Exhibit 4.03
FORM OF TRO LEARNING, INC.
1997 STOCK INCENTIVE PLAN
TRO LEARNING, INC.
1997 STOCK INCENTIVE PLAN
1. PURPOSE. The TRO Learning, Inc. 1997 Stock Incentive Plan (the
"Plan") is intended to promote the long-term success of TRO Learning, Inc.
(the "Company") and its stockholders by strengthening the Company's ability
to attract and retain highly competent managers and other selected employees
and to provide a means to encourage stock ownership and proprietary interest
in the Company. The Plan is intended to provide participants with
stock-based incentive compensation which is not subject to the deduction
limitation rules prescribed under Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), and should be construed to the extent
possible as providing for remuneration which is "performance-based
compensation" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
2. TERM. The Plan shall become effective upon its ratification
and approval by the affirmative vote of the holders of a majority of the
securities of the Company present or represented, and entitled to vote at a
meeting of stockholders of the Company, and shall terminate at the close of
business on the tenth anniversary of such approval date unless terminated
earlier under Section 14. After termination of the Plan, no future awards may
be granted, but previously granted awards shall remain outstanding in
accordance with their applicable terms and conditions and the terms and
conditions of the Plan.
3. PLAN ADMINISTRATION. A committee (the "Compensation
Committee") appointed by the Board of Directors of the Company (the "Board")
shall be responsible for administering the Plan. The Compensation Committee
shall be comprised of two or more non-employee members of the Board who shall
qualify as outside Directors to administer the Plan as contemplated by (1)
Rule 16b-3 under the Securities and Exchange Act of 1934 (the "Exchange Act")
or any successor rules; and (2) Section 162(m) of the Code. Except as
otherwise provided in the Plan, the Compensation Committee shall have full
and exclusive power to interpret the Plan and to adopt such rules,
regulations and guidelines for carrying out the Plan as it may deem necessary
or proper, and such power shall be executed in the best interests of the
Company and in keeping with the objectives of the Plan. The interpretation
and construction of any provision of the Plan or any option or right granted
hereunder and all determinations by the Compensation Committee in each case
shall be final, binding and conclusive with respect to all interested parties.
4. ELIGIBILITY. Any employee of the Company shall be eligible to
receive one or more awards under the Plan. "Company" includes any entity
that is directly or indirectly controlled by the Company or any entity in
which the Company has a significant equity interest, as determined by the
Compensation Committee.
5. SHARES OF COMMON STOCK SUBJECT TO THE PLAN. Subject to the
provisions of Section 6 of the Plan, the aggregate number of shares of Common
Stock, $.01 par value, of the Company ("Stock") which may be transferred to
participants under the Plan shall be 600,000, and the aggregate number of
shares of Stock that may be covered by awards granted to any single
individual under the Plan shall not exceed 75,000 shares per fiscal year of
the Company. Any or all of such shares may be granted in the form of
incentive stock options ("ISOs") intended to comply with Section 422 of the
Code.
Shares subject to awards under the Plan which expire, terminate, or are
canceled prior to exercise or, in the case of awards granted under Section
8.3, do not vest, shall thereafter be available for the granting of other
awards. Shares which have been exchanged by a participant as full or partial
payment to the Company in connection with any award under the Plan also
shall thereafter be available for the granting of other awards. In instances
where a stock appreciation right ("SAR") or other award is settled in cash,
the shares covered by such award shall remain available for issuance under
the Plan. Likewise, the payment of cash dividends and dividend equivalents
paid in cash in conjunction with outstanding awards shall not be counted
against the shares available for issuance. Any shares that are issued by the
Company, and any awards that are granted through the assumption of, or in
substitution for, outstanding awards previously granted by an acquired entity
shall not be counted against the shares available for issuance under the Plan.
Any shares of Stock issued under the Plan may consist in whole or in
part of authorized and unissued shares or of treasury shares, and no
fractional shares shall be issued under the Plan. Cash may be paid in lieu
of any fractional shares in settlements of awards under the Plan.
6. ADJUSTMENTS. In the event of any stock dividend, stock split,
combination or exchange of shares, merger, consolidation, spin-off,
recapitalization or other distribution (other than normal cash dividends) of
Company assets to stockholders, or any other change affecting shares of Stock
or share price, such proportionate adjustments, if any, as the Compensation
Committee in its discretion may deem appropriate to reflect such change shall
be made with respect to (1) the aggregate number of shares of Stock that may
be issued under the Plan; (2) each outstanding award made under the Plan; and
(3) the exercise price per share for any outstanding stock options, SARs or
similar awards under the Plan.
7. FAIR MARKET VALUE. "Fair Market Value," for all purposes of
the Plan, shall mean the closing price of a share of Stock on the NASDAQ
National Market System for the date in question. If no sales of shares were
made on such date, the closing price of a share as reported for the preceding
day on which a sale of shares occurred shall be used.
8. AWARDS. Except as otherwise provided in this Section 8, the
Compensation Committee shall recommend to the Board the type or types of
award(s) to be made to each participant and the number of shares of Stock
subject to each such award, and any other terms, conditions and limitations
applicable to such award, and the Board shall grant awards under the Plan
after considering such recommendations. Awards may be granted singly, in
combination or in tandem. Awards also may be made in combination or in
tandem with, in replacement of, as alternatives to or as the payment form for
grants or rights under any other compensation plan or individual contract or
agreement of the Company including those of any acquired entity. The types
of awards that may be granted under the Plan are:
8.1 STOCK OPTIONS. A stock option is a right to purchase a
specified number of shares of Stock during a specified period. The
purchase price per share for each stock option shall be not less than
100% of Fair Market Value on the date of grant, except if a stock option
is granted retroactively in tandem with or as a substitution for a SAR,
the exercise price may be no lower than the Fair Market Value of a share
as set forth in award agreements for such tandem or replaced SAR. A
stock option may be in the form of an ISO which complies with Section
422 of the Code. The price at which shares may be purchased under a
stock option shall be paid in full by the optionee at the time of the
exercise in cash or such other method permitted by the Compensation
Committee, including (1) tendering shares; (2) authorizing a third party
to sell the shares (or a sufficient portion thereof) acquired upon
exercise of a stock option and assigning the delivery to the Company of
a sufficient amount of the sale proceeds to pay for all the shares
acquired through such exercise; or (3) any combination of the above.
8.2 SARS. A SAR is a right to receive a payment, in cash and/or
shares, equal to the excess of the Fair Market Value of a specified
number of shares of Stock on the date the SAR is exercised over the Fair
Market Value on the date the SAR was granted as set forth in the
applicable award agreement; except that if a SAR is granted
retroactively in tandem with or in substitution for a stock option, the
designated Fair Market Value set forth in the award agreement shall be
no lower than the Fair Market Value of a share for such tandem or
replaced stock option.
8.3 STOCK AWARDS. A stock award is a grant made or denominated in
shares or units equivalent in value to shares. All or part of any stock
award may be subject to conditions and restrictions as set forth in the
applicable award agreement, which may be based on continuous service
with the Company or the achievement of performance goals related to
profits, profit growth, profit-related return ratios, cash flow or total
stockholder return, where such goals may be stated in absolute terms or
relative to comparable companies.
Notwithstanding the foregoing, the Compensation Committee shall have
full and exclusive authority to determine the type or types of awards to be
made to the Chief Executive Officer of the Company, the number of shares
subject to each such award and any other terms, conditions and limitations
applicable to such awards.
9. DIVIDENDS AND DIVIDEND EQUIVALENTS. Any awards under the Plan
may earn dividends or dividend equivalents as set forth in the applicable
award agreement. Such dividends or dividend equivalents may be paid
currently or may be credited to a participant's account. Any crediting of
dividends or dividend equivalents may be subject to such restrictions and
conditions may be established in the applicable award agreement, including
reinvestment in additional shares or share equivalents.
10. DEFERRALS AND SETTLEMENTS. Payment of awards may be in the
form of cash, stock, other awards or combinations thereof as shall be
determined at the time of grant, and with such restrictions as may be imposed
in the award agreement. The Compensation Committee also may require or
permit participants to elect to defer the issuance of shares or the
settlement of awards in cash under such rules and procedures as it may
establish under the Plan. It also may provide that deferred settlements
include the payment or crediting of interest on the deferral amounts, or the
payment or crediting of dividend equivalents where the deferral amounts are
denominated in shares.
11. TRANSFERABILITY AND EXERCISABILITY. Awards granted under the
Plan shall not be transferable or assignable other than (1) by will or the
laws of descent and distribution; (2) by gift or other transfer of an award
to any trust or estate in which the original award recipient or such
recipient's spouse or other immediate relative has a substantial beneficial
interest, or to a spouse or other immediate relative, provided that any such
transfer is permitted by Rule 16b-3 under the Exchange Act as in effect when
such transfer occurs and the Board does not rescind this provision prior to
such transfer; or (3) pursuant to a domestic relations order (as defined by
the Code). However, any award so transferred shall continue to be subject to
all the terms and conditions contained in the instrument evidencing such
award.
12. AWARD AGREEMENTS. Awards under the Plan shall be evidenced by
agreements as approved by the Compensation Committee that set forth the
terms, conditions and limitations for each award, which may include the term
of an award (except that in no event shall the term of any ISO exceed a
period of ten years from the date of its grant), the provisions applicable in
the event the participant's employment terminates, and the Compensation
Committee's authority to unilaterally or bilaterally amend, modify, suspend,
cancel or rescind any award. The Compensation Committee need not require the
execution of any such agreement, in which case acceptance of the award by the
participant shall constitute agreement to the terms of the award.
13. ACCELERATION AND SETTLEMENT OF AWARDS. The Compensation
Committee shall have the discretion, exercisable at any time before a sale,
merger, consolidation, reorganization, liquidation or change of control of
the Company, as defined by the Compensation Committee, to provide for the
acceleration of vesting and for settlement, including cash payment of an
award granted under the Plan, upon or immediately before the effectiveness of
such event. However, the granting of awards under the Plan shall in no way
affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure, or to merge, consolidate,
dissolve, liquidate, sell or transfer all or any portion of its businesses or
assets.
14. PLAN AMENDMENT. The Plan may be amended by the Compensation
Committee as it deems necessary or appropriate to better achieve the purposes
of the Plan, except that no such amendment shall be made without the approval
of the Company's stockholders which would increase the number of shares
available for issuance in accordance with Sections 5 and 6 of the Plan, or
cause the Plan not to comply with Section 162(m) of the Code. The Board may
suspend the Plan or terminate the Plan at any time; provided, that no such
action shall adversely affect any outstanding benefit. Any shares authorized
under Section 5 (or any amendment thereof) with respect to which no Award is
granted prior to termination of the Plan, or with respect to which an Award
is terminated, forfeited or canceled after termination of the Plan, shall
automatically be transferred to any subsequent stock incentive plan for
employees of the Company.
15. TAX WITHHOLDING. The Company shall have the right to deduct
from any settlement of an award made under the Plan, including the delivery
or vesting of shares, a sufficient amount to cover withholding of any
federal, state or local taxes required by law, or to take such other action
as may be necessary to satisfy any such withholding obligations. The
Compensation Committee may, in its discretion and subject to such rules as it
may adopt, permit participants to use shares to satisfy required tax
withholding and such shares shall be valued at the Fair Market Value as of
the settlement date of the applicable award.
16. REGISTRATION OF SHARES. Notwithstanding any other provision
of the Plan, the Company shall not be obligated to offer or sell any shares
unless such shares are at that time effectively registered or exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act") and the offer and sale of such shares are otherwise in compliance with
all applicable federal and state securities laws and the requirements of any
stock exchange or similar agency on which the Company's securities may then
be listed or quoted. The Company shall have no obligation to register the
shares under the federal securities laws or take any other steps as may be
necessary to enable the shares to be offered and sold under federal or other
securities laws. Prior to receiving shares a Plan participant may be
required to furnish representations or undertakings deemed appropriate by the
Company to enable the offer and sale of the shares or subsequent transfers of
any interest in such shares to comply with the Securities Act and other
applicable securities laws. Certificates evidencing shares shall bear any
legend required by, or useful for the purposes of compliance with, applicable
securities laws, this Plan or award agreements.
17. OTHER BENEFIT AND COMPENSATION PROGRAMS. Unless otherwise
specifically determined by the Compensation Committee, settlements of awards
received by participants under the Plan shall not be deemed a part of a
participant's regular, recurring compensation for purposes of calculating
payments or benefits from any Company benefit plan or severance program.
Further, the Company may adopt other compensation programs, plans or
arrangements as it deems appropriate or necessary.
18. UNDERFUNDED PLAN. Unless otherwise determined by the
Compensation Committee, the Plan shall be unfunded and shall not create (or
be construed to create) a trust or a separate fund or funds. The Plan shall
not establish any fiduciary relationship between the Company and any
participant or other person. To the extent any person holds any rights by
virtue of an award granted under the Plan, such rights shall be no greater
than the rights of an unsecured general creditor of the Company.
19. USE OF PROCEEDS. The cash proceeds received by the Company
from the issuance of shares pursuant to awards under the Plan shall
constitute general funds of the Company.
20. REGULATORY APPROVALS. The implementation of the Plan, the
granting of any award under the Plan, and the issuance of shares upon the
exercise or settlement of any award shall be subject to the Company's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the awards granted under it or the shares
issued pursuant to it.
21. EMPLOYMENT RIGHTS. The Plan does not constitute a contract of
employment and participation in the Plan will not give a participant the
right to continue in the employ of the Company on a full-time, part-time or
any other basis. Participation in the Plan will not give any participant any
right or claim to any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan.
22. GOVERNING LAW. The validity, construction and effect of the
Plan and any actions taken or relating to the Plan shall be determined in
accordance with the laws of the State of Illinois and applicable federal law.
23. SUCCESSORS AND ASSIGNS. The Plan shall be binding on all
successors and assigns of a participant, including, without limitation, the
estate of such participant and the executor, administrator or trustee of such
estate, or any receiver or trustee in bankruptcy or representative of the
participant's creditors.