EXHIBIT 10.1
KARRINGTON HEALTH, INC.
1996 INCENTIVE STOCK PLAN
SECTION l. PURPOSES. The purposes of the Karrington Health, Inc. 1996
Incentive Stock Plan are to promote the interests of Karrington Health, Inc. and
its shareholders by (a) attracting and retaining exceptional executive personnel
and other key employees of, and advisors and consultants to, and directors of
the Company and its Subsidiaries; (b) motivating such employees, advisors and
consultants and Eligible Directors by means of performance-related incentives to
achieve longer-range performance goals; and (c) providing all long-term
employees of the Company and its Subsidiaries with the opportunity to
participate in the long-term growth and financial success of the Company.
SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall
have the meanings set forth below:
"Award" shall mean any Option; stock appreciation right ("Stock
Appreciation Right"), as described in Section 10, which may be awarded either in
tandem with Options ("Tandem Stock Appreciation Rights") or on a stand-alone
basis ("Nontandem Stock Appreciation Rights"); Restricted Stock Award;
Performance Award or unrestricted Common Shares ("Unrestricted Shares"), as
described in Section 12, but shall not include any Director Option.
"Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award which may, but need not, be executed
or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Cash Account" shall mean an account established for each Participant to
which amounts withheld through payroll deductions shall be credited to purchase
Shares under the provisions of Section 11.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean: (a) until a registration statement for an initial
public offering of the Company's Shares shall become effective, the full Board
and (b) after such a registration statement shall become effective, a committee
of the Board designated by the Board to administer the Plan which shall satisfy
the requirements contained in Section 1.162-27(c)(4) of the Final Regulations
and which shall be composed of not less than the minimum number of persons from
time to time required by Rule 16b-3, each of whom shall be (i) a person from
time to time permitted by the rules promulgated under Section 16 of the Exchange
Act in order for grants of Awards to be exempt transactions under said Section
16 and (ii) receiving remuneration in no other capacity than as a director,
except as permitted under Section 1.162-27(e)(3) of the Final Regulations.
"Company" shall mean Karrington Health, Inc., together with any successor
thereto.
"Covered Employee" shall mean any individual who, on the last day of the
Company's taxable year, is
(a) the chief executive officer of the Company or is acting in such
capacity; or
(b) among the four highest compensated officers (other than the chief
executive officer).
For this purpose, whether an individual is the chief executive officer or one of
the four highest compensated officers of the Company shall be determined
pursuant to the executive compensation disclosure rules under the Exchange Act.
"Director Option" shall mean a Non-Qualified Stock Option granted to each
Eligible Director pursuant to Section 6(e) without any action by the Board or
the Committee.
"Eligible Director" shall mean, on any date, a person who is serving as a
member of the Board but shall not include a person who is an Employee of the
Company or a Subsidiary.
"Employee" shall mean (a) an employee of the Company or of any Subsidiary;
and (b) except with respect to an Incentive Stock Option and a Right to
Purchase, an advisor or consultant to the Company or to any Subsidiary.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean the fair market value of the property or
other item being valued, as determined by the Committee in its sole discretion,
provided that the fair market value of Common Shares shall be determined by
reference to the most recent closing price quotation or, if none, the average of
the bid and asked prices, as reported as of the most recent available date with
respect to the sale of Common Shares on any quotation system approved by the
National Association of Securities Dealers then reporting sales of Common Shares
or on any national securities exchange on which the Common Shares are then
listed.
"Final Regulations" shall mean the final regulations promulgated by the
Internal Revenue Service under Section 162(m) of the Code.
"Incentive Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is intended to meet
the requirements of Section 422 of the Code or any successor provision thereto.
"Non-Qualified Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is not intended to
be an Incentive Stock Option.
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"Offering" shall mean an opportunity provided by the Committee to purchase
Shares under the provisions of Section 11. Offerings may be consecutive or
concurrent, as determined by the Committee. The Committee shall designate the
maximum number of Shares that may be purchased under each Offering. Shares not
sold under one Offering may be offered again in any subsequent Offering.
"Offering Effective Date" shall mean the first business day of the month
designated by the Committee as the start of the Offering Period applicable to an
Offering.
"Offering Period" shall mean the duration of an Offering, as designated by
the Committee. The Offering Period for any Offering shall not exceed 12 months.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option but shall not include a Director Option.
"Participant" shall mean any Employee selected by the Committee to receive
an Award under the Plan. In addition, for purposes of Section 11, the term
"Participant" shall include any Employee who has satisfied the requirements of
such section to acquire Shares under the Plan.
"Performance Award" shall mean any right granted under Section 8 of the
Plan.
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.
"Plan" shall mean the Karrington Health, Inc. 1996 Incentive Stock Plan.
"Restricted Stock" shall mean any Share granted under Section 7 of the
Plan.
"Right to Purchase" shall mean an option to purchase Shares granted to a
Participant who elects to participate in an Offering under the provisions of
Section 11. A Right to Purchase granted for an Offering shall terminate
following the close of business on the Right to Purchase Date for that Offering
to the extent that such Right to Purchase is not exercised on such Right to
Purchase Date.
"Right to Purchase Date" shall mean the last business day of an Offering
Period to purchase Shares under the provisions of Section 11.
"Rule l6b-3" shall mean Rule 16b-3 as promulgated and interpreted by the
SEC under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto and shall include the staff thereof.
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"Shares" shall mean Common Shares, without par value, of the Company or
such other securities of the Company as may be designated by the Committee from
time to time.
"Share Account" shall mean an account established for each Participant who
exercises a Right to Purchase under Section 11. A Participant's Share Account
will be credited with the number of Shares purchased on each Right to Purchase
Date and debited for the number of Shares withdrawn by the Participant after
such date.
"Subsidiary" shall mean any corporation which, on the date of
determination, qualified as a subsidiary corporation of the Company under
Section 424(f) of the Code. In addition, the term "Subsidiary" shall include
any trade or business which is under common control with the Company, as
determined under Section 414(c) of the Code.
"Substitute Awards" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by a company acquired by
the Company or with which the Company combines.
"Ten Percent Shareholder" shall mean any shareholder who, at the time an
Incentive Stock Option is granted to such shareholder, owns [within the meaning
of Section 425(d) of the Code] more than ten percent of the voting power of all
classes of stock of the Company or a Subsidiary.
"Year of Service" shall mean each 12 consecutive month period, beginning on
an Employee's date of hire with the Company or a Subsidiary (and anniversaries
of such date), during which an Employee is employed by the Company or a
Subsidiary. For this purpose, all service with the Company or a Subsidiary
prior to the effective date of this Plan (as provided in Section 15) shall be
included. Further, periods of service with the Company or a Subsidiary which
are interrupted by a termination of employment (not including any authorized
leave of absence) shall not be aggregated.
SECTION 3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee. Subject to the
terms of the Plan and applicable law, and in addition to other express powers
and authorizations conferred on the Committee by the Plan, the Committee shall
have full power and authority to: (i) designate Participants; (ii) determine
the type or types of Awards to be granted to an eligible Employee;
(iii) determine the number of Shares to be covered by, or with respect to which
payments, rights or other matters are to be calculated in connection with
Awards; (iv) determine the terms and conditions of any Award; (v) determine
whether, to what extent and under what circumstances Awards may be settled or
exercised in cash, Shares, other securities, other Awards or other property or
canceled, forfeited or suspended; (vi) determine whether, to what extent and
under what circumstances cash, Shares, other securities, other Awards, other
property and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the holder thereof or of the
Committee; (vii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (viii) establish, amend,
suspend or waive such rules and regulations and appoint such agents as it shall
deem appropriate
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for the proper administration of the Plan; and (ix) make any other determination
and take any other action that the Committee deems necessary or desirable for
the administration of the Plan. Notwithstanding anything else contained in the
Plan to the contrary, neither the Committee nor the Board shall have any
discretion regarding whether an Eligible Director shall receive a Director
Option pursuant to Section 6(e) or regarding the terms of any Director Option,
including, without limitation, the number of Shares subject to such Director
Option, the timing of the grant or the exercisability of such Director Option or
the exercise price per Share of such Director Option.
(b) Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon all Persons, including the Company, any subsidiary, any Participant, any
holder or beneficiary of any Award, any stockholder and any Employee.
SECTION 4. SHARES AVAILABLE FOR THE PLAN.
(a) SHARES AVAILABLE. Subject to adjustment as provided in Section
4(b), the number of Shares available for issuance under the Plan shall be
550,000. If, after the effective date of the Plan, any Shares covered by an
Award or Director Option granted under the Plan, or to which such an Award or
Director Option relates, or any Shares issued under Section 11, are forfeited,
or if an Award or Director Option otherwise terminates or is canceled without
the delivery of Shares, then the Shares which may be issued under this Plan, to
the extent of any such settlement, forfeiture, termination or cancellation,
shall again be, or shall become, Shares available for issuance, to the extent
permissible under Rule l6b-3. In the event that any Option, Director Option or
other Award granted hereunder is exercised through the delivery of Shares, the
number of Shares available under the Plan shall be increased by the number of
Shares surrendered, to the extent permissible under Rule l6b-3.
(b) ADJUSTMENTS. In the event that any dividend or other
distribution (whether in the form of Shares, other securities or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Shares or other securities of the Company, issuance of warrants or other
rights to purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an adjustment is
necessary in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall proportionately adjust any or all (as necessary) of (i) the
number of Shares or other securities of the Company (or number and kind of other
securities or property) which may be issued under this Plan; (ii) the number of
Shares or other securities of the Company (or number and kind of other
securities or property) subject to outstanding Awards; (iii) the number of
Shares or other securities of the Company (or number and kind of other
securities or property) and the purchase price per Share subject to purchase
under Section 11 hereof; and (iv) the grant or exercise price with respect to
any Award; provided, 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 the Plan to violate Section 422(b)(l) of the Code, as from
time to time amended. If, pursuant to the preceding sentence, an adjustment is
made to
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outstanding Options held by Participants, a corresponding adjustment shall be
made to outstanding Director Options and if, pursuant to the preceding sentence,
an adjustment is made to the number of Shares authorized for issuance under the
Plan, a corresponding adjustment shall be made to the number of Shares subject
to each Director Option thereafter granted pursuant to Section 6(e).
(c) SOURCES OF SHARES. Any Shares issued pursuant to the terms of
this Plan may consist, in whole or in part, of authorized and unissued Shares or
of Treasury Shares.
SECTION 5. ELIGIBILITY FOR AWARDS AND DIRECTOR OPTIONS. Any Employee,
including any officer or employee-director of the Company or any Subsidiary, who
is not a member of the Committee, shall be eligible to be designated a
Participant for purposes of receiving an Award under the Plan. Each Eligible
Director shall receive nondiscretionary Director Options in accordance with, and
only in accordance with, Section 6(e) hereof.
SECTION 6. OPTIONS AND DIRECTOR OPTIONS.
(a) GRANT. Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to determine the Employees to whom
Options shall be granted, the number of Shares to be covered by each Option, the
option price therefor and the conditions and limitations applicable to the
exercise of the Option. The Committee shall have the authority to grant
Incentive Stock Options or to grant Non-Qualified Stock Options or to grant both
types of options. In the case of Incentive Stock Options, the terms and
conditions of such grants shall be subject to, and comply with, such rules as
may be prescribed by Section 422 of the Code, as from time to time amended, and
any regulations implementing such statute, including, without limitation, the
requirements of Code Section 422(d) which limit the aggregate Fair Market Value
of Shares for which Incentive Stock Options are exercisable for the first time
to $100,000 per calendar year. Each provision of the Plan and of each written
option agreement relating to an Option designated as an Incentive Stock Option
shall be construed so that such Option qualifies as an Incentive Stock Option,
and any provision that cannot be so construed shall be disregarded.
(b) EXERCISE PRICE. The Committee shall establish the exercise price
at the time each Option is granted, which price, except in the case of Options
that are substitute Awards, shall not be less than 100% of the per Share Fair
Market Value on the date of grant. Notwithstanding any provision contained
herein, in the case of an Incentive Stock Option, the exercise price at the time
such Incentive Stock Option is granted to any Employee who, at the time of such
grant, is a Ten Percent Shareholder, shall not be less than 110% of the per
Share Fair Market Value on the date of grant.
(c) EXERCISE. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award Agreement or thereafter; provided,
in the case of an Incentive Stock Option, a Participant may not exercise such
Incentive Stock Option after (i) the date which is ten years (five years in the
case of a Participant who is a Ten Percent Stockholder) after the date on which
such Incentive Stock Option is granted; or (ii) the date which is three months
[twelve months in the case of a
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Participant who becomes disabled, as defined in Section 22(e)(3) of the Code, or
who dies] after the date on which he ceases to be an Employee of the Company or
a Subsidiary. The Committee may impose such conditions with respect to the
exercise of Options, including without limitation, any relating to the
application of federal or state securities laws, as it may deem necessary or
advisable. The Committee shall have the right to accelerate the exercisability
of any Option or outstanding Option in its discretion.
(d) PAYMENT. No Shares shall be delivered pursuant to any exercise
of an Option until payment in full of the option price therefor is received by
the Company. Such payment may be made in cash, or its equivalent or, if and to
the extent permitted by the Committee, by exchanging Shares owned by the
optionee (which are not the subject of any pledge or other security interest) or
by a combination of the foregoing, provided that the combined value of all cash
and cash equivalents and the Fair Market Value of any such Shares so tendered to
the Company as of the date of such tender is at least equal to such option
price.
(e) DIRECTOR OPTIONS. Notwithstanding anything else contained herein
to the contrary:
(i) on the first business day after the date a registration
statement for an initial public offering of the Company's Shares shall
become effective, each Eligible Director who is serving as a member of
the Board on that date shall receive a grant of a Director Option to
purchase 6,000 Shares at an exercise price per Share equal to the
public offering price per share of the Shares included in such initial
public offering;
(ii) each Eligible Director who becomes a member of the
Board after the date a registration statement for an initial public of
the Company's Shares shall become effective, shall receive, on the
first business day after he becomes an Eligible Director, a grant of a
Director Option to purchase 6,000 Shares at an exercise price per
Share equal to the Fair Market Value on the date of grant; and
(iii) on the first business day after each annual meeting of
shareholders of the Company beginning with the annual meeting in 1997,
each Eligible Director who is serving as a member of the Board on such
date and who is not receiving a Director Option pursuant to (ii) above
on such date, shall receive a grant of a Director Option to purchase
2,000 Shares at an exercise price per Share equal to the Fair Market
Value on the date of grant.
A Director Option shall be exercisable during a period beginning six months
after the date of grant and ending on the earlier to occur of the following two
dates: (A) the tenth anniversary of the date of grant of such Director Option
or (B) three months [twelve months in the case of an Eligible Director who
becomes disabled, as defined in Section 22(e)(3) of the Code, or who dies] after
the date the Eligible Director ceases to be a member of the Board, except that
if the Eligible Director ceases to be a member of the Board after having been
convicted of, or pled guilty or nolo contendere to, a felony, his Director
Option shall be canceled on the date he ceases to be a
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member of the Board. An Eligible Director may pay the exercise price of a
Director Option in the manner described in Section 6(d).
SECTION 7. RESTRICTED STOCK.
(a) GRANT. Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to determine the Employees to whom Shares
of Restricted Stock shall be granted, the number of Shares of Restricted Stock
to be granted to each Participant, the duration of the period during which, and
the conditions under which, the Restricted Stock will vest and no longer be
subject to forfeiture to the Company and the other terms and conditions of such
Awards. The Committee shall have the right to accelerate the vesting of any
Restricted Stock or outstanding Restricted Stock in its discretion.
(b) TRANSFER RESTRICTIONS. Until the lapse of applicable
restrictions, Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered except as provided in the Plan or the applicable
Award Agreements. Certificates issued in respect of Shares of Restricted Stock
shall be registered in the name of the Participant and deposited by such
Participant, together with a stock power endorsed in blank, with the Company.
Upon the lapse of the restrictions applicable to such Shares of Restricted
Stock, the Company shall deliver such certificates to the Participant or the
Participant's legal representative.
(c) PAYMENT OF DIVIDENDS. Dividends paid on any Shares of Restricted
Stock may be paid directly to the Participant, or may be reinvested in
additional Shares of Restricted Stock, as determined by the Committee in its
sole discretion.
SECTION 8. PERFORMANCE AWARDS.
(a) GRANT. The Committee shall have sole and complete authority to
determine the Employees who shall receive a Performance Award denominated in
cash or Shares; (i) valued, as determined by the Committee, in accordance with
the achievement of such performance goals during such performance periods as the
Committee shall establish; and (ii) payable at such time and in such form as the
Committee shall determine.
(b) TERMS AND CONDITIONS. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the performance goals
to be achieved during any performance period, the length of any performance
period, the amount of any Performance Award and the amount and kind of any
payment or transfer to be made pursuant to any Performance Award.
(c) PAYMENT OF PERFORMANCE AWARDS. Performance Awards may be paid in
a lump sum or in installments following the close of the performance period or,
in accordance with procedures established by the Committee, on a deferred basis.
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SECTION 9. CODE SECTION 162(m) LIMITATIONS.
(a) GENERAL LIMITATIONS. Any Awards issued under this Plan to
Covered Employees must satisfy the requirements of this Section 9.
(b) REQUIREMENTS FOR ALL AWARDS. Any Award issued to a Covered
Employee shall constitute qualified performance-based compensation. For this
purpose, an Award shall constitute qualified performance-based compensation to
the extent that:
(i) it is granted by the Committee on account of the
attainment of one or more preestablished, objective performance goals
established by the Committee, in accordance with the provisions of
Section 1.162-27(e)(2) of the Final Regulations;
(ii) the material terms of the performance goal under which
the Award is issued are disclosed to and subsequently approved by the
stockholders of the Company, in accordance with the provisions of
Section 1.162-27(e)(4) of the Final Regulations; and
(iii) the Committee certifies, in writing, prior to the
payment of any compensation under the Award, that the performance
goals and any other material terms were in fact satisfied.
(c) SPECIAL RULES FOR OPTIONS. The grant of an Option to a Covered
Employee under this Plan shall satisfy the requirements of Section 9(b)(i) above
to the extent that the following requirements are satisfied:
(i) subject to the provisions of Section 4(b), no Covered
Employee shall receive Options for more than 50,000 Shares over any
five-year period. For this purpose, to the extent that any Option is
canceled [as described in Section 1.162-27(e)(2)(vi)(B) of the Final
Regulations], such canceled Option shall continue to be counted
against the maximum number of Shares for which Options may be granted
to a Covered Employee under the Plan; and
(ii) under the terms of the Option, the amount of
compensation that the Covered Employee may receive is based solely on
an increase in the value of the Shares after the grant of the Option,
unless the grant of such Option is contingent upon the attainment of a
performance goal that otherwise satisfies the requirements of Section
9(b)(i) above.
SECTION 10. STOCK APPRECIATION RIGHTS.
(a) GRANTS OF STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights may be awarded by the Committee in connection with any Option granted
under the Plan, either at the time the Option is granted or thereafter at any
time prior to the exercise, termination or
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expiration of the Option. Nontandem Stock Appreciation Rights may also be
granted by the Committee at any time. At the time of grant of a Nontandem Stock
Appreciation Right, the Committee shall specify the number of Shares covered by
such right and the base price of Shares to be used in connection with the
calculation described in Section 10(d) below. The base price of a Nontandem
Stock Appreciation Right shall be not less than 100% of the per Share Fair
Market Value on the date of grant. Stock Appreciation Rights shall be subject
to such terms and conditions not inconsistent with the other provisions of this
Plan as the Committee shall determine.
(b) LIMITATIONS ON EXERCISE. A Tandem Stock Appreciation Right shall
be exercisable only to the extent that the related Option is exercisable and
shall be exercisable only for such period as the Committee may determine (which
period may expire prior to the expiration date of the related Option). Upon the
exercise of all or a portion of Tandem Stock Appreciation Rights, the related
Option shall be canceled with respect to an equal number of Shares. Shares
subject to Options, or portions thereof, surrendered upon exercise of a Tandem
Stock Appreciation Right, shall not be available for subsequent awards under the
Plan. A Nontandem Stock Appreciation Right shall be exercisable during such
period as the Committee shall determine.
(c) SURRENDER OR EXCHANGE OF TANDEM STOCK APPRECIATION RIGHTS. A
Tandem Stock Appreciation Right shall entitle the Participant to surrender to
the Company unexercised the related Option, or any portion thereof, and to
receive from the Company in exchange therefor that number of Shares having an
aggregate Fair Market Value equal to (i) the excess of (A) the Fair Market Value
of one (1) Share as of the date the Tandem Stock Appreciation Right is exercised
over (B) the exercise price per share specified in such Option, multiplied by
(ii) the number of Shares subject to the Option, or portion thereof, which is
surrendered. Cash shall be delivered in lieu of any fractional shares.
(d) EXERCISE OF NONTANDEM STOCK APPRECIATION RIGHTS. The exercise of
a Nontandem Stock Appreciation Right shall entitle the employee to receive from
the Company that number of Shares having an aggregate Fair Market Value equal to
(i) the excess of (A) the Fair Market Value of one (1) Share as of the date on
which the Nontandem Stock Appreciation Right is exercised over (B) the base
price of the Shares covered by the Nontandem Stock Appreciation Right,
multiplied by (ii) the number of Shares covered by the Nontandem Stock
Appreciation Right, or the portion thereof being exercised. Cash shall be
delivered in lieu of any fractional shares.
(e) SETTLEMENT OF STOCK APPRECIATION RIGHTS. As soon as is
reasonably practicable after the exercise of a Stock Appreciation Right, the
Company shall (i) issue, in the name of the Participant, stock certificates
representing the total number of full Shares to which the Participant is
entitled pursuant to Section 10(c) or 10(d) hereof, and cash in an amount equal
to the Fair Market Value, as of the date of exercise, of any resulting
fractional shares, and (ii) if the Committee causes the Company to elect to
settle all or part of its obligations arising out of the exercise of the Stock
Appreciation Right in cash pursuant to Section 10(f), deliver to the
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Participant an amount in cash equal to the fair market value, as of the date of
exercise, of the Shares it would otherwise be obligated to deliver.
(f) CASH SETTLEMENT. The Committee, in its discretion, may cause the
Company to settle all or any part of its obligation arising out of the exercise
of a Stock Appreciation Right by the payment of cash in lieu of all or part of
the Shares it would otherwise be obligated to deliver in an amount equal to the
Fair Market Value of such Shares on the date of Exercise.
SECTION 11. STOCK PURCHASE PLAN.
(a) ELIGIBILITY. Each Employee who has at least one Year of Service
on an Offering Effective Date shall be eligible to participate in the Offering
which is applicable to such Offering Effective Date. Nothing contained herein
and no rules and regulations prescribed by the Committee shall permit or deny
participation in any Offering contrary to the requirements of the Code
(including, without limitation, Sections 423(b)(3), 423(b)(4) and 423(b)(8)
thereof). Nothing contained herein and no rules and regulations prescribed by
the Committee shall permit any Participant to be granted a Right to Purchase:
(i) if, immediately after such Right to Purchase is
granted, such Participant would own, and/or hold outstanding options
or rights to purchase, shares of the Company or of any Subsidiary,
possessing five percent (5%) or more of the total combined voting
power or value of all classes of shares of the Company or such
Subsidiary; or
(ii) which permits a Participant's rights to purchase Shares
under all employee stock purchase plans of the Company and of its
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000.00) of Fair Market Value of Shares (determined as of
the date such right is granted) for each calendar year in which such
right is outstanding at any time.
For purposes of clause (a)(i) above, the provisions of Section 424(d) of the
Code shall apply in determining the stock ownership of each Participant. For
purposes of clause (a)(ii) above, the provisions of Section 423(b)(8) of the
Code shall apply in determining whether a Participant's Rights to Purchase and
other rights are permitted to accrue at a rate in excess of the permitted rate.
(b) PURCHASE PRICE. The purchase price for a Share under each
Offering shall be determined by the Committee prior to the Offering Effective
Date and shall be stated as a percentage of the Fair Market Value of a Share on
either the Right to Purchase Date or the Offering Effective Date, whichever is
the lesser, but the purchase price shall not be less than the lesser of eighty-
five percent (85%) of the per share Fair Market Value of the Shares as of the
Offering Effective Date or eighty-five percent (85%) of the per share Fair
Market Value of the Shares as of the Right to Purchase Date for the Offering.
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(c) PARTICIPATION IN OFFERINGS. Except as may be otherwise provided
for herein, each Employee who is eligible for and elects to participate in an
Offering shall be granted Rights to Purchase for as many full Shares as he may
elect to purchase during that Offering, to be paid by payroll deductions during
such period. The Committee shall establish administrative rules and regulations
regarding the payroll deduction process for this Section 11, including, without
limitation, minimum and maximum permissible deductions; the timing for initial
elections, changes in elections and suspensions of elections during an Offering
Period and the complete withdrawal by a Participant from an Offering. Amounts
withheld through payroll deductions under this paragraph shall be credited to
each Participant's Cash Account. Such amounts will be delivered to a custodian
for the Plan and held pending the purchase of Shares as described in paragraph
(e) of this Section 11. All amounts held in a Participant's Cash Account shall
bear interest at a rate as may be agreed upon by the Committee and the custodian
of the Plan. If a Participant withdraws entirely from an Offering (pursuant to
rules established by the Committee), his Cash Account balance will not be used
to purchase Shares on the Right to Purchase Date. Instead, the portion of the
Cash Account equal to the Participant's payroll deductions under the Plan during
the Offering Period will be refunded to the Participant without interest
(notwithstanding any provision contained herein). Such a Participant will not
be eligible to re-enroll in that Offering, but may resume participation on the
Offering Effective Date for the next Offering. In addition, the Committee may
impose such other restrictions on the right to withdraw from Offerings as it may
deem appropriate.
(d) GRANT OF RIGHTS TO PURCHASE. Rights to Purchase with respect to
Shares shall be granted to Participants who elect to participate in an Offering.
Such Rights to Purchase may be exercised on the Right to Purchase Date
applicable to the Offering. The number of Shares subject to Rights to Purchase
on each Right to Purchase Date shall not exceed the number of Shares authorized
for issuance during the applicable Offering.
(e) EXERCISE OF RIGHTS TO PURCHASE. Each Right to Purchase shall be
exercised on the applicable Right to Purchase Date. Each Participant
automatically and without any act on his part will be deemed to have exercised a
Right to Purchase on each Right to Purchase Date to the extent that the amount
in his Cash Account on such Right to Purchase Date is sufficient to purchase
whole Shares. Fractional Shares will not be issued under the Plan. Any
remaining amount credited to a Participant's Cash Account which is not
sufficient to purchase a whole Share shall remain in such Participant's Cash
Account for use in the next Offering unless withdrawn by the Participant. The
Company shall deliver to the custodian of the Plan as soon as practicable after
each Right to Purchase Date a certificate for the total number of whole Shares
purchased by all Participants on such Right to Purchase Date. The custodian
shall allocate the proper number of Shares to the Share Account of each
Participant. If the aggregate Cash Account balances of all Participants on any
Right to Purchase Date exceeds the amount required to purchase all of the Shares
subject to Rights to Purchase on that Right to Purchase Date, then the Shares
subject to Rights to Purchase shall be allocated pro rata among the Participants
in the proportion that the number of Shares subject to Rights to Purchase bears
to the number of Shares that could have been purchased with such aggregate
amount available, if an unlimited number of Shares were available for purchase.
Any balances remaining in Participants' Cash Accounts due to over
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subscription will remain in the Participants' Cash Accounts for use in the next
Offering unless withdrawn by the Participant.
(f) WITHDRAWALS FROM SHARE ACCOUNTS AND DIVIDEND REINVESTMENT. A
Participant may withdraw the Shares credited to his Share Account on a first-in-
first-out basis. The Committee shall establish rules and regulations governing
such withdrawals. All cash dividends paid, if any, with respect to the Shares
credited to a Participant's Share Account shall be added to the Participant's
Cash Account and thereby shall be applied to exercise Rights to Purchase for
whole Shares on the Right to Purchase Date next succeeding the date such cash
dividends are paid by the Company. An election to leave Shares with the
custodian shall constitute an election to apply the cash dividends with respect
to such Shares to the exercise of Rights to Purchase hereunder. Shares so
purchased shall be applied to the Shares credited to each Participant's Share
Account.
(g) TERMINATION OF EMPLOYMENT. If the employment of a Participant
terminates for any reason, including death, disability, retirement or other
cause, his participation in this Section 11 of the Plan shall automatically and
without any act on his part terminate as of the date of termination of his
employment. As soon as practicable following the Participant's termination of
employment, the Company shall refund to such Participant (or beneficiary, in the
case of the Participant's death) any amount in his Cash Account which
constitutes payroll deductions, without interest, and the custodian shall
deliver to such Participant a share certificate issued in his name for the
number of whole Shares credited to his Share Account through prior Offerings.
SECTION 12. UNRESTRICTED SHARES.
(a) AWARD OF UNRESTRICTED SHARES. The Committee may cause the
Company to grant Unrestricted Shares to Employees at such time or times, in such
amounts and for such reasons as the Committee, in its sole discretion, shall
determine. No payment shall be required for Unrestricted Shares.
(b) DELIVERY OF UNRESTRICTED SHARES. The Company shall issue, in the
name of each Employee to whom Unrestricted Shares have been granted, stock
certificates representing the total number of Unrestricted Shares granted to the
Employee, and shall deliver such certificates to the Employee as soon as
reasonably practicable after the date of grant or on such later date as the
Committee shall determine at the time of grant.
SECTION 13. AMENDMENT AND TERMINATION.
(a) AMENDMENTS TO THE PLAN. The Board may amend, alter, suspend,
discontinue or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without stockholder approval if such approval is necessary to
comply with any tax or regulatory requirement, including for these purposes any
approval requirement which is a prerequisite for exemptive relief from Section
16(b) of the Exchange Act for which or with which the Board deems it necessary
or desirable to qualify or comply; and, provided further, that no amendment
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may be made to Section 6(e) or any other provision of the Plan relating to
Director Options within six months of the last date on which any such provision
was amended, other than to comport with changes in the Code or the rules
thereunder. Notwithstanding anything to the contrary herein, the Committee may
amend the Plan, subject to any stockholder approval required under Rule l6b-3,
in such manner as may be necessary so as to have the Plan conform with local
rules and regulations in any jurisdiction outside the United States.
(b) AMENDMENTS TO AWARDS. Subject to the provisions of Section 9,
the Committee may waive any conditions or rights under, amend any terms of, or
alter, suspend, discontinue, cancel or terminate any Award therefore granted,
prospectively or retroactively; provided that any such waiver, amendment,
alteration, suspension, discontinuance, cancellation or termination that would
impair the rights of any Participant or any holder or beneficiary of any Award
therefore granted shall not to that extent be effective without the consent of
the affected Participant, holder or beneficiary.
(c) CANCELLATION OF AWARD. Any provision of this Plan (except
Section 9) or any Award Agreement to the contrary notwithstanding, the Committee
may cause any Award granted hereunder to be canceled in consideration of the
granting to the holder of an alternative Award having a Fair Market Value equal
to the Fair Market Value of such canceled Award.
SECTION 14. GENERAL PROVISIONS.
(a) NONTRANSFERABILITY.
(i) Each Award, each Director Option and each Right to
Purchase, and each right under any Award, any Director Option or any
Right to Purchase, shall be exercisable during the Participant's or
the Eligible Director's lifetime only by the Participant or the
Eligible Director or, if permissible under applicable law, by the
Participant's or the Eligible Director's guardian or legal
representative or a transferee receiving such Award, Director Option
or Right to Purchase pursuant to a qualified domestic relations order
("QDRO"), as determined by the Committee.
(ii) No Award, Director Option or Right to Purchase that
constitutes a "derivative security," for purposes of Section 16 of the
Exchange Act, may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a Participant or Eligible
Director otherwise than by will or by the laws of descent and
distribution or pursuant to a QDRO, and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be
void and unenforceable against the Company or any Subsidiary; provided
that the designation of a beneficiary shall not constitute an
assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.
(b) NO RIGHTS TO AWARDS. No Employee, Participant or other Person
shall have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of
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Employees, Participants or holders or beneficiaries of Awards. The terms and
conditions of Awards need not be the same with respect to each recipient.
(c) SHARE CERTIFICATES. All certificates for Shares or other
securities of the Company or any Subsidiary delivered under the Plan shall be
subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the Plan or the rules, regulations and other requirements
of the SEC, any stock exchange or national securities association upon which
such Shares or other securities are then listed and any applicable federal or
state laws; and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(d) WITHHOLDING. A Participant or Eligible Director may be required
to pay to the Company or any Subsidiary and the Company or any Subsidiary shall
have the right and is hereby authorized to withhold from any Award, Director
Option or Share otherwise issued under the Plan, from any payment due or
transfer made under any Award or any Director Option or otherwise under the
Plan, or from any compensation or other amount owing to a Participant or
Eligible Director, the amount of any applicable withholding taxes in respect of
an Award, a Director Option or a Share otherwise issued under the Plan, its
exercise or any payment or transfer under an Award, under a Director Option or
otherwise under the Plan and to take such other action as may be necessary in
the opinion of the Company to satisfy all obligations for the payment of such
taxes. With respect to Participants who are not subject to Section 16 of the
Exchange Act, the withholding may be in the form of cash, shares, other
securities, other Awards or other property as the Committee may allow. With
respect to Participants and Eligible Directors who are subject to Section 16 of
the Exchange Act, the withholding shall be in cash or in any other property
permitted by Rule 16b-3 as the Committee may allow. The Committee may provide
for additional cash payments to Participants or Eligible Directors to defray or
offset any tax arising from the grant, vesting, exercise or payments of any
Award or Share otherwise issued under this Plan.
(e) AWARD AGREEMENTS. Each Award hereunder shall be evidenced by an
Award Agreement which shall be delivered to the Participant and shall specify
the terms and conditions of the Award and any rules applicable thereto,
including but not limited to the effect on such Award of the death, retirement
or other termination of employment of a Participant and the effect, if any, of a
change in control of the Company.
(f) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained
in the Plan shall prevent the Company or any Subsidiary from adopting or
continuing in effect other compensation arrangements, which may, but need not,
provide for the grant of options, restricted stock, shares and other types of
awards provided for hereunder (subject to stockholder approval if such approval
is required), and such arrangements may be either generally applicable or
applicable only in specific cases.
(g) NO RIGHT TO EMPLOYMENT. Eligibility for participation in this
Plan or the grant of an Award shall not be construed as giving a Participant the
right to be retained in the employ of the Company or any Subsidiary. Further,
the Company or a Subsidiary may at any time
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dismiss a Participant from employment, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(h) NO RIGHTS AS SHAREHOLDER. Subject to the provisions of the Plan
and/or the applicable Award, no Participant or holder or beneficiary of any
Award or Director Option shall have any rights as a shareholder with respect to
any Shares to be distributed under the Plan until he or she has become the
holder of such Shares. Notwithstanding the foregoing, in connection with each
grant of Restricted Stock hereunder, the applicable Award shall specify if and
to what extent the Participant shall not be entitled to the rights of a
shareholder in respect of such Restricted Stock.
(i) GOVERNING LAW. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan and any Award Agreement shall
be determined in accordance with the laws of the State of Ohio.
(j) SEVERABILITY. If any provision of the Plan 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 or any Award under
any law deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to the 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 Award, such provision shall be stricken
as to such jurisdiction, Person or Award and the remainder of the Plan and any
such Award shall remain in full force and effect.
(k) OTHER LAWS. The Committee may refuse to issue or transfer any
Shares or other consideration under the Plan if, acting in its sole discretion,
it determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the issuance of such Shares shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Award granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and
until the Committee in its sole discretion has determined that any such offer,
if made, would be in compliance with all applicable requirements of the U.S.
federal securities laws.
(l) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Subsidiary and a Participant
or any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Subsidiary pursuant to the Plan, such rights
shall be no greater than the right of any unsecured general creditor of the
Company or any Subsidiary
(m) RULE 16b-3 COMPLIANCE. With respect to persons subject to
Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable terms
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and conditions of Rule 16b-3 and any successor provisions. To the extent that
any provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
(n) HEADINGS. Headings are given to the sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
(o) NO IMPACT ON BENEFITS. Plan Awards or Shares otherwise issued
under this Plan shall not be treated as compensation for purposes of calculating
an Employee's rights under any employee benefit plan.
(p) INDEMNIFICATION. Each person who is or shall have been a member
of the Committee or of the Board shall be indemnified and held harmless by the
Company against and from any loss, cost, liability or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit or proceeding to which he may be made a party or in
which he may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction of any
judgment in any such action, suit or proceeding against him, provided he shall
give the Company an opportunity, at its own expense, to handle and defend the
same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive and shall be
independent of any other rights of indemnification to which such persons may be
entitled under the Company's Certificate of Incorporation or By-laws, by
contract, as a matter of law, or otherwise.
SECTION 15. TERM OF THE PLAN.
(a) EFFECTIVE DATE. The Plan shall be effective as of June 3, 1996,
the date of its approval by the sole shareholder of the Company.
(b) EXPIRATION DATE. No Award or Right to Purchase shall be granted
under the Plan after June 3, 2006, the ten year anniversary of the effective
date of the Plan. Unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award granted hereunder may, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue or
terminate any such Award or to waive any conditions or rights under any such
Award shall, continue after June 3, 2006.
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