Exhibit A
FLOTEK INDUSTRIES INC. 2003
LONG-TERM INCENTIVE PLAN
1. PURPOSE.
This Plan is intended to provide employees, directors, consultants and
other individuals (individually, a "Participant" and, collectively, the
"Participants") rendering services to or on behalf of Flotek Industries Inc.
(the "Corporation") and/or one or more of its subsidiaries (individually, a
"Subsidiary" and, collectively, the "Subsidiaries") an opportunity to acquire an
equity interest in the Corporation. The Corporation intends to use the Plan to
link the long-term interests of stockholders of the Corporation and Plan
Participants, attract and retain Participants' services, motivate Participants
to increase the Corporation's value, and create flexibility in compensating
Participants.
The Plan allows the Corporation to reward Participants with (i) incentive
stock options and/or non-qualified stock options to purchase shares of common
stock of the Corporation, (ii) stock appreciation rights with respect to shares
of common stock of the Corporation, (iii) shares of common stock of the
Corporation, (iv) performance share awards which are designated as a specified
number of shares of common stock of the Corporation and earned based on
performance, and (v) performance unit awards which are designated as having a
certain value per unit and earned based on performance (individually an "Award"
and collectively the "Awards").
The Corporation has reserved the number of shares of common stock of the
Corporation specified in Section 6(a) for purposes of the Plan.
2. DEFINITIONS.
(a) "Award" shall mean any award granted under the Plan.
(b) "Award Agreement" shall mean, with respect to each Award, the signed
written agreement between the Corporation and the Participant receiving the
Award setting forth the terms and conditions of the Award. The general terms and
conditions described in this Plan with respect to such type of Award shall be
incorporated by reference into the Award Agreement and shall apply to such
Award, except to the extent specifically provided otherwise in the Award
Agreement. In the event of a conflict between the terms of the Plan and an Award
Agreement, the terms of the Plan shall govern.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "Change-in-Control" of the Corporation shall mean the first to occur of
the following events occurring on or following the Effective Date of the Plan:
(i) Any Person (other than those Persons in control of the Corporation
on the Effective Date of the Plan, a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation, or a
corporation owned directly or indirectly by the stockholders of the
Corporation in substantially the same proportions as their ownership of
stock of the Corporation) becomes the beneficial owner, directly or
indirectly, of securities of the Corporation representing twenty percent
(20%) or more of the combined voting power of the Corporation's then
outstanding securities; or
(ii) During any period of one (1) year (not including any period prior
to the Effective Date of the Plan), individuals who at the beginning of
such period constitute the Board (and any new Director whose election by
the Corporation's stockholders was approved by a vote of at least
two-thirds (2/3) of the Directors then still in office who either were
Directors at the beginning of the period or whose election or nomination
for election was so approved) cease for any reason to constitute a majority
thereof;
(iii) The stockholders of the Corporation approve (A) an agreement for
the sale or disposition of all or substantially all the Corporation's
assets, or (B) a merger, consolidation, or reorganization of the
Corporation with or involving any other entity, other than a merger,
consolidation, or reorganization that would result in the voting securities
of the Corporation outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least fifty percent (50%) of
the combined voting power of the securities of the Corporation (or such
surviving entity) outstanding immediately after such merger, consolidation,
or reorganization.
However, in no event shall a Change-in-Control be deemed to have occurred
with respect to a Participant, if the Participant is part of a purchasing group
which consummates the Change-in-Control transaction. The Participant shall be
deemed "part of a purchasing group" for purposes of the preceding sentence if
the Participant is an equity participant in the purchasing group (except for (i)
passive ownership of less than three percent (3%) of the stock of the purchasing
group, or (ii) ownership of equity participation in the purchasing group which
is otherwise not significant, as determined prior to the Change-in-Control by
the Committee).
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee" shall mean the Compensation Committee or any special
committee appointed by the Board in accordance with Section 4 to administer the
Plan, unless the Board, itself, administers the Plan.
(g) "Common Stock" shall mean the voting common stock of the Corporation,
as constituted on the Effective Date of the Plan, or any shares or securities
into which the Common Stock may be changed, reclassified, subdivided,
consolidated or converted thereafter.
(h) "Compensation Committee" shall mean the compensation committee of the
Board.
(i) "Consultant" shall mean any individual who is not an Employee or
Director and who has or will render services to or on behalf of the Corporation
or a Subsidiary.
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(j) "Corporation" or "Company" shall mean Flotek Industries Inc., a
corporation organized under the laws of Delaware, and any successor or
continuing corporation resulting from the amalgamation of the Corporation and
any other corporation or resulting from any other form of corporate
reorganization of the Corporation.
(k) "Director" shall mean a member of the Board.
(l) "Effective Date" shall mean _________________, 2003.
(m) "Employee" shall mean any individual, including an officer, who is a
common law employee of the Corporation or a Subsidiary.
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(o) "Exercise Price" shall mean:
(i) With respect to an Option, the price per Share at which the Option
may be exercised, as determined by the Committee and as specified in the
Participant's Award Agreement; or
(ii) With respect to a Stock Appreciation Right, the price per Share
which is the base price for determining the future value of the Stock
Appreciation Right, as determined by the Committee and as specified in the
Participant's Award Agreement.
(p) "Fair Market Value" shall mean the value of one Share determined as of
any specified date, and such value shall be equal to the per share "closing"
price of the Common Stock (on the principal exchange or the over the counter
market on which Shares are traded) on the business day immediately preceding the
date as of which such determination is to be made.
(q) "For Cause" shall mean the termination of a Participant's status as an
Employee or a Consultant (as applicable) for any of the following reasons, as
determined by the Committee:
(i) A Participant who is an Employee and who willfully fails to
substantially perform the Participant's duties (other than any such failure
resulting from the Participant's Total and Permanent Disability) after a
written demand for substantial performance has been delivered by the
Corporation to the Participant that specifically identifies the manner in
which the Corporation believes that the Participant has not substantially
performed the Participant's duties, and the Participant fails to remedy
such failure within ten (10) calendar days after receiving such notice;
(ii) A Participant who is a Consultant and who commits a material
breach of any consulting, confidentiality or similar agreement with the
Corporation or a Subsidiary, as determined under such agreement;
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(iii) A Participant who is an Employee or a Consultant and who is
convicted (by trial, plea of guilty or plea of nolo contendere) for
committing an act of fraud, embezzlement, theft, or other act constituting
a felony; or
(iv) A Participant who is an Employee or a Consultant and who
willfully engages in gross misconduct or willfully violates a Corporation
or a Subsidiary policy which is materially and demonstrably injurious to
the Corporation and/or a Subsidiary after a written demand to cease such
misconduct or violation has been delivered by the Company to the
Participant that specifically identifies the manner in which the Company
believes that the Participant has violated this Paragraph (iv), and the
Participant fails to cease such misconduct or violation and remedy any
injury suffered by the Corporation or the Subsidiary as a result thereof
within thirty (30) calendar days after receiving such notice. However, no
act or failure to act, on the Participant's part shall be considered
"willful" unless done, or omitted to be done, by the Participant not in
good faith and without reasonable belief that the Participant's action or
omission was in the best interest of the Corporation or the Subsidiary; or
(v) A Participant who is an Employee and who commits a material breach
of any noncompetition, confidentiality or similar agreement with the
Corporation or a Subsidiary, as determined under such agreement.
(r) "Incentive Stock Option" shall mean an Option of the type which is
described in Section 422(b) of the Code.
(s) "Non-Employee Director" shall mean a member of the Board who is not an
Employee.
(t) "Non-qualified Stock Option" shall mean an Option which is not of the
type described in Section 422(b) of the Code.
(u) "Option" shall mean any Option which is granted pursuant to the Plan to
purchase one or more Shares of Common Stock, whether granted as an Incentive
Stock Option or as a Non-qualified Stock Option.
(v) "Participant" shall mean any individual to whom an Award has been
granted under the Plan, and such term shall include, where appropriate, the duly
appointed conservator or other legal representative of a mentally incompetent
Participant and the allowable transferee of a deceased Participant, as provided
in the Plan.
(w) "Performance Share" shall mean an Award designated as a specified
number of Shares which may, in whole or in part, be earned by and paid to a
Participant at the end of a performance period based on performance during that
period in achieving the performance objectives specified in the Participant's
Award Agreement. A Performance Share may be settled in cash or Shares, as
provided in the Participant's Award Agreement.
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(x) "Performance Unit" shall mean an Award designated as a specified dollar
value which may, in whole or in part, be earned by and paid to the Participant
at the end of a performance period based on performance during that period in
achieving the performance objectives specified in the Participant's Award
Agreement. A Performance Unit may be settled in cash or Shares, as provided in
the Participant's Award Agreement.
(y) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Section 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d).
(z) "Plan" shall mean this Flotek Industries Inc. 2003 Long-Term Incentive
Plan, as amended.
(aa) "Pyramiding" shall mean a Participant's payment, in whole or in part,
of the Exercise Price of an Option made by exchanging a Share(s) that the
Participant had acquired pursuant to the exercise of another option during the
preceding six (6) months (under this Plan or any other plan or program of the
Corporation or a Subsidiary) or had otherwise acquired from the Corporation or a
Subsidiary during the preceding six (6) months without paying full consideration
for such Share(s).
(bb) "Reload" shall mean the grant of new Options to a Participant who pays
all or a portion of the Exercise Price of an Option with previously acquired
Shares, with the number of new Options being equal to the number of Shares
submitted by the Participant.
(cc) "Restricted Stock" shall mean a Share(s) of Common Stock issued to a
Participant which will Vest in accordance with the conditions, if any, specified
in the Participant's Award Agreement.
(dd) "Retirement" shall mean, except as otherwise specifically provided in
an Award Agreement:
(i) A Participant's voluntary termination of employment with the
Corporation and its Subsidiaries at or following "normal retirement age"
(as defined in the Corporation's or the Subsidiary's qualified 401(k)
retirement plan covering the Participant), or
(ii) If there is no such plan, the Participant's voluntary termination
of employment with the Corporation and, if applicable, all Subsidiaries at
or following age 65.
(ee) "Share" shall mean one authorized share of Common Stock.
(ff) "Stock Appreciation Right" or "SAR" shall mean a right issued to a
Participant to receive all or any portion of the future appreciation in the Fair
Market Value of one Share over the Exercise Price of such Right. A Stock
Appreciation Right may be settled in cash or Shares, as provided in the
Participant's Award Agreement.
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(gg) "Subsidiary" shall mean:
(i) For purposes of granting Incentive Stock Options, any corporation
(other than the Corporation) in an unbroken chain of corporations beginning
with the Corporation if, at the time of granting an Award, each of the
corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the voting power in one of the other
corporations in such chain; and
(ii) For all other purposes of the Plan, any business entity (other
than the Corporation) in which the Corporation has an equity interest.
(hh) "Tandem Option/Stock Appreciation Right" shall mean an Option to
purchase a specified number of Share(s) and a Stock Appreciation Right granted
with respect to a specified number of Share(s) which are granted together and
designated as a "Tandem Option/SAR" in the Participant's Award Agreement,
whereby the exercise of either the Option or the SAR cancels the other granted
in tandem with it.
(ii) "Ten Percent Stockholder" shall, for purposes of granting Incentive
Stock Options, have the meaning ascribed to such term in Code Section 422(b)(6)
or in any successor provision of the Code.
(jj) "Total and Permanent Disability" shall mean with respect to a
Participant:
(i) The mental or physical disability, either occupational or
non-occupational in cause, which satisfies the definition of "total
disability" in the principal long-term disability policy or plan provided
by the Corporation or a Subsidiary covering the Participant; or
(ii) If no such policy is then covering the Participant, a physical or
mental infirmity which, as determined by the Committee, upon receipt of and
in reliance on sufficient competent medical advice from one or more
individuals, selected by the Committee, who are qualified to give
professional medical advice, impairs the Participant's ability to
substantially perform the Participant's duties for a period of at least one
hundred eighty (180) consecutive days.
(kk) "Vest" or "Vesting" shall mean the date on which an Award becomes
exercisable, payable and/or nonforfeitable, as applicable.
(ll) "Voting Power" shall mean the total combined rights to cast votes at
and election for members of the Board.
3. EFFECTIVE DATE.
The Plan was adopted by the Board on the Effective Date, subject to the
approval of the Corporation's stockholders in accordance with Section 18.
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4. ADMINISTRATION.
(a) Administration by the Board or the Committee.
(i) The Plan shall be administered by the Board, unless the Board
appoints the Compensation Committee or another Committee to administer the
Plan. The Compensation Committee or any other Committee administering the
Plan may, but is not required to, satisfy the criteria set forth in Section
4(a)(ii). With respect to any period during which the Board administers the
Plan, the term "Committee" as used in the Plan and any Award Agreement
shall mean the Board.
(ii) For purposes of Section 4(a)(i), the Committee may consist of not
less than two members, each of whom shall be a "non-employee director"
within the meaning of Rule 16b-3(b)(iii) promulgated by the Securities and
Exchange Commission under the Exchange Act, and an "outside director"
within the meaning of Section 162(m)(4)(C)(i) of the Code and the
regulations issued thereunder.
(b) Actions of the Committee.
(i) The Committee shall hold meetings at such times and places as it
may determine. For a Committee meeting, if the Committee has two members,
both members must be present to constitute a quorum, and if the Committee
has three or more members, a majority of the Committee shall constitute a
quorum. Acts by a majority of the members present at a meeting at which a
quorum is present and acts approved in writing by all the members of the
Committee shall constitute valid acts of the Committee.
(ii) Members of the Committee may vote on any matters affecting the
administration of the Plan or the grant of any Award pursuant to the Plan,
subject to the remainder of this Section 4(b)(ii). No member shall act upon
the granting of an Award to himself or herself.
(c) Powers of the Committee.
On behalf of the Corporation and subject to the provisions of the Plan and
Rule 16b-3 of the Exchange Act, the Committee shall have the authority and
complete discretion to:
(i) Prescribe, amend and rescind rules and regulations relating to the
Plan, and, if desired, delegate authority to take actions under the Plan to
the President or other appropriate officer(s) of the Corporation within the
limits determined by the Committee;
(ii) Select Participants to receive Awards;
(iii) Determine the form and terms of Awards;
(iv) Determine the number of Shares or other consideration subject to
Awards;
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(v) Determine whether Awards will be granted singly, in combination or
in tandem with, in replacement of, or as alternatives to, other Awards
under the Plan or any other incentive or compensation plan of the
Corporation or any Subsidiary;
(vi) Construe and interpret the Plan, any Award Agreement and any
other agreement or document executed pursuant to the Plan;
(vii) Correct any defect or omission, or reconcile any inconsistency
in the Plan, any Award or any Award Agreement;
(viii) Determine whether an Award has been earned and/or Vested;
(ix) Determine whether a Participant has incurred a Total and
Permanent Disability;
(x) Accelerate or, with the consent of the Participant, defer the
Vesting of any Award and/or the exercise date of any Award;
(xi) Determine whether a Participant's status with the Corporation or
any Subsidiary has been terminated For Cause;
(xii) Authorize any person to execute on behalf of the Corporation or
any Subsidiary any instrument required to effectuate the grant of an Award;
(xiii) With the consent of the Participant, reprice, cancel and
reissue, or otherwise adjust the terms of an Award previously issued to the
Participant;
(xiv) Determine when an Employee's period of employment is deemed to
be continued during an approved leave of absence;
(xv) Determine when a Consultant's period of rendering service is
deemed to be continuous notwithstanding a period of interrupted service and
when a Consultant's period of rendering services has ended;
(xvi) Determine, upon review of relevant information, the Fair Market
Value of the Common Stock; and
(xvii) Make all other determinations deemed necessary or advisable for
the administration of the Plan.
(d) Committee's Interpretation of the Plan.
The Committee's interpretation and construction of any provision of the
Plan, of any Award granted under the Plan, or of any Award Agreement shall be
final and binding on all persons claiming an interest in an Award granted or
issued under the Plan. Neither the Committee, a member of the Committee nor any
Director shall be liable for any action or determination made in good faith with
respect to the Plan. The Corporation, in accordance with its bylaws, shall
indemnify and defend such parties to the fullest extent provided by law and such
bylaws.
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5. PARTICIPATION.
(a) Eligibility for Participation.
Subject to the conditions of Section 5(b), all Employees, Directors and
Consultants rendering services to the Corporation and/or any Subsidiary are
eligible to be selected as Participants by the Committee. The Committee's
determination of an individual's eligibility for participation shall be final.
(b) Eligibility for Awards.
The Committee has the authority to grant Award(s) to Participants. A
Participant may be granted more than one Award under the Plan.
6. SHARES OF STOCK OF THE CORPORATION.
(a) Shares Subject to the Plan.
Awards granted under the Plan shall be with respect to 700,000 authorized
but unissued or reacquired Shares of Common Stock.
(b) Allocation of Shares Which May be Granted as Restricted Stock.
Of the Shares authorized under Section 6(a), only 140,000 Shares may be
issued as Restricted Stock.
(c) Adjustment of Shares.
In the event of an adjustment described in Section 13, then (i) the number
of Shares reserved for issuance under the Plan, (ii) the Exercise Price of and
number of Shares subject to outstanding Options, (iii) the Exercise Price of and
number of Shares with respect to which there are outstanding Stock Appreciation
Rights, and (iv) any other factor pertaining to outstanding Awards shall be duly
and proportionately adjusted, subject to any required action by the Board or the
stockholders of the Corporation and compliance with applicable securities laws;
provided, however, that fractions of a Share shall not be issued but shall
either be paid in cash at Fair Market Value or shall be rounded up to the
nearest Share, as determined by the Committee.
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(d) Awards Not to Exceed Shares Available.
The number of Shares subject to Awards which have been granted under the
Plan at any time during the Plan's term shall not, in the aggregate at any time,
exceed the number of Shares authorized for issuance under the Plan. The number
of Shares subject to an Award which expires, is canceled, is forfeited or is
terminated for any reason other than, and to the extent, being settled in Shares
shall again be available for issuance under the Plan.
7. GENERAL TERMS AND CONDITIONS OF AWARDS.
(a) Award Agreements.
Each Award shall be evidenced by a written Award Agreement which shall set
forth the terms and conditions pertaining to such Award. Each Award Agreement
shall specify the manner and procedure for exercising an Award, if relevant for
the Award, and specify the effective date of such exercise.
(b) Number of Shares Covered by an Award.
Each Award Agreement shall state the number of Shares subject to the Award,
subject to adjustment of such Shares pursuant to Section 13.
(c) Other Provisions.
An Award Agreement may contain such other provisions as the Committee in
its discretion deems advisable, including but not limited to:
(i) Restrictions on the exercise of the Award;
(ii) Submission by the Participant of such forms and documents as the
Committee may require; and/or
(iii) Procedures to facilitate the payment of the Exercise Price of an
Option under any method allowable under Section 16.
(d) Vesting of Awards.
Each Award Agreement shall include a Vesting schedule describing the date,
event or act upon which an Award shall Vest, in whole or in part, with respect
to all or a specified portion of the Shares covered by such Award. The condition
shall not impose upon the Corporation or any Subsidiary any obligation to retain
the Participant in its employ for any period as an Employee, Director and/or
Consultant.
(e) Effect of Termination of Employment, Directorship or Consultancy on
Nonvested and Vested Awards.
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(i) For purposes of the Plan, a Participant's status as an Employee, a
Director or a Consultant shall be determined by the Committee and will be
treated as continuing intact while the Participant is on military leave,
sick leave or other bona fide leave of absence, as determined by the
Committee.
(ii) If a Participant ceases to be an Employee, a Director and/or a
Consultant for any reason (A) the Participant's Award(s) which are not
Vested at the time that the Participant ceases to be an Employee, a
Director or a Consultant (as applicable) shall be forfeited, and (B) the
Participant's Award(s) which are Vested at the time the Participant ceases
to be an Employee, a Director or a Consultant (as applicable) shall be
forfeited and/or expire on the terms specified in Sections 8 through 11, as
applicable.
(f) Nontransferability of Awards.
An Award granted to a Participant shall, during the lifetime of the
Participant, be exercisable only by the Participant and shall not, except to the
extent specifically provided otherwise in the Participant's Award Agreement, be
assignable or transferable. In the event of the Participant's death, an Award is
transferable by the Participant only by will or the laws of descent and
distribution. Any attempted assignment, transfer or attachment by any creditor
in violation of this Section 7(f) shall be null and void.
(g) Modification, Extension or Renewal of Awards.
Within the limitations of the Plan, the Committee may, in its discretion,
modify, extend or renew any outstanding Award or accept the cancellation of
outstanding Award(s) for the granting of a new Award(s) in substitution
therefor. Notwithstanding the preceding sentence, no modification of an Award
shall:
(i) Without the consent of the Participant, alter or impair any rights
or obligations under any Award previously granted;
(ii) Without the consent of the Participant, cause an Incentive Stock
Option previously granted to fail to satisfy all the conditions required to
qualify as an Incentive Stock Option; or
(iii) Exceed or otherwise violate any limitation set forth in the
Plan.
(h) Rights as a Stockholder.
A Participant shall have no rights as a stockholder of the Corporation with
respect to any Shares subject to Award until the date a stock certificate for
such Shares is issued to the Participant. No adjustment shall be made for
dividends (ordinary or extraordinary or whether in currency, securities or other
property), distributions, or other rights for which the record date is prior to
the date such stock certificate is issued.
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8. SPECIFIC TERMS AND CONDITIONS OF OPTIONS.
(a) Eligibility for Incentive Stock Options.
Incentive Stock Options may be granted only to a Participant who is an
Employee. Any Incentive Stock Option granted to a Participant who is also a Ten
Percent Stockholder shall be subject to the following additional limitations:
(i) the Exercise Price of each Share subject to such Incentive Stock Option,
when granted, is equal to or exceeds 110% of the Fair Market Value of a Share,
and (ii) the term of the Incentive Stock Option does not exceed five (5) years.
(b) Exercise Price.
Each Award Agreement shall state the Exercise Price for the Shares to which
the Option pertains, provided that the Exercise Price of an Option (whether
granted as an Incentive Stock Option or a Nonqualified Stock Option) shall not
be less than 100% of the Fair Market Value of the Shares determined as of the
date the Option is granted (substituting "110%" for "100%" for any Incentive
Stock Option granted to a Ten Percent Stockholder).
(c) Exercise of Options, Payment of Exercise Price, and Stock Settlement of
Options.
(i) A Participant may exercise an Option only on or after the date on
which the Option Vests and only on or before the date on which the term of
the Option expires.
(ii) Subject to Section 8(c)(iii) below, a Participant exercising an
Option shall pay the Exercise Price for the Shares to which such exercise
pertains in full in cash (in U.S. dollars) as a condition of such exercise,
unless the Committee, in its discretion, allows the Participant to pay the
Exercise Price in a manner allowed under Section 16, so long as the sum of
cash so paid and such other consideration equals the Exercise Price. The
Committee may, in its discretion, permit the sequential exercise of an
Option through Pyramiding and/or permit the grant of Reload Options.
(iii) The Committee may, in its discretion, permit a Participant to
exercise an Option without paying the Exercise Price for the Shares to
which such exercise pertains, in which event the Option so exercised shall
be settled in a specific number of whole Shares having an aggregate Fair
Market Value equal to (A) the excess of the Fair Market Value, determined
as of the date of exercise, of one Share over the Exercise Price of such
Option, multiplied by (B) the number of Shares to which such exercise
pertains.
(d) Term and Expiration of Options.
Subject to Section 8(i), except as otherwise specifically provided in a
Participant's Award Agreement, the term of an Option shall expire on the first
to occur of the following events:
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(i) The tenth (10th) anniversary of the date the Option was granted
(for an Incentive Stock Option granted to any Participant who is a Ten
Percent Stockholder, "fifth anniversary" shall be substituted for "tenth
anniversary");
(ii) The date determined under Section 8(e) for a Participant who
ceases to be an Employee, Director or Consultant by reason of voluntary
termination or involuntary termination by the Corporation For Cause;
(iii) The date determined under Section 8(f) for a Participant who
ceases to be an Employee, Director or Consultant by reason of the
Participant's death;
(iv) The date determined under Section 8(g) for a Participant who
ceases to be an Employee, Director, or Consultant by reason of the
Participant's Total and Permanent Disability;
(v) The date determined under Section 8(h) for a Participant who
ceases to be an Employee, Director or Consultant by reason of involuntary
termination by the Corporation not For Cause;
(vi) On the effective date of a transaction described in Section
13(b); or
(vii) The expiration date specified in the Award Agreement pertaining
to the Option.
(e) Voluntary Termination and Involuntary Termination For Cause.
If a Participant ceases to be an Employee, Director or Consultant by
resigning or by being terminated For Cause, then the Participant's Options which
are Vested at the time the Participant ceases to be an Employee, Director or
Consultant shall expire within one month of such resignation or termination.
(f) Death of Participant.
If a Participant dies while an Employee, Director or Consultant, any Option
granted to the Participant may be exercised, to the extent it was Vested on the
date of the Participant's death or became Vested as a result of the
Participant's death, at any time within one (1) year after the Participant's
death (but not beyond the date that the term of the Option would earlier have
expired pursuant to Section 8(d) had the Participant's death not occurred).
(g) Total and Permanent Disability of Participant.
If a Participant ceases to be an Employee, Director or Consultant as a
consequence of Total and Permanent Disability, any Option granted to the
Participant may be exercised, to the extent it was Vested on the date that the
Participant ceased to be an Employee, Director or Consultant or became Vested as
a result of Participant's Total and Permanent Disability, at any time within one
(1) year after such date (but not beyond the date that the term of the Option
would earlier have expired pursuant to 8(d) had the Participant's Total and
Permanent Disability not occurred).
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(h) Involuntary Termination Not For Cause.
If a Participant ceases to be an Employee, Director or Consultant by being
terminated not For Cause, the Participant's Options which are Vested at the time
the Participant ceases to be an Employee, Director or Consultant may be
exercised at any time within three (3) months after such date (but not beyond
the date that the term of the Option would earlier have expired pursuant to
8(d)).
(i) No Disqualification of Incentive Stock Options.
Notwithstanding any other provision of the Plan, the Plan shall not be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be exercised, so as to disqualify the Plan under Section 422 of
the Code or, without the consent of the Participant affected, disqualify any
Incentive Stock Option under Section 422 of the Code (except as provided in
Section 8(j)).
(j) Limitation on Incentive Stock Options.
The aggregate Fair Market Value (determined with respect to each Incentive
Stock Option as of the date of grant of such Incentive Stock Option) of all
Shares with respect to which a Participant's Incentive Stock Options first
become Vested during any calendar year (under the Plan and under other incentive
stock option plans, if any, of the Corporation and its Subsidiaries) shall not
exceed US $100,000. Any purported Incentive Stock Options in excess of such
limitation shall be recharacterized as Non-qualified Stock Options.
9. SPECIFIC TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.
(a) Exercise Price.
(i) Each Stock Appreciation Right Award Agreement shall state the
number of Shares to which it pertains and the Exercise Price which is the
basis for determining future appreciation, subject to adjustment pursuant
to Section 13, provided that the Exercise Price of a Stock Appreciation
Right shall not be less than 100% of the Fair Market Value of a Share
determined as of the date the Stock Appreciation Right is granted.
(ii) A Stock Appreciation Right shall be issued to and exercised by a
Participant without payment by the Participant of any consideration.
(b) Exercise and Settlement of Stock Appreciation Rights.
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(i) A Participant may exercise a Stock Appreciation Right only on or
after the date on which the Stock Appreciation Right Vests and only on or
before the date on which the Stock Appreciation Right expires.
(ii) A Participant's properly exercised Stock Appreciation Right may
be settled in the form of cash (either in a lump sum payment or in
installments), whole Shares or a combination thereof, as the Award
Agreement prescribes.
(c) Term and Expiration of Stock Appreciation Rights.
Except as otherwise specifically provided in a Participant's Award
Agreement, the term of a Stock Appreciation Right shall expire on the first to
occur of the following events:
(i) The tenth (10th) anniversary of the date the Right was granted;
(ii) The date determined under Section 9(d) for a Participant who
ceases to be an Employee, Director or Consultant by reason of voluntary
termination or involuntary termination For Cause;
(iii) The date determined under Section 9(e) for a Participant who
ceases to be an Employee, Director or Consultant by reason of the
Participant's death;
(iv) the date determined under Section 9(f) for a Participant who
ceases to be an Employee, Director or Consultant by reason of the
Participant's Total and Permanent Disability;
(v) The date determined under Section 9(g) for a Participant who
ceases to be an Employee, Director or Consultant by reason of involuntary
termination not For Cause;
(vi) On the effective date of a transaction described in Section
13(b); or
(vii) The expiration date specified in the Award Agreement pertaining
to the Stock Appreciation Right.
(d) Voluntary Termination and Involuntary Termination For Cause.
If a Participant ceases to be an Employee, Director or Consultant by
resigning or by being terminated For Cause, the Participant's Stock Appreciation
Rights which are Vested at the time the Participant ceases to be an Employee,
Director or Consultant shall expire within one month of such resignation or
termination.
(e) Death of Participant.
If a Participant dies while an Employee, Director or Consultant, any Stock
Appreciation Right granted to the Participant may be exercised, to the extent it
was Vested on the date of the Participant's death or became Vested as a
consequence of the Participant's death, at any time within one (1) year after
the Participant's death (but not beyond the date that the term of the Stock
Appreciation Right would earlier have expired pursuant to Section 9(c) had the
Participant's death not occurred).
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(f) Total and Permanent Disability of Participant.
If a Participant ceases to be an Employee, Director or Consultant as a
consequence of Total and Permanent Disability, any Stock Appreciation Right
granted to the Participant may be exercised, to the extent it was Vested on the
date that the Participant ceased to be an Employee or became Vested as a
consequence of the Participant's Total and Permanent Disability, at any time
within one (1) year after such date (but not beyond the date that the term of
the Stock Appreciation Right would earlier have expired pursuant to 9(c) had the
Participant's Total and Permanent Disability not occurred).
(g) Involuntary Termination Not For Cause.
If a Participant ceases to be an Employee, Director or Consultant by being
terminated not For Cause, the Participant's Stock Appreciation Rights which are
Vested at the time the Participant ceases to be an Employee, Director or
Consultant may be exercised at any time within three (3) months after such date
(but not beyond the date that the term of the Stock Appreciation Rights would
earlier have expired pursuant to 9(c)).
10. SPECIFIC TERMS AND CONDITIONS OF RESTRICTED STOCK.
(a) Purchase Price.
(i) Each Award Agreement shall state the number of Shares to which it
pertains and the purchase price per Share, if any, that the Participant
paid for such Shares, subject to adjustment pursuant to Section 13.
(ii) A Share of Restricted Stock may be issued to a Participant with
or without payment by the Participant of any consideration (other than
services), unless the Participant is required to pay a minimum purchase
price, such as par value, for such Shares.
(b) Forfeiture of Restricted Stock.
If a Participant's status as an Employee, Director or Consultant
terminates for any reason, any Share of Restricted Stock which was not
Vested or did not become Vested as the result of the Participant's
termination shall be forfeited immediately.
(c) Certificates Representing Non-Vested Shares of Restricted Stock.
As a condition to receiving an Award of Shares of Restricted Stock
which are not Vested, the Participant shall duly execute a "power of
attorney" or a form of "stock power" provided by the Corporation with
respect to such Shares authorizing the re-transfer, without any further
action by the Participant, to the Corporation of any Shares which may be
forfeited by the Participant. The Corporation shall retain the stock
certificate evidencing such Shares until the Shares are Vested. If, in the
opinion of the Corporation and its counsel, the retention of the stock
certificate representing such Restricted Shares is no longer required, the
Corporation shall deliver to the Participant a stock certificate
representing such Shares, bearing such restrictive legends as are required
or may be deemed advisable under the Plan or the provisions of any
applicable law.
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(d) Legends.
Stock certificates evidencing Restricted Shares shall bear a
restrictive legend noting the forfeiture provisions attached to such Shares
and such other restrictive legends as are required or may be deemed
advisable under the Plan or the provisions of any applicable law.
(e) Exchange of Certificates.
If, in the opinion of the Corporation and its counsel, any legend
placed on a stock certificate representing Restricted Shares issued
pursuant to the Plan is no longer required, the Participant or the holder
of such certificate shall be entitled to exchange such certificate for a
certificate representing the same number of Shares but lacking such legend.
11. PERFORMANCE SHARES AND PERFORMANCE UNITS.
(a) Number of Shares Covered by a Performance Share Award.
Each Performance Share Award Agreement shall state the number of Shares to
which it pertains, subject to adjustment pursuant to Section 13.
(b) Value of a Performance Unit Award.
Each Performance Unit Award Agreement shall state the value of such Award.
(c) Purchase Price.
A Performance Share and a Performance Unit shall be issued to a Participant
without payment by the Participant of any consideration (other than services).
(d) Settlement of a Performance Share and a Performance Unit.
Following the end of the performance period applicable to a Performance
Share or a Performance Unit and the Committee's determination of the extent to
which the Award Vests, the Award shall be settled in the form of cash (either in
a lump sum payment or in installments), whole Shares or a combination thereof,
as the Award Agreement prescribes.
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(e) Term and Expiration of Performance Shares and Performance Units.
Except as otherwise specifically provided in a Participant's Award
Agreement, the term of a Performance Share and Performance Unit shall expire on
the first to occur of the following events:
(i) The date determined under Section 11(f) for a Participant who
ceases to be an Employee, Director or Consultant for any reason;
(ii) On the effective date of a transaction described in Section
13(b); or
(iii) The expiration date specified in the Award Agreement pertaining
to the Performance Share or the Performance Unit.
(f) Forfeiture of Performance Shares and Performance Units.
If a Participant status as an Employee, Director or Consultant terminates
for any reason, any Performance Share and Performance Unit which was not Vested
or did not become Vested as the result of the Participant's termination shall be
forfeited immediately.
12. TERM OF PLAN.
Awards may be granted pursuant to the Plan through the period commencing on
the Effective Date and ending on December 31, 2013. All Awards which are
outstanding on such date shall remain in effect until they are exercised or
expire by their terms. The Plan shall expire for all purposes on December 31,
2023. The Board is authorized to extend the Plan for an additional term at any
time; however, no Incentive Stock Options may be granted under the Plan on or
after the tenth (10th) anniversary of the Effective Date of the Plan unless an
extension is approved by the stockholders of the Corporation within one (1) year
of such extension.
13. RECAPITALIZATION, DISSOLUTION AND CHANGE OF CONTROL.
(a) Recapitalization.
Notwithstanding any other provision of the Plan to the contrary, but
subject to any required action by the stockholders of the Corporation and
compliance with any applicable securities laws, the Committee shall make any
adjustments to the class and/or number of Shares covered by the Plan, the number
of Shares for which each outstanding Award pertains, the Exercise Price of an
Option, the Exercise Price of a Stock Appreciation Right, and/or any other
aspect of this Plan to prevent the dilution or enlargement of the rights of
Participants under this Plan in connection with any increase or decrease in the
number of issued Shares resulting from the payment of a Common Stock dividend,
stock split, reverse stock split, recapitalization, combination, or
reclassification or any other event which results in an increase or decrease in
the number of issued Shares without receipt of adequate consideration by the
Corporation (as determined by the Committee).
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(b) Dissolution, Merger, Consolidation, or Sale or Lease of Assets.
In connection with a Change-in-Control of the Corporation described in
Section 2(d)(iii), each Award shall expire as of the effective time of such
transaction, provided that the Committee shall, to the extent possible
considering the timing of the transaction, give at least thirty (30) days' prior
written notice of such event to any Participant who shall then have the right to
exercise his or her Vested Awards (as an Award Agreement may provide) prior to
or as of the effective time of such transaction, subject to earlier expiration
pursuant to Sections 8 through 11, as applicable. The preceding sentence shall
not apply if the Change-in-Control of the Corporation is described in Section
2(d)(iii)(C) and the surviving entity agrees to assume outstanding Awards.
(c) Determination by the Committee.
All adjustments described in this Section 13 shall be made by the Committee
and shall be conclusive and binding on all persons.
(d) Limitation on Rights of Participants.
Except as expressly provided in this Section 13, no Participant shall have
any rights by reason of any reorganization, dissolution, Change-in-Control,
merger or acquisition. Any issuance by the Corporation or any Subsidiary of
Awards shall not affect, and no adjustment by reason thereof shall be made with
respect to, any Awards previously issued under the Plan.
(e) No Limitation on Rights of Corporation.
The grant of an Award pursuant to the Plan shall not affect in any way the
right or power of the Corporation or any Subsidiary to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure, or to merge or consolidate, or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
14. SECURITIES LAW REQUIREMENTS.
(a) Legality of Issuance.
No Share shall be issued upon the exercise of any Award unless and until
the Committee has determined that:
(i) The Corporation, its Subsidiaries and the Participant have taken
all actions required to register the Shares under the Securities Act of
1933, as amended (the "Act"), or to perfect an exemption from registration
requirements of the Act, or to determine that the registration requirements
of the Act do not apply to such exercise;
(ii) Any applicable listing requirement of any stock exchange on which
the Share is listed has been satisfied; and
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(iii) Any other applicable provision of state, federal or foreign law
has been satisfied.
(b) Restrictions on Transfer; Representations of Participant; Legends.
Regardless of whether the offering and sale of Shares under the Plan have
been registered under the Act or have been registered or qualified under the
securities laws of any state, the Corporation may impose restrictions upon the
sale, pledge or other transfer of such Shares (including the placement of
appropriate legends on stock certificates) if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable to
achieve compliance with the provisions of the Act, the securities laws of any
state, or any other law. If the offering and/or sale of Shares under the Plan is
not registered under the Act and the Corporation determines that the
registration requirements of the Act apply but an exemption is available which
requires an investment representation or other representation, the Participant
shall be required, as a condition to acquiring such Shares, to represent that
such Shares are being acquired for investment, and not with a view to the sale
or distribution thereof, except in compliance with the Act, and to make such
other representations as are deemed necessary or appropriate by the Corporation
and its counsel. Stock certificates evidencing Shares acquired pursuant to an
unregistered transaction to which the Act applies shall bear a restrictive
legend substantially in the following form and such other restrictive legends as
are required or deemed advisable under the Plan or the provisions of any
applicable law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 ("ACT"). THEY MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE UNLESS
A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR
IN THE OPINION OF COUNSEL FOR THE ISSUER EITHER SUCH REGISTRATION IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT OR THE
REGISTRATION PROVISIONS OF THE ACT DO NOT APPLY TO SUCH PROPOSED TRANSFER.
Any determination by the Corporation, its Subsidiaries and its counsel in
connection with any of the matters set forth in this Section 14 shall be
conclusive and binding on all persons.
(c) Registration or Qualification of Securities.
The Corporation and/or its Subsidiaries may, but shall not be obligated to,
register or qualify the offering or sale of Shares under the Act or any other
applicable law.
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(d) Exchange of Certificates.
If, in the opinion of the Corporation, its Subsidiaries and its counsel,
any legend placed on a stock certificate representing Shares issued pursuant to
the Plan is no longer required, the Participant or the holder of such
certificate shall be entitled to exchange such certificate for a certificate
representing the same number of Shares but lacking such legend.
15. AMENDMENT OF THE PLAN.
The Committee may, from time to time, terminate, suspend or discontinue the
Plan, in whole or in part, or revise or amend it in any respect whatsoever
including, but not limited to, the adoption of any amendment deemed necessary or
advisable to qualify the Awards under rules and regulations promulgated by the
Securities and Exchange Commission with respect to Participants who are subject
to the provisions of Section 16 of the Exchange Act, or to correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any Award
granted under the Plan, with or without approval of the stockholders of the
Corporation, but if any such action is taken without the approval of the
Corporation's stockholders, no such revision or amendment shall:
(a) Increase the number of Shares subject to the Plan, other than any
increase pursuant to Section 13;
(b) Change the designation of the class of persons eligible to receive
Awards; or
(c) Amend this Section 15 to defeat its purpose.
No amendment, termination or modification of the Plan shall, without the
consent of a Participant, adversely affect the Participant with respect to any
Award previously granted to the Participant.
16. PAYMENT FOR SHARE PURCHASES.
Payment of the Exercise Price for any Shares purchased pursuant to the Plan
may be made in cash (in U.S. dollars) or, where expressly approved for the
Participant by the Committee, in its discretion, and where permitted by law:
(a) By check;
(b) By cancellation of indebtedness of the Corporation or a Subsidiary to
the Participant;
(c) By surrender of Shares that either: (A) have been owned by Participant
for more than six months (unless the Committee permits a Participant to exercise
an Option by Pyramiding, in which event the six months holding period shall not
apply) and have been "paid for" within the meaning of SEC Rule 144 (and, if such
shares were purchased from the Corporation or a Subsidiary by use of a
promissory note, such note has been fully paid with respect to such Shares); or
(B) were obtained by Participant in the public market;
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(d) By waiver of compensation due or accrued to Participant for services
rendered;
(e) With respect only to purchases upon exercise of an Option, and provided
that a public market for the Corporation's stock exists:
(i) Through a "same day sale" commitment from the Participant and a
broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares so purchased to pay
for the Exercise Price, and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the Exercise Price and any
applicable withholding taxes directly to the Corporation; or
(ii) Through a "margin" commitment from the Participant and an NASD
Dealer whereby the Participant irrevocably elects to exercise the Option
and to pledge the Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
Exercise Price, and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise Price and any applicable
withholding taxes directly to the Corporation; or
(iii) By any combination of the foregoing and/or by any other method
approved by the Committee.
17. APPLICATION OF FUNDS.
The proceeds received by the Corporation and its Subsidiaries from the sale
of Common Stock pursuant to the exercise of an Option or in any other manner
with respect to any Award shall be used for general corporate purposes.
18. APPROVAL OF STOCKHOLDERS.
The Plan shall be subject to approval by the affirmative vote of the
holders of a majority of the outstanding shares present and entitled to vote at
the first annual meeting of stockholders of the Corporation following the
adoption of the Plan by the Board, and in no event later than December 31, 2003.
Prior to such approval, Awards may be granted but may not be exercised or
settled. Pursuant to Section 15, certain amendments shall also be subject to
approval by the Corporation's stockholders.
19. WITHHOLDING OF TAXES.
(a) General.
Whenever Shares are to be issued under the Plan, the Corporation or a
Subsidiary may require, as a condition to such issuance of Shares, the
Participant to remit to the Corporation or such Subsidiary, from any source, an
amount sufficient to satisfy foreign, federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
Shares. Whenever, under the Plan, payments in satisfaction of Awards are to be
made in cash, such payment shall be net of an amount sufficient to satisfy
foreign, federal, state, and local withholding tax requirements.
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(b) Stock Withholding.
When, under applicable tax laws, a Participant incurs a tax liability in
connection with the issuance of Shares under the Plan and the Participant is
obligated to pay the Corporation or such Subsidiary the amount required to be
withheld, the Participant may, if subject to Section 16(b) of the Exchange Act,
elect to satisfy the minimum withholding tax obligation by electing to have the
Corporation or such Subsidiary withhold from the Shares to be issued the
specific number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose shall be made in writing in a form acceptable to the
Committee.
20. RIGHTS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT.
The Plan shall not be construed to give any individual the right to remain
in the employ of the Corporation (or a Subsidiary) or to affect the right of the
Corporation (or such Subsidiary) to terminate such individual's status as an
Employee, Director or Consultant at any time, with or without cause. The grant
of an Award shall not entitle the Participant to, or disqualify the Participant
from, participation in the grant of any other Award under the Plan or
participation in any other plan maintained by the Corporation or any Subsidiary.
21. NOTICES.
Any notice to be provided by one party to the other party under this Plan
shall be deemed to have been duly delivered to the other party (i) on the date
such notice is delivered at the address provided in a Participant's Award
Agreement or at such other address as the party may notify the other party in
writing at any time, or (ii) on the date such notice is deposited in the United
States mail as first class mail, postage prepaid if addressed to the party at
the address provided in a Participant's Award Agreement or at such other address
as the party may notify the other party in writing at any time. For the purposes
of clause (i), the term "delivered" shall include hand delivery, delivery by
facsimile, and delivery by electronic mail.
22. MISCELLANEOUS.
(a) Unfunded Plan.
The Plan shall be unfunded and the Corporation and its Subsidiaries shall
not be required to establish any special account or fund or to otherwise
segregate or encumber assets to ensure payment of any Award.
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(b) No Restrictions on Other Programs.
Nothing contained in the Plan shall prevent the Corporation or any
Subsidiary from adopting other or additional compensation arrangements or plans,
subject to stockholder approval if such approval is required, and such
arrangements or plan may be either generally applicable or applicable only to
specific classes.
(c) Governing Laws.
The Plan and each Award Agreement shall be governed by the laws of the
State of Delaware, excluding any conflicts or choice of law rule or principle
that might otherwise refer construction or interpretation of the Plan or Award
Agreement to the substantive law of another jurisdiction. Unless otherwise
provided in the Award Agreement, recipients of an Award are deemed to submit to
the exclusive jurisdiction and venue of the federal or state courts of Delaware,
in the County of the principal offices of the Corporation, to resolve any and
all issues that may arise out of or relate to the Plan and any related Award
Agreement.
(d) Attorney Fees.
In the event that a Participant or the Corporation or any Subsidiary brings
an action to enforce the terms of the Plan or any Award Agreement and the
Corporation or such Subsidiary prevails, the Participant shall pay all costs and
expenses incurred by the Corporation and such Subsidiary in connection with that
action, including reasonable attorney's fees, and all further costs and fees,
including reasonable attorney's fees, incurred by the Corporation and such
Subsidiary in connection with collection.
(e) Invalidity or Unenforceability of Any Provision.
If any provision of the Plan is or becomes or is deemed invalid, illegal or
unenforceable in any jurisdiction, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such provisions shall be
construed or deemed amended or limited in scope to conform to applicable laws
or, in the discretion of the Committee, it shall be stricken and the remainder
of the Plan shall remain in effect.
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