board may amend the Plan so that it (or certain of its provisions) no longer
comply with either or both Rule 16b-3 or Section 162(m) if the Board
specifically determines that such compliance is no longer desired.
8.12 CAPTIONS. The captions (I.E., all Section headings) used in the
Plan are for convenience only, do not constitute a part of the Plan, and shall
not be deemed to limit, characterize, or affect in any way any provisions of the
Plan, and all provisions of the Plan shall be construed as if no captions have
been used in the Plan.
8.13 SEVERABILITY. Whenever possible, each provision in the Plan and
every Award at any time granted under the Plan shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of the Plan or any Award at any time granted under the Plan shall be held to be
prohibited by or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law, and (b) all other provisions of
the Plan and every other Award at any time granted under the Plan shall remain
in full force and effect.
8.14 LEGENDS. All certificates for Common Stock delivered under the
Plan shall be subject to such transfer restrictions set forth in the Plan and
such other restrictions as the Administrator may deem advisable under the rules,
regulations, and other requirements of the SEC, any stock exchange upon which
the Common Stock is then listed, and any applicable federal or state securities
law. The Administrator may cause a legend or legends to be put on any such
certificates to make appropriate references to such restrictions.
8.15 INVESTMENT REPRESENTATION. The Administrator may, in its sole and
absolute discretion, demand that any Participant awarded an Award deliver to the
Administrator at the time of grant or exercise of such Award a written
representation that the shares of Common Stock subject to such Award are to be
acquired for investment and not for resale or with a view to the distribution
thereof. Upon such demand, delivery of such written representation by the
Participant prior to the delivery of any shares of Common Stock pursuant to the
grant or exercise of his or her Award shall be a condition precedent to the
Participant's right to purchase or otherwise acquire such shares of Common Stock
by such grant or exercise. The Company is not legally obliged hereunder if
fulfillment of its obligations under the Plan would violate federal or state
securities laws.
8.16 AMENDMENT AND TERMINATION.
(a) AMENDMENT. The Board shall have complete power and
authority to amend the Plan at any time it is deemed necessary or
appropriate; PROVIDED, HOWEVER, that the Board shall not, without the
affirmative approval of a simple majority of the holders of Voting
Stock, represented, by person or by proxy, and entitled to vote at an
annual or special meeting of the holders of Voting Stock, make any
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amendment that requires stockholder approval under any applicable law
or rule, unless the Board determines that compliance with such law or
rule is no longer desired. No termination or amendment of the Plan may,
without the consent of the Participant to whom any Award shall
theretofore have been granted under the Plan, adversely affect the
right of such individual under such Award; PROVIDED, HOWEVER, that the
Administrator may, in its sole and absolute discretion, make provision
in an Award Agreement for such amendments that, in its sole and
absolute discretion, it deems appropriate.
(b) TERMINATION. The Board shall have the right and the power
to terminate the Plan at any time. No Award shall be granted under the
Plan after the termination of the Plan, but the termination of the Plan
shall not have any other effect and any Award outstanding at the time
of the termination of the Plan may be amended and exercised and may
vest after termination of the Plan at any time prior to the expiration
date of such Award to the same extent such Award could have been
amended or would have been exercisable or vest had the Plan not
terminated.
8.17 COSTS AND EXPENSES. All costs and expenses incurred in
administering the Plan shall be borne by the Company.
8.18 UNFUNDED PLAN. The Plan shall be unfunded. The Company shall not
be required to establish any special or separate fund or make any other
segregation of assets to assure the payment of any Award under the Plan.
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