1996 STOCK OPTION PLAN
OF
ACR GROUP, INC.
ARTICLE I
PURPOSE
ACR Group, Inc., a Texas corporation (the "Company"), is largely dependent
for the successful conduct of its business on the initiative, effort and
judgment of its officers, employees and directors, and the officers and
employees of its subsidiaries. This Stock Option Plan (the "Plan") is intended
to provide such persons an incentive through the grant of options to acquire
stock in the Company and encourage them to remain in the Company's service.
Further, the Plan is intended to provide the Company and its subsidiaries a
means of rewarding outstanding performance, a means of enabling the Company to
develop and maintain a competitive position, and a means to attract and retain
key personnel necessary for growth and profitability. Moreover, since the stock
options provided for in the Plan are subject to various alternative provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), the Committee
will have certain flexibility in shaping options granted under the Plan to the
particular circumstances of the optionee, thus recognizing the full value of the
stock option.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Stock Option Committee (the
"Committee"). The Committee shall consist of not less than two members of the
Board of Directors of the Company (the "Board"), and shall not include any
persons that are not members of the Board. All members of the Committee shall
be selected by (and serve at the pleasure of) the Board. All members of the
Committee shall be "disinterested persons" within the meaning of Rule 16b-3 of
the General Rules and Regulation under the Securities Exchange Act of 1934, as
amended (the "1934 Act"). Subject to the express provisions of the Plan and the
policies of each stock exchange on which any of the Company's stock at any time
may be traded, the Committee shall have plenary authority, in its discretion, to
recommend to the Board the individuals within the class set forth in Article IV
to whom, and the time and price per share at which, stock options shall be
granted, the number of shares to be subject to each stock option and the other
terms and provisions of their respective Agreements, as defined herein (which
need not be identical). In making such recommendations and determinations, the
Committee may take into account the nature of the services rendered by such
individuals, their present and potential contributions to the Company's success
and such other factors as the Committee in its discretion shall deem relevant.
Subject to the express provisions of the Plan, the Committee shall also have
plenary authority to interpret the Plan, to prescribe, amend and rescind rules
and regulations regulating it, to determine the terms and provisions of the
respective stock options (which need not be identical), to determine the
duration and purposes of leaves of absence that may be granted to participants
without constituting a termination of their employment for purposes of the Plan,
and
to make all other determinations necessary or advisable for the
administration of the Plan. The Committee shall hold meetings at such time
and place as it may determine. Acts by the majority of the Committee or acts
reduced to or approved in writing by a majority of the members of the
Committee shall be the valid acts of the Committee. From time to time the
Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause), and appoint new members in
substitution therefor, or fill vacancies however caused, subject to the
requirements that the members of the Committee shall be "disinterested
persons" as described above, and that there always be at least two members of
the Committee. The Committee's determination on the matters referred to in
this Plan shall be final, conclusive and binding upon all optionees.
ARTICLE III
SHARES SUBJECT TO PLAN AND DURATION OF PLAN
Under the Plan a majority of the members of the Board who are disinterested
persons may, upon recommendation of the Committee, at any time on or before ten
(10) years after the date of adoption of the Plan or approval of the Plan by the
shareholders of the Company, whichever is earlier, but not thereafter, grant to
eligible persons incentive stock options (as defined in Section 422 of the Code)
or non-qualified stock options to purchase up to but not exceeding an aggregate
of five hundred thousand (500,000) shares of the Company's Common Stock, $.01
par value ("Common Stock") (subject to adjustment as provided in Article VIII).
Shares subject to stock options under the Plan may be either authorized and
unissued shares or issued shares that have been acquired by the Company and are
being held in its treasury, in the sole discretion of the Board. When stock
options have been granted under the Plan and have lapsed unexercised or
partially unexercised or have been cancelled or terminated, the shares which
were subject thereto may be reoptioned under the Plan.
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
To the fullest extent permitted by applicable law, all officers, directors
and employees of the Company, any Parent Corporation and any Subsidiary
Corporation (including Parent Corporations or Subsidiary Corporations which
become such after adoption of the Plan) shall be eligible to receive stock
options under the Plan, and employment by any of such Parent Corporations and
Subsidiary Corporations shall constitute employment by the Company for purposes
of this Plan. For purposes of the Plan, the term "Parent Corporation" shall
have the meaning set forth in Section 424(e) of the Code, and the term
"Subsidiary Corporation" shall have the meaning set forth in Section 424(f) of
the Code.
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ARTICLE V
TERMS AND CONDITIONS OF STOCK OPTIONS
Each stock option granted under the Plan shall be evidenced by and subject
to a stock option agreement (the "Agreement"), in a form not inconsistent with
the Plan which shall have been approved by the Committee. The Agreement shall
be executed by the Company and the optionee and shall set forth the terms and
conditions of the stock option, which terms and conditions shall include, but
not be limited to, the following:
(a) OPTION PRICE. The option price shall be determined by the Committee,
but shall not in any event be less than the par value, if any, of the Company's
Common Stock on the date of exercise.
(b) TERM OF STOCK OPTION. No stock option granted under the Plan shall be
exercisable more than ten (10) years after the date such stock option is
granted. Each such stock option shall be subject to earlier termination as
hereinafter provided.
(c) TRANSFERABILITY. Stock options granted hereunder shall not be
transferable other than by will or operation of the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder. During the lifetime of the optionee, and except for stock options
transferred pursuant to a qualified domestic relations order, stock options
granted hereunder shall be exercisable only by the optionee or the optionee's
guardian or legal representative.
(d) VESTING. The Committee shall have complete discretion in determining
when stock options granted hereunder are to vest; provided, however, that the
sale of the shares issued on the exercise of the stock option by any person
subject to Section 16 of the 1934 Act shall not be allowed until at least six
months after the later of (i) the approval of this Plan by the shareholders of
the Company in accordance with Article XI hereof or (ii) the grant of the stock
option. Vesting provisions for each stock option are to be determined prior to
or at the time that stock option is granted.
(e) TERMINATION OF EMPLOYMENT. In the event of an optionee's termination
of employment (or service on the Board in the case of a director) with the
Company, any Parent Corporation or any Subsidiary Corporation for any reason
other than death or disability, all stock options granted hereunder shall
thereupon terminate. Upon the termination of an optionee's employment by reason
of his death or disability, his stock option shall terminate to the extent it
was not exercisable at the date of his death or disability, but to the extent it
was then exercisable by the optionee, his estate or the beneficiaries thereof
shall be entitled to exercise it for a period of one (1) year from the date of
his death or disability but not thereafter, notwithstanding the specified term
of the option. For purposes of the Plan, the term "disability" shall have the
meaning set forth in Section 22(e)(3) of the Code.
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(f) OTHER CONDITIONS. At its sole discretion, the Committee may impose
other conditions upon or provide for other terms of the stock options granted
hereunder, so long as those conditions do not conflict with any other provisions
of the Plan. Such conditions may include, by way of illustration, but not by
way of limitation, percentage limitations upon the exercisability of stock
options granted hereunder.
ARTICLE VI
INCENTIVE STOCK OPTIONS
In recommending and granting stock options hereunder, the Committee and the
Board shall have the discretion to determine that certain stock options shall
be Incentive Stock Options, as defined in Section 422 of the Code, while other
stock options shall be Non-Qualified Stock Options. Neither the members of the
Committee, nor the Company shall be under any obligation or incur any liability
to any person by reason of the determination by the Board whether an option
granted under the Plan shall be an Incentive Stock Option or a Non-Qualified
Stock Option, or by reason of the failure of any stock option to qualify as an
Incentive Stock Option. The provisions of this Article VI (notwithstanding any
provision of Article V to the contrary) shall be applicable to all Incentive
Stock Options at any time granted or outstanding under the Plan.
All Incentive Stock Options granted or outstanding under the Plan shall be
granted and held subject to and in compliance with the terms and conditions
specifically set forth in the other Articles hereof, to the extent not
inconsistent with the terms and conditions of this Article VI and the
requirements of Section 422 of the Code, and, in addition, subject to and in
compliance with the following further terms and conditions:
(a) the per share option price of all Incentive Stock Options shall not be
less than one hundred percent (100%) of the Fair Market Value (as defined below)
of one share of the Company's Common Stock at the time the option is granted;
(b) no Incentive Stock Option shall be granted to any person who, at the
time of the grant, owns stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any
Parent Corporation or Subsidiary Corporation; provided, however, that this
ownership limitation will be waived if at the time the option is granted the per
share option price is at least one hundred ten percent (110%) of the Fair Market
Value of one share of the Company's Common Stock and such option by its terms is
not exercisable after the expiration of five (5) years from the date such option
is granted;
(c) the aggregate Fair Market Value of all shares of Common Stock
(determined at the time of the grant of the option) with respect to which
Incentive Stock Options are exercisable for the first time by an optionee during
any one calendar year (under the Plan and any other plans of the Company and its
Parent Corporations and Subsidiary Corporations) shall not exceed $100,000, and
if it does, such Incentive Stock Options shall be deemed to be Non-Qualified
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Stock Options to the extent of such excess;
(d) no Incentive Stock Option shall be granted more than ten (10) years
after the earlier of the date the Plan is adopted and the date the Plan is
approved by the shareholders of the Company as described in Article XI;
(e) the term of an Incentive Stock Option shall not exceed ten (10) years;
(f) an Incentive Stock Option shall not be transferable other than by will
or the laws of descent and distribution, and shall be exercisable during the
lifetime of the optionee only by the optionee;
(g) in the event of an optionee's termination of employment with the
Company, any Parent Corporation or any Subsidiary Corporation, by reason of his
death or disability, Article V(e) shall apply except that the Incentive Stock
Option shall only be exercisable until the earlier of (i) one (1) year from the
date of such termination of employment, and (ii) the expiration of the date of
the Incentive Stock Option according to its terms; and
(h) any other term or condition that the Committee determines is required
in order that such stock options qualify as Incentive Stock Options.
For purposes of the Plan, the term "Fair Market Value" on any date shall
mean (i) if the Common Stock is listed or admitted to trade on a national
securities exchange or national market system, the closing price of the Common
Stock, as published in the WALL STREET JOURNAL or, if there is no trading of the
Common Stock on such date, then the closing price of the Common Stock on the
next preceding date on which there was trading in such shares; (ii) if the
Common Stock is not listed or admitted to trade on a national securities
exchange or national market system, the mean between the bid and asked price for
the Common Stock on such date, as furnished by the National Association of
Securities Dealers, Inc., through NASDAQ or a similar organization if NASDAQ is
no longer reporting such information; or (iii) if the Common Stock is not listed
or admitted to trade on a national securities exchange or national market system
and if bid and asked prices for the Common Stock are not so furnished through
NASDAQ or a similar organization, the value established by the Board for
purposes of granting stock options under the Plan. In addition to the above
rules, Fair Market Value shall be determined without regard to any restriction
other than a restriction which, by its terms, will never lapse.
ARTICLE VII
EXERCISE OF STOCK OPTIONS
Stock options granted hereunder may be exercised in whole or in part at any
time or from time to time during their respective terms, but only to the extent
that they have vested and only by tendering to the Company written notice of
exercise accompanied by the aggregate purchase price for the shares with respect
to which the stock option is being exercised. The purchase
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price of shares of Common Stock of the Company acquired upon the exercise of
any stock option granted under the Plan may be paid by an optionee by the
payment by cash or check, or, upon receipt of all required regulatory
approvals, if any, by the assignment to the Company of shares of the
Company's Common Stock theretofore owned by the optionee having a Fair Market
Value equal to such option price, or by any combination thereof.
No stock option shall be exercisable unless the Plan and all shares
issuable on the exercise thereof have been registered under the Act and all
other applicable securities laws, and there is available for delivery a
prospectus meeting the requirements of Section 10 of the Act, or the Company
shall have first received the opinion of its counsel that registration under the
Act and all other applicable securities laws is not required in connection with
such issuance. At the time of exercise, if the shares with respect to which the
stock option is being exercised have not been registered under the Act and all
other applicable securities laws, the Company may require the optionee to give
the Company whatever written assurance counsel for the Company may require that
the shares are being acquired for investment and not with a view to the
distribution thereof, and that the shares will not be disposed of without the
written opinion of such counsel that registration under the Act and all other
applicable securities laws is not required. Share certificates issued to the
optionee upon exercise of the stock option shall bear a legend to the foregoing
effect to the extent counsel for the Company deems it advisable.
ARTICLE VIII
ADJUSTMENTS
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required
action by the Company's directors and shareholders, the number of shares
provided for in each outstanding stock option and the price per share thereof,
and the number of shares provided for in the Plan, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of the
Company's Common Stock resulting from a subdivision or consolidation of shares
or the payment of a stock dividend (but only on the Common Stock), a stock
split, a reverse stock split, or any other increase or decrease in the number of
such shares effected without receipt of consideration by the Company, and shall
also be proportionately adjusted in the event of a spin-off, spin-out, or other
distribution of assets to shareholders of the Company, to the extent necessary
to prevent dilution of the interests of grantees pursuant to the Plan or of the
other shareholders of the Company, as applicable. If the Company shall engage
in a merger, consolidation, reorganization or recapitalization, each outstanding
stock option (or if such transaction involves less than all of the shares of the
Company's Common Stock, then a number of stock options proportionate to the
number of such involved shares) shall, subject to Article VIII(b) hereof, become
exercisable for the securities and other consideration that a holder of the
number of shares of the Company's Common Stock subject to each such stock option
would have been entitled to receive in any such merger, consolidation,
reorganization or recapitalization.
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(b) ACCELERATION. In the event of a potential merger or consolidation
involving the Company (regardless of whether the Company is the surviving entity
of such merger or consolidation), a potential liquidation or dissolution of the
Company, a potential sale or other disposition by the Company of all or
substantially all of its assets, or a potential sale or other disposition by the
shareholders of the Company of all or substantially all of the outstanding
Common Stock to one purchaser (any such merger, consolidation, liquidation,
dissolution or sale being referred to herein as a "Significant Event"), then the
Company shall have the option of terminating all outstanding stock options upon
the actual occurrence of the Significant Event, by notice to all optionees at
least 15 days before the occurrence of the Significant Event. In consideration
for this option of the Company to terminate outstanding stock options, the
Company, if it exercises its option, shall waive any and all restrictions on the
vesting of optionees' rights under the stock options granted pursuant to this
Plan, and optionees' rights under their respective stock options shall vest in
full, subject to the occurrence of the Significant Event. Any exercise by an
optionee in these circumstances may be conditioned upon the occurrence of the
Significant Event. If the Company exercises its option under this paragraph
(b), upon the actual occurrence of the Significant Event, each outstanding stock
option shall terminate. If the potential Significant Event does not in fact
occur for any reason, then the Company's exercise of its option under this
paragraph (b) shall have no effect and the optionees' rights shall be vested
only to the extent that they would be vested if the Company had not exercised
its option under this paragraph (b).
(c) CHANGE OF PAR VALUE. In the event of a change in the Company's Common
Stock which is limited to a change of all of its authorized shares without par
value into the same number of shares with a par value (and any subsequent
changes to such par value), the shares resulting from any such change shall be
deemed to be Common Stock within the meaning of the Plan.
(d) MISCELLANEOUS. The adjustments provided for in this Article shall be
made by the Committee, whose determination in that respect shall be final,
binding and conclusive. Except as hereinbefore expressly provided in this
Article, the holder of a stock option shall not be entitled to the privilege of
stock ownership as to any shares of Common Stock or other stock not actually
issued and delivered to the holder. Any issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
not affect and no adjustment by reason thereof shall be made with respect to the
number or price of shares of the Company's Common Stock subject to any stock
option. The grant of a stock option pursuant to the Plan shall not affect in
any way the right or power of the Company to, among other things, make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve or liquidate or
sell or transfer all of any part of its business or assets.
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ARTICLE IX
CONTINUATION OF EMPLOYMENT
Nothing contained in the Plan (or in any stock option granted pursuant to
the Plan) shall confer upon any employee any right to continue in the employ of
the Company or any Parent Corporation or Subsidiary Corporation or constitute
any contract or agreement of employment or interfere in any way with the right
of the Company, the Parent Corporation or any Subsidiary Corporation to reduce
any person's compensation from the rate in existence at the time of the granting
of a stock option or to terminate such person's employment. Nothing contained
herein or in any Agreement shall affect any other contractual rights of an
employee.
ARTICLE X
AMENDMENT OR DISCONTINUANCE
The Board may at any time and from time to time amend, rescind, suspend or
terminate the Plan, as it shall deem advisable, provided that the Plan may not
be amended in any manner which would cause the Plan no longer to comply with
Rule 16b-3 of the General Rules and Regulations under the 1934 Act, or any
successor rule, or with the provisions of the Code applicable to Incentive Stock
Options, as such provisions shall read as of the time of amendment. In addition
to Board approval of any amendment to the Plan, if Rule 16b-3 or any successor
rule, or any provisions of the Code applicable to Incentive Stock Options, as
such rule or provision shall read as of the time of amendment, requires
shareholder approval of such amendment, then such amendment shall be approved by
the holders of a majority of the voting stock of the Company (voting as a single
class) present, or represented, and entitled to vote at a meeting of such
shareholders duly held in accordance with the applicable laws of the state or
other jurisdiction in which the Company is incorporated.
In addition, no change may be made in, and no amendment, rescission,
suspension or termination of the Plan shall have an effect on, stock options
previously granted under the Plan which may impair or alter their rights or
obligations, except that any change may be made in stock options previously
granted with the consent of the optionees.
ARTICLE XI
SHAREHOLDER APPROVAL
The Plan shall be effective when it has received the approval of a majority
of the Board. However, the Plan and all stock options granted under the Plan
shall be void if the Plan is not approved by the holders of a majority of the
outstanding voting stock of the Company (voting as a single class) present, or
represented, and entitled to vote at a meeting of such shareholders duly held in
accordance with the applicable laws of the state or other jurisdiction in which
the Company is incorporated, within 12 months after the date on which the Plan
is adopted by the
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Board. No stock option granted under the Plan shall be exercisable in whole
or in part unless and until such approval is obtained.
ARTICLE XII
MISCELLANEOUS
(a) GOVERNING LAW. The Plan, the stock options issued hereunder and the
Agreements evidencing such stock options shall be governed by, and construed and
enforced in accordance with, the laws of the State of Texas applicable to
contracts made and performed within that State.
(b) NO LIABILITY FOR GOOD FAITH DETERMINATIONS. Neither the members of
the Board nor any members of the Committee shall be liable for any act, omission
or determination taken or made in good faith with respect to the Plan or any
stock option granted under it. All Board and Committee members shall also be
entitled, with respect to all matters relating to the Plan, to all of the
protections and rights, including, without limitation, indemnification and
limitation of liability rights, provided to Board members generally pursuant to
applicable law, the charter documents of the Company, the bylaws of the Company
or otherwise.
(c) INFORMATION CONFIDENTIAL. As partial consideration for the granting
of each stock option hereunder and subject to the provisions of applicable law,
the optionee shall keep confidential the manner and amount of his participation
in the Plan. In the event any breach of this promise comes to the attention of
the Board, and in addition to any other rights and remedies of the Company or
the Board against such optionee, in determining whether to recommend the grant
of any future stock option to such optionee, the Board shall take into
consideration such breach as a factor militating against the advisability of
granting any future stock option to such employee.
(d) OTHER BENEFITS. Participation in the Plan shall not preclude the
optionee from eligibility in any other stock option plan of the Company, any
Parent Corporation or any Subsidiary Corporation, or any benefit, insurance,
pension, profit sharing, retirement, bonus or other extra compensation plans
that the Company, any Parent Corporation or any Subsidiary Corporation has
adopted, or may, at any time, adopt for the benefit of its employees.
(e) RELEASE OF CLAIMS. Any issuance or transfer of shares of Common Stock
to the optionee, or to his legal representative, heir, legatee or distributee,
in accordance with the provisions hereof, shall, to the extent thereof, be in
full satisfaction of all claims of such persons arising from or with respect to
the grant, holding or exercise of options granted under this Plan.
(f) COMPANY RECORDS. The Committee shall be entitled fully to rely on the
records of the Company, any Parent Corporation or any Subsidiary Corporation
regarding the optionee's period of employment, termination of employment and the
reason therefor, leaves of absence, re-employment and other matters which shall
be conclusive for all purposes hereunder, except
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to the extent the Committee has actual knowledge that such records are
incorrect.
(g) INFORMATION. The Company, any Parent Corporation and any Subsidiary
Corporation shall, upon request or as may be specifically required hereunder,
furnish or cause to be furnished to the Committee all of the information or
documentation that is necessary or required by the Committee to perform its
duties and functions under the Plan.
(h) NO LIABILITY OF COMPANY. The Company assumes no obligation or
responsibility to the optionee or his legal representatives, heirs, legatees or
distributees for any act of, or failure to act by, the Board or the Committee.
(i) SEVERABILITY. In the event any provision of the Plan shall be held to
be illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions hereof, but shall be fully severable and the
Plan shall be construed and enforced as if the illegal or invalid provision had
never been included herein.
(j) NOTICE. Whenever any notice is required or permitted hereunder, such
notice must be in writing and personally delivered or sent by mail. Any notice
required or permitted to be delivered hereunder shall be deemed to be delivered
on the date that it is personally delivered or, whether actually received or
not, on the third business day after it is deposited in the United States mail,
certified or registered, postage prepaid, addressed to the person who is to
receive it at the address which such person has theretofore specified by written
notice delivered in accordance herewith. The Company or an optionee may change,
at any time and from time to time, by written notice to the other, the address
which it or he had theretofore specified for receiving notices. Until it is
changed in accordance herewith, the Company and each optionee shall specify as
its and his address for receiving notices the address set forth in the Agreement
pertaining to the shares to which such notice relates.
(k) ISSUANCE OF STOCK CERTIFICATES. Upon exercise of a stock option, the
person exercising the stock option shall be entitled to one (1) stock
certificate evidencing the shares acquired upon such exercise; provided,
however, that any person who tenders Common Stock of the Company in payment of a
portion or all of the purchase price of Common Stock purchased upon exercise of
the stock option shall be entitled to receive a separate certificate
representing the number of shares purchased in consideration of the tender of
such Common Stock.
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