EXHIBIT 10.2
INNOTRAC CORPORATION
STOCK OPTION AND INCENTIVE
AWARD PLAN
NOVEMBER 24, 1997
INNOTRAC CORPORATION
STOCK OPTION AND INCENTIVE AWARD PLAN
TABLE OF CONTENTS
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION......................... 1
1.1 ESTABLISHMENT OF THE PLAN.......................................... 1
1.2 PURPOSES OF THE PLAN............................................... 1
1.3 DURATION OF THE PLAN............................................... 1
ARTICLE 2. DEFINITIONS.................................................. 1
ARTICLE 3. ADMINISTRATION............................................... 5
3.1 THE COMMITTEE...................................................... 5
3.2 AUTHORITY OF THE COMMITTEE......................................... 5
3.3 COMMITTEE DECISIONS BINDING........................................ 5
ARTICLE 4. SHARES SUBJECT TO THE PLAN................................... 5
4.1 NUMBER OF SHARES................................................... 5
4.2 LAPSED GRANTS OR AWARDS............................................ 6
4.3 ADJUSTMENTS IN NUMBER OF PLAN SHARES............................... 6
ARTICLE 5. ELIGIBILITY AND PARTICIPATION................................ 6
ARTICLE 6. STOCK OPTIONS................................................ 7
6.1 GRANT OF OPTIONS................................................... 7
6.2 OPTION AGREEMENT................................................... 7
6.3 OPTION PRICE....................................................... 7
6.4 DURATION OF OPTIONS................................................ 7
6.5 EXERCISE OF OPTIONS................................................ 8
6.6 PAYMENT............................................................ 8
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6.7 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY OR RETIREMENT... 8
6.8 TERMINATION OF EMPLOYMENT FOR OTHER REASONS........................ 9
6.9 NONTRANSFERABILITY OF OPTIONS...................................... 9
ARTICLE 7. STOCK APPRECIATION RIGHTS.................................... 9
7.1 GRANT OF SAR....................................................... 9
7.2 AWARD AGREEMENT.................................................... 10
7.3 EXERCISE OF SARS................................................... 10
ARTICLE 8 STOCK AWARDS - RESTRICTED AND UNRESTRICTED.................... 11
8.1 AWARD.............................................................. 11
8.2 RESTRICTED PERIOD; LAPSE OF RESTRICTIONS........................... 11
8.3 RIGHTS OF RESTRICTED STOCK HOLDER; LIMITATIONS THEREON............. 12
8.4 DELIVERY OF UNRESTRICTED SHARES.................................... 12
8.5 NONASSIGNABILITY OF RESTRICTED STOCK............................... 13
ARTICLE 9. PERFORMANCE SHARES........................................... 13
9.1 GRANT OF PERFORMANCE SHARES........................................ 13
9.2 VALUE OF PERFORMANCE SHARES........................................ 13
9.3 EARNING OF PERFORMANCE SHARES...................................... 14
9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE SHARES................... 14
9.5 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY OR RETIREMENT
OR BY THE COMPANY WITHOUT CAUSE.................................... 14
9.6 TERMINATION OF EMPLOYMENT FOR OTHER REASONS........................ 14
9.7 NONTRANSFERABILITY................................................. 15
ARTICLE 10. BENEFICIARY DESIGNATION..................................... 15
ARTICLE 11. DEFERRALS................................................... 15
ARTICLE 12. RIGHTS OF PARTICIPANTS...................................... 15
12.1 EMPLOYMENT........................................................ 15
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12.2 PARTICIPATION..................................................... 15
ARTICLE 13. CHANGE IN CONTROL........................................... 16
13.1 OCCURRENCE........................................................ 16
13.2 DEFINITION........................................................ 17
13.3 POOLING OF INTERESTS ACCOUNTING................................... 17
ARTICLE 14. AMENDMENT, MODIFICATION AND TERMINATION..................... 18
14.1 AMENDMENT, MODIFICATION AND TERMINATION........................... 18
14.2 GRANTS OR AWARDS PREVIOUSLY GRANTED............................... 18
14.3 COMPLIANCE WITH CODE SECTION 162(m)............................... 18
ARTICLE 15. WITHHOLDING................................................. 18
15.1 TAX WITHHOLDING................................................... 18
15.2 SHARE WITHHOLDING................................................. 18
ARTICLE 16. SUCCESSORS.................................................. 19
ARTICLE 17. LEGAL CONSTRUCTION.......................................... 19
17.1 GENDER AND NUMBER................................................. 19
17.2 SEVERABILITY...................................................... 19
17.3 REQUIREMENTS OF LAW............................................... 19
17.4 REGULATORY APPROVALS AND LISTING.................................. 19
17.5 SECURITIES LAW COMPLIANCE......................................... 20
17.6 GOVERNING LAW..................................................... 20
17.7 DISPUTES AND EXPENSES............................................. 20
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INNOTRAC CORPORATION
STOCK OPTION AND INCENTIVE AWARD PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 Establishment of the Plan. Innotrac Corporation, a Georgia corporation
(hereinafter referred to as the "Company"), hereby establishes a stock option
and incentive award plan known as the "Innotrac Corporation Stock Option and
Incentive Award Plan" (the "Plan"), as set forth in this document. The Plan
permits the grant of Non-qualified Stock Options and Incentive Stock Options,
and the award of Stock Appreciation Rights, Stock Awards (restricted or
unrestricted), and Performance Shares.
The Plan shall become effective on November 24, 1997 (the "Effective Date")
and shall remain in effect as provided in Section 1.3. The Plan and all action
taken pursuant thereto gives effect to the 70.58823 for one stock split of the
Company that was approved simultaneously with the the approval of the Plan.
1.2 Purposes of the Plan. The purposes of the Plan are to promote greater
stock ownership in the Company by those Participants who are principally
responsible for its future growth and continued success; to more closely link
the personal interests of Participants to those of the Company's shareholders;
and to provide flexibility to the Company in its ability to motivate, attract
and retain the services of Participants upon whose judgment, initiative and
special effort the continued success of the Company depends.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date,
and shall remain in effect, subject to the right of the Board of Directors to
amend or terminate the Plan at any time pursuant to Article 14, until the day
prior to the tenth (10th) anniversary of the Effective Date.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter of the word is
capitalized:
(a) "Award" means, individually or collectively, any award under this Plan
of Stock Appreciation Rights, Stock Awards, or Performance Shares.
(b) "Award Agreement" or "Option Agreement" means an agreement entered
into by each Participant and the Company, setting forth as applicable,
the terms and provisions applicable to Grants or Awards made to
Participants under this Plan.
(c) "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act.
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(d) "Board" or "Board of Directors" means the Board of Directors of the
Company.
(e) "Cause" means: (i) with respect to the Company or any Subsidiary which
employs the Participant or for which the Participant primarily
performs services, the commission by the Participant of an act of
fraud, embezzlement, theft or proven dishonesty, or any other illegal
act or practice (whether or not resulting in criminal prosecution or
conviction), or any act or practice which the Committee shall, in good
faith, deem to have resulted in the Participant's becoming unbondable
under the Company's or the Subsidiary's fidelity bond; (ii) the
willful engaging by the Participant in misconduct which is deemed by
the Committee, in good faith, to be materially injurious to the
Company or any Subsidiary, monetarily or otherwise; or (iii) the
willful and continued failure or habitual neglect by the Participant
to perform his duties with the Company or the Subsidiary substantially
in accordance with the operating and personnel policies and procedures
of the Company or the Subsidiary generally applicable to all their
employees. For purposes of this Plan, no act or failure to act by the
Participant shall be deemed to be "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 Company and/or the Subsidiary. Notwithstanding the
foregoing, if the Participant has entered into an employment agreement
that is binding as of the date of employment termination, and if such
employment agreement defines "Cause," then the definition of "Cause"
in such agreement shall apply to the Participant in this Plan. "Cause"
under either (i), (ii) or (iii) shall be determined by the Committee.
(f) "Change in Control" has the meaning set forth in Article 13 of this
Plan.
(g) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(h) "Committee" means: (i) the committee appointed by the Board to
administer the Plan with respect to Grants or Awards, as specified in
Article 3; or (ii) in the absence of such appointment, the Board
itself.
(i) "Company" means Innotrac Corporation, a Georgia corporation, or any
successor thereto, as provided in Article 16.
(j) "Director" means any individual who is a member of the Board of
Directors of the Company.
(k) "Disability" shall have the meaning ascribed to such term in the
Company's long-term disability plan covering the Participant, or in
the absence of such plan, a meaning consistent with Section 22(e) (3)
of the Code.
(l) "Employee" means any full-time, salaried employee of the Company, or
of any of the Company's Subsidiaries.
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(m) "Effective Date" shall have the meaning ascribed to such term in
Section 1.1.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
(o) "Fair Market Value" shall be determined as follows:
(i) If, on the relevant date, the Shares are traded on a national or
regional securities exchange or on The NASDAQ National Market
System and closing sale prices for the Shares are customarily
quoted, on the basis of the quoted closing sale price or, if
there is no such sale on the relevant date, then on the last
previous day on which a sale was reported;
(ii) If, on the relevant date, the Shares are not listed on any
securities exchange or traded on the NASDAQ National Market
System but the Shares otherwise are publicly traded and reported
by NASDAQ (but closing sale prices for the Shares are not
customary quoted), on the basis of the mean between the closing
bid and asked quotations in such other over-the-counter market
as reported by NASDAQ; but if there are no bid and asked
quotations in the over-the-counter market as reported by NASDAQ
on that date, then the mean between the closing bid and asked
quotations in the over-the-counter market as reported by NASDAQ
on the last previous day such bid and asked prices were quoted;
and
(iii) If, on the relevant date, the Shares are not publicly traded as
described in (i) or (ii), on the basis of the good faith
determination of the Committee.
(p) "Grant" means, individually or collectively, any grant under this Plan
of Non-qualified Stock Options or Incentive Stock Options.
(q) "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 which is designated as an Incentive Stock
Option and is intended to meet the requirements of Section 422 of the
Code.
(r) "Insider" shall mean an Employee who is, on the relevant date, an
officer or a Director; or a beneficial owner of ten percent (10%) or
more of any class of the Company's equity securities that is
registered pursuant to Section 12 of the Exchange Act, all as defined
under Section 16 of the Exchange Act.
(s) "Named Executive Officer" means a Participant who, as of the date of
vesting and/or payout of an Award or Grant is one of the group of
"covered employees," as defined in the regulations promulgated under
Code Section 162(m), or any successor statute.
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(t) "Non-qualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6, and which is not intended to meet the
requirements of Code Section 422.
(u) "Option" means an Incentive Stock Option or a Non-qualified Stock
Option.
(v) "Option Price" means the price at which a Share may be purchased by a
Participant Pursuant to an Option, as determined by the Committee.
(w) "Participant" means any Director or Employee, independent contractor,
adviser, or consultant to the Company who has an outstanding Grant or
Award made under the Plan.
(x) "Performance Share" means an Award granted to a Participant, as
described in Article 9 hereof.
(y) "Retirement," "Normal Retirement Age," and "Normal Retirement Date"
shall have the meanings ascribed to such terms in the Innotrac
Corporation Employee Retirement Plan, or any successor plan thereto.
(z) "Restricted Stock" means restricted Shares awarded in accordance with
the terms of Article 8 and the other provisions of the Plan.
(aa) "SAR Award Value" means, as applied to a SAR granted independent of an
Option, such amount which may be greater than 100% but not less than
100% of the Fair Market Value of a Share on the date the SAR is
granted, as shall be fixed by the Committee.
(ab) "Shares" means the shares of Common Stock of the Company.
(ac) "Stock Award" means Shares (whether restricted or unrestricted)
awarded under the provisions of Article 8 of the Plan.
(ad) "Stock Appreciation Rights" or "SAR" means an Award of the right to
receive an amount based upon an increase in the Fair Market Value of
the Shares.
(ae) "Subsidiary" means any corporation, partnership, limited liability
company, joint venture or other entity in which the Company has a
majority voting interest, either direct or indirect. With respect to a
Participant, the term shall refer to the Subsidiary for which the
Participant primarily performs services.
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ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the Compensation
Committee of the Board, or by any substitute Committee appointed by the Board
that is granted authority to administer the Plan. Qualified members of the
Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors. In the absence of any such appointment or
if no Compensation Committee is then empowered, the Plan shall be administered
by the Board.
3.2 Authority of the Committee. Subject to the provisions of the Plan the
Committee shall have full and exclusive power to select Participants who shall
participate in the Plan (who may change from year to year); determine the size
and types of Awards or Grants; determine the terms and conditions of Awards or
Grants in a manner consistent with the Plan (including vesting provisions and
the duration of the Awards or Grants); construe and interpret the Plan and any
agreement or instrument entered into under the Plan; establish, amend or waive
rules and regulations for the Plan's administration; and (subject to the
provisions of Article 14) amend the terms and conditions of any outstanding
Award or Grant to the extent such terms and conditions are within the discretion
of the Committee as provided in the Plan. Further, the Committee shall make all
other determinations which may be necessary or advisable in the Committee's
opinion for the administration of the Plan.
3.3 Committee Decisions Binding. All determinations and decisions made by
the Committee pursuant to Paragraph 3.2 above shall be final, conclusive and
binding on the Company and the Participants, their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3,
the gross number of Shares available for Awards or Grants under the plan shall
be Eight Hundred Thousand (800,000) Shares. These Shares may, in the discretion
of the Company, be either authorized but unissued Shares or Shares purchased by
the Company on the open market.
The following rules shall apply for purposes of the determination of the
number of Shares available for Grant or Award under the Plan:
(a) The number of Shares underlying any outstanding Stock Option,
SAR, or Stock Award shall be counted against the gross number of
Plan shares authorized to be issued under the Plan regardless of
its vested status.
(b) The Committee shall determine the appropriate number of Shares to
deduct against the gross number of authorized shares in
connection with the award of Performance Shares.
4.2 Lapsed Grants or Awards . If any Award or Grant made under this Plan
is canceled, terminates, expires or lapses for any reason, any Shares subject to
such Award or Grant shall again
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be available for issue under the Plan. However, in the event that prior to the
Award's or Grant's cancellation, termination, expiration or lapse, the holder of
the Award or Grant at any time received one or more "benefits of ownership"
pursuant to such Award (as defined by the Securities and Exchange Commission,
pursuant to any rule or interpretation promulgated under Section 16 of the
Exchange Act), the Shares subject to such Award or Grant shall not be made
available for issue under the Plan.
4.3 Adjustments in Number of Plan Shares. In the event of any change in
corporate capitalization (such as a stock split or a corporate transaction, such
as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization [whether or
not such reorganization comes within the definition of such term in Code Section
368] or any partial or complete liquidation of the Company) and to prevent
dilution or enlargement of rights under this Plan, an adjustment, as the
Committee shall in its sole discretion determine to be appropriate and
equitable, shall be made in the number and class of Shares which may be
delivered under the Plan and in the number and class of and/or price of Shares
subject to outstanding Awards or Grants made under the Plan; provided however,
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that the number of Plan Shares subject to any Award or Grant shall always be a
whole number and the Committee shall make such adjustments as are necessary to
insure Awards or Grants of whole Shares. In no event will any such adjustment be
made as a result of the consolidation of the Company with IELC, Inc., HomeTel
Systems, Inc., SellTel #1, Inc., RenTel #1, Inc., HomeTel Providers, Inc.,
SellTel #2, LLC, RenTel #2, LLC, and HomeTel Providers Partners, L.P. that is
contemplated to take place in connection with the Company's initial public
offering of its securities.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
Any Director or key Employee of the Company, or of any Subsidiary, or any
independent contractor, adviser, or consultant to the Company or any Subsidiary,
whose judgment, initiative and efforts contribute or may be expected to
contribute materially to the successful performance of the Company and its
Subsidiaries shall be eligible to receive an Award or Grant under the Plan. In
determining the Participants to whom such an Award or Grant will be made, the
Committee shall take into account the duties and responsibilities of the
respective Participants, their present and potential contributions to the
success of the Company and its Subsidiaries, and such other factors as the
Committee shall deem relevant in connection with accomplishing the purpose of
the Plan. No person who is a member of the Committee shall be eligible to
receive an Award or Grant under the Plan while so serving.
ARTICLE 6. STOCK OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants from time to time, as determined by the
Committee. The Committee shall have sole discretion in determining the number of
Shares underlying each Option granted to a Participant; provided, however, that
in the case of any ISO granted under the Plan, the aggregate Fair Market Value
(determined at the time such Option is granted) of the Shares to which ISOs are
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exercisable for the first time by the Participant during any calendar year
(under the Plan and all other incentive stock option plans of the Company and
any Subsidiary) shall not exceed One Hundred Thousand United States Dollars
($100,000).
The Committee may grant a Participant ISOs, NQSOs or a combination thereof,
and may vary such Grants among Participants. In no event however, shall any
Participant who owns (within the meaning of Section 424(d) of the Code), at the
time he would otherwise be granted an Option to purchase Shares, stock of the
Company possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company be eligible to receive an Incentive
Stock Option to purchase Shares hereunder.
The maximum number of Shares subject to Options which can be granted under
the Plan during a 12-month period to any Participant including a Named Executive
Officer is Two Hundred Thousand (200,000) Shares; provided, however, that the
maximum number of Option Shares available for grant to a Participant during any
12-month period should be correspondingly reduced by the number of Shares
underlying any SAR Awards made under Article 7 hereof to the Participant during
the same period.
6.2 Option Agreement. Each Option granted under the Plan shall be
evidenced by an Option Agreement that shall specify the Option Price, the
duration of the Option, the number of Shares to which the Option pertains and
such other provision as the Committee shall determine. The Option Agreement
shall further specify whether the Option is intended to be an ISO within the
meaning of Code Section 422, or an NQSO, which is not intended to fall under the
provisions of Code Section 422. The failure to so specify shall not impair the
treatment of an Option as an ISO if it otherwise so qualifies.
6.3 Option Price. The Option Price for each ISO granted under this Article
6 shall be not less than the Fair Market Value of a Share on the date the ISO is
granted. The Option Price of each Share underlying a NQSO shall be established
by the Committee, but in no event shall such price be less than eighty-five
percent (85%) of the Fair Market Value (or such higher percentage of Fair Market
Value as may be established by Internal Revenue Service rules or regulations as
the limit for granting discounted stock options without causing immediate tax
consequences to the Participant) of a Share on the date the Option is granted.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Options shall be exercisable later than the tenth (10th) anniversary of its
grant. Notwithstanding anything to the contrary herein or in any Option
Agreement, if at the time of vesting of the Option, the Shares of the Company
are not registered under the Exchange Act, or the Shares are not publicly traded
on a national or regional securities exchange, on The NASDAQ Stock Market, or in
the over-the-counter market, then such Option expires ninety days (90) after the
date of vesting, unless the Shares are registered or become publicly traded
within that ninety (90) day period.
6.5 Exercise of Options. Options granted under the Plan shall be subject
to such vesting schedules and exercise periods, and other restrictions and
conditions, as the Committee shall in
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each instance approve, which need not be the same for each Grant or for each
Participant. Except as the Committee may otherwise provide, Options granted
under this Plan shall not generally be exercisable prior to six (6) months
following the date of grant.
6.6 Payment. Options shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
the Shares. The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash, or (b) by tendering previously acquired
Shares having an aggregate Fair Market Value at the time of exercise equal to
the total Option Price (provided that the Shares which are tendered must have
been held by the Participant for the period required by law, if any, prior to
their tender to satisfy the Option Price), or (c) by a combination of (a) and
(b). The Committee also may allow cashless exercises, subject to applicable
securities law restrictions, or by any other means which the Committee
determines to be consistent with the Plan's purpose and applicable law.
As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
6.7 Termination of Employment Due to Death, Disability or Retirement .
Unless otherwise provided by the Committee in the Option Agreement, the
following rules shall apply in the event of the Participant's termination of
employment due to death, Disability or Retirement:
(a) Termination by Death. In the event the Participant dies while
actively employed, all outstanding unvested Options granted to
that Participant shall immediately vest, and thereafter all
vested Options shall remain exercisable at any time prior to
their expiration date, or for two (2) years after the date of
death, whichever period is shorter, by (i) such person(s) as
shall have been named as the Participant's beneficiary, (ii) such
person(s) that have acquired the Participant's rights under such
Options by will or by the laws of descent and distribution, or
(iii) the Participant's estate or representative of the
Participant's estate.
(b) Termination by Disability. In the event the employment of the
Participant is terminated by reason of Disability, all
outstanding unvested Options granted to the Participant shall
immediately vest as of the date the Committee determines the
definition of Disability to have been satisfied, and thereafter
all vested Options shall remain exercisable at any time prior to
their expiration date, or for one (1) year after the date that
the Committee determines the definition of Disability to have
been satisfied, whichever period is shorter.
(c) Termination by Retirement. In the event the employment of the
Participant is terminated by reason of Retirement the Participant
shall be entitled to prorata vesting of all outstanding unvested
Options. The prorata vesting
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shall be determined by the Committee, in its sole discretion, and
shall be based upon the length of time that the Participant held
the unvested Options relative to the vesting period for each
Grant of outstanding unvested Options. Upon Retirement vested
Options shall remain exercisable at any time prior to their
expiration date, or for one (1) year after the effective date of
Retirement, whichever period is shorter.
6.8 Termination of Employment for Other Reasons. In the event a
Participant's employment is terminated by the Company or Subsidiary for Cause,
the Participant's right to exercise any then vested outstanding Options shall
expire immediately upon termination of employment. If the Participant's
employment is terminated by the Company or Subsidiary without Cause, or the
Participant voluntarily terminates his employment, any Options vested as of his
date of termination shall remain exercisable at any time prior to their
expiration date or for three (3) months after his date of termination of
employment, whichever period is shorter.
6.9 Nontransferability of Options. Unless the Committee provides otherwise
in the Option Agreement, no Option granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution, and any attempt to sell
transfer, pledge, assign or otherwise alienate or hypothecate an Option shall be
null and void and of no force or effect, and all Options granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 Grant of SAR. Stock Appreciation Rights or SARs may be awarded in
conjunction with, or in addition to, any Options granted under the Plan, or may
be awarded under the Plan independent of any Option. Nothing shall preclude the
award on the same day an Option is granted (with or without related SARs) of
SARs independent of an Option. SARs granted in conjunction with, or in addition
to, an Option may be granted either at the time of the Grant of the Option or
any time thereafter during the term of the Option. SARs awarded in conjunction
with an Option shall entitle the holder of the related Option, upon exercise, in
whole or in part, of the SARs, to surrender the Option, or any portion thereof,
to the extent unexercised, and to receive a number of Shares determined pursuant
to subsection 7.3 below. Such Option shall, to the extent so surrendered, cease
to be exercisable.
The maximum number of Shares underlying SARs which can be awarded under the
Plan during any 12-month period to any Participant including a Named Executive
Officer is Two Hundred Thousand (200,000) Shares; provided, however, that the
maximum number of Shares available for award to a Participant during any 12-
month period shall be correspondingly reduced by the number of Shares subject to
Options granted to the Participant during the same period.
7.2 Award Agreement. SARs shall be subject to such terms and conditions
not inconsistent with the Plan as shall from time to time be approved by the
Committee and to the following:
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(a) SARs granted in conjunction with an Option shall be exercisable
at such time or times and to the extent, but only to the extent,
that the Option to which they relate shall be exercisable.
(b) SARs not granted in conjunction with an Option shall be
exercisable at such time or times as may be determined by the
Committee at the time of grant, but shall be subject to the same
restrictions and other rules as to duration, transferability, and
exercisability that are set out for Options in Article 6 above.
7.3 Exercise of SARs. (a) Upon exercise of SARs, the holder thereof shall
be entitled to receive a number of Shares which have an aggregate Fair Market
Value on the date of exercise equal to the amount by which the Fair Market Value
per share of one Share on the date of such exercise shall exceed (i) in the case
of SARs granted in conjunction with an Option or in addition to an Option, the
Option price per Share of the related Option, or (ii) in the case of SARs
unrelated to an Option, its SAR Grant Value, in each case multiplied by the
number of Shares in respect of which the SARs shall have been exercised.
(b) All or any part of the obligation arising out of an exercise of SARs,
whether or not such rights are granted in conjunction with an Option, may in the
sole discretion of the Committee (and consistent with the requirements of Rule
16b-3 of the Exchange Act) be settled by the payment of cash equal to the
aggregate Fair Market Value of the Shares that would otherwise have been
delivered under subsection (a) above.
(c) To the extent that SARs granted in conjunction with an Option shall be
exercisable and whether the obligation upon such exercise shall be discharged by
the delivery of Shares or the payment of cash the Option in connection with
which such SAR shall have been granted shall be deemed to have been exercised
for the purpose of the maximum share limitation set forth in the Plan.
(d) To the extent that SARs granted in addition to, or independent of, an
Option shall be exercised and whether the obligation upon such exercise shall be
discharged by the delivery of Shares or the payment of cash, the number of
Shares in respect of which the SARs shall have been exercised shall be charged
against the maximum share limitation set forth in the Plan.
ARTICLE 8. STOCK AWARDS - RESTRICTED AND UNRESTRICTED
8.1 Award. The Committee may from time to time in its discretion make
Stock Awards to Participants and may determine the number of Shares to be
awarded. The Committee shall determine the terms and conditions of, and the
amount of payment, if any, to be made by the Participant for such Stock Award.
An Award of Restricted Stock may require the Participant to pay
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for such Shares of Restricted Stock, but the Committee may establish a price
below Fair Market Value at which the Participant can purchase the Shares of
Restricted Stock. Each Award of Restricted Stock will be evidenced by an Award
Agreement containing terms and conditions not inconsistent with the Plan as the
Committee shall determine to be appropriate in its sole discretion.
The maximum number of Shares that may be awarded under a Stock Award
(whether restricted or unrestricted) to a Named Executive Officer during any 12-
month period is Two Hundred Thousand (200,000) Shares.
8.2 Restricted Period; Lapse of Restrictions. At the time an Award of
Restricted Stock is made, the Committee shall establish a period or periods of
time (the "Restricted Period") applicable to such Award which, unless the
Committee otherwise provides, shall not be less than six (6) months. Subject to
the other provisions of this Section 8, at the end of the Restricted Period all
restrictions shall lapse and the Restricted Stock shall vest in the Participant.
At the time an Award is made, the Committee may, in its discretion, prescribe
conditions for the incremental lapse of restrictions during the Restricted
Period and for the lapse or termination of restrictions upon the occurrence of
other conditions in addition to or other than the expiration of the Restricted
Period with respect to all or any portion of the Restricted Stock. Such
conditions may, but need not, include without limitation:
(a) The death, Disability or Retirement of the Employee to whom
Restricted Stock is awarded, or
(b) The occurrence of a Change in Control.
The Committee may also, in its discretion, shorten or terminate the Restricted
Period, or waive any conditions for the lapse or termination of restrictions
with respect to all or any portion of the Restricted Stock at any time after the
date the Award is made.
8.3 Rights of Restricted Stock Holder; Limitations Thereon. Upon an Award
of Restricted Stock, a stock certificate (or certificates) representing the
number of Shares of Restricted Stock granted to the Participant shall be
registered in the Participant's name and shall be held in custody by the Company
or a bank selected by the Committee for the Participant's account. Following
such registration, the Participant shall have the rights and privileges of a
shareholder as to such Restricted Stock, including the right to receive
dividends and to vote such Restricted Stock, provided that, the right to receive
cash dividends shall be the right to receive such dividends either in cash
currently or by payment in Restricted Stock, as the Committee shall determine,
and provided further that the following restrictions shall apply:
(a) The Participant shall not be entitled to delivery of a
certificate until the expiration or termination of the Restricted
Period for the Shares represented by such certificate and the
satisfaction of any and all other conditions prescribed by the
Committee;
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(b) None of the Shares of Restricted Stock may be sold, transferred,
assigned, pledged, or otherwise encumbered or disposed of during
the Restricted Period and until the satisfaction of any and all
other conditions prescribed by the Committee; and
(c) All of the Shares of Restricted Stock that have not vested shall
be forfeited and all rights of the Participant to such Shares of
Restricted Stock shall terminate without further obligation on
the part of the Company, unless the Participant has remained a
full-time employee of the Company, or any of its Subsidiaries,
until the expiration or termination of the Restricted Period and
the satisfaction of any and all other conditions prescribed by
the Committee applicable to such Shares of Restricted Stock. Upon
the forfeiture of any Shares of Restricted Stock, such forfeited
Shares shall be transferred to the Company without, further
action by the Participant.
With respect to any Shares received as a result of adjustments under
Section 4.3 hereof and any Shares received with respect to cash dividends
declared on Restricted Stock, the Participant shall have the same rights and
privileges, and be subject to the same restrictions, as are set forth in this
Section 8.
8.4 Delivery of Unrestricted Shares. Upon the expiration or termination of
the Restricted Period for any Shares of Restricted Stock and the satisfaction of
any and all other conditions prescribed by the Committee, the restrictions
applicable to such Shares of Restricted Stock shall lapse and a stock
certificate for the number of Shares of Restricted Stock with respect to which
the restrictions have lapsed shall be delivered, free of all such restrictions
except any that may be imposed by law, to the holder of the Restricted Stock.
The Company shall not be required to deliver any fractional Share but will pay,
in lieu thereof, the Fair Market Value (determined as of the date the
restrictions lapse) of such fractional share to the holder thereof. Prior to or
concurrently with the delivery of a certificate for Restricted Stock, the holder
shall be required to pay an amount necessary to satisfy any applicable federal,
state and local tax requirements as set out in Article 15 below.
8.5 Nonassignability of Restricted Stock. Unless the Committee provides
otherwise in the Award Agreement, no Award of, nor any right or interest of a
Participant in or to any Restricted Stock, or in any instrument evidencing any
Award of Restricted Stock under the Plan, may be assigned, encumbered or
transferred except, in the event of the death of a Participant, by will or the
laws of descent and distribution.
ARTICLE 9. PERFORMANCE SHARES
9.1 Grant of Performance Shares. Subject to the terms of the Plan,
Performance Shares may be granted to Participants from time to time for no
payment. The Committee shall have complete discretion in determining the number
of Performance Shares granted to each Participant; provided, however, that
unless and until the Company's shareholders vote to change the maximum
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number of Performance Shares that may be earned by any one Named Executive
Officer (subject to the terms of Article 14 hereof), none of the Named Executive
Officers may earn more than Two Hundred Thousand (200,000) Performance Shares
with respect to any performance period.
9.2 Value of Performance Shares. Each Performance Share shall have a value
equal to the Fair Market Value of a Share on the date the Performance Share is
earned. The Committee shall set performance goals in its discretion which,
depending on the extent to which they are met, will determine the number of
Performance Shares that will be earned by the Participants. The time period
during which the performance goals must be met shall be called a "performance
period." Performance periods shall, in all cases, equal or exceed two (2) years
in length. The performance goals shall be established at the beginning of the
performance period (or within such time period as is permitted by Code Section
162(m) and the regulations thereunder).
The Committee will select one or more of the following performance measures
for purposes of Awards under the Plan to Named Executive Officers: total
shareholder return, average return on assets, average return on equity, average
growth in assets, increase in operating earnings per share, increase in book
value per share of Common Stock, and ratio of operating revenue to operating
overhead. The Committee, in its sole discretion, may assign the relative weights
to be given to each performance measure selected by it. For Participants other
than Named Executive Officers, the Committee may, in its sole discretion, select
such performance measures (from among those described above or other) as it may
deem appropriate, and may assign the relative weights to be given to each
performance measure selected by it. The Committee may, in its sole discretion,
reserve the right to exclude the effect of extraordinary and non-recurring items
from calculations involving any performance measure.
In the event that applicable tax and/or securities laws (including, but not
limited to, Code Section 162(m) and Section 16 of the Exchange Act) change to
permit the Committee to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval.
9.3 Earning of Performance Shares. After the applicable performance period
has ended, the Committee shall certify the extent to which the established
performance goals have been achieved. The Committee may increase or decrease the
amount of any Performance Share Award otherwise payable to a Participant under
this Article 9 if, in the Committee's view, the Company's financial performance
during the relevant performance period justifies such adjustment, whether or not
any one or more of the established performance goals has been achieved;
provided, however, that the Committee shall have no discretion to increase the
amount of any Performance Share Award otherwise payable to a Named Executive
Officer under this Article 9.
9.4 Form and Timing of Payment of Performance Shares . Except as otherwise
provided in Article 13 hereof payment of earned Performance Shares shall be made
in a single lump sum as soon as practical after the end of the performance
period to which the Award relates. The Committee, in its sole discretion, may
pay earned Performance Shares in the form of cash or in
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Shares (or in a combination thereof) which have, as of the last day of the
performance period, an aggregate value equal to the Fair Market Value of the
earned Performance Shares.
9.5 Termination of Employment Due to Death, Disability or Retirement or by
the Company Without Cause. Unless the Award Agreement provides otherwise, in the
event the employment of a Participant is terminated by reason of death,
Disability or Retirement or by the Company without Cause during a performance
period, the Participant shall be entitled to a prorated payout with respect to
the unearned Performance Shares. The prorated payout shall be determined by the
Committee, in its sole discretion, and shall be based upon the length of time
that the Participant held the unearned Performance Shares during the performance
period relative to the performance period, and shall be the greater of the
target award prorated for the applicable time period, or the payout earned on
the basis of actual performance, measured by the achievement of the established
performance goals prorated to the time of his termination due to death,
Disability or Retirement or by the Company without Cause.
Payment of earned Performance Shares to Participants whose termination is
due to Retirement or by the Company without Cause shall be made at the same time
payments are made to Participants who did not terminate employment during the
applicable performance period. Payment of earned Performance Shares to
Participants whose termination is due to death or Disability shall be made as
soon as practical after the Participant's termination.
9.6 Termination of Employment for Other Reasons. Except as provided in
Article 13 and in the Award Agreement, in the event that a Participant's
employment terminates during a performance period for any reason other than
those reasons set forth in Section 9.5 hereof, all unearned Performance Shares
shall be forfeited by the Participant to the Company.
9.7 Nontransferability. Performance Shares may not be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. Further, a Participant's Performance
Share rights under the Plan shall be exercisable during the Participant's
lifetime only by the Participant or the Participant's legal representative.
ARTICLE 10. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company and shall be effective only when filed by the
Participant in writing, with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
ARTICLE 11. DEFERRALS
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The Committee may permit a Participant to defer to another plan or program
such Participant's receipt of Shares or cash that would otherwise be due to such
Participant by virtue of the exercise of an Option or SAR, the vesting of
Restricted Stock or the earning of Performance Shares. If any such deferral
election is required or permitted, the Committee shall, in its sole discretion,
establish rules and procedures for such payment deferrals.
ARTICLE 12. RIGHTS OF PARTICIPANTS
12.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company or a Subsidiary to terminate any Participant's
employment at any time, nor confer upon any Participant any right to continue in
the employ of the Company or a Subsidiary. For purpose of the Plan, transfer of
employment of a Participant between the Company and any one of its Subsidiaries
(or between Subsidiaries) shall not be deemed a termination of employment.
12.2 Participation. No Employee shall have the right to be selected to
receive an Award or Grant under this Plan, or, having been so selected, to be
selected to receive a future Award or Grant.
ARTICLE 13. CHANGE IN CONTROL
13.1 Occurrence. If after the initial registration of the Company's
Shares with the Securities and Exchange Commission pursuant to the Exchange Act,
a Change in Control should occur, and except as provided in the Award Agreement
or Section 13.3, or as prohibited by the terms of Article 17 hereof, then:
(a) All outstanding, unvested Options and SARs granted or awarded to
Participants hereunder (or, in the case of the termination of a
Participant by the Company or Subsidiary other than for Cause, to
the terminated Participant) shall become fully vested and
immediately exercisable;
(b) To the extent provided by the Committee in the Award Agreement,
the earning of unearned Performance Shares will be based upon the
target award levels or the actual performance compared with goals
prorated to the date of the Change in Control or to the date of
the Participant's termination by the Company or Subsidiary other
than for Cause, whichever provides the greater amount. Unearned
Performance Shares outstanding at the time of a Change in Control
or at the time of a Participant's termination by the Company or
Subsidiary other than for Cause will be fully vested (subject to
the employment requirements in the next sentence) and will be
payable in Shares or cash, or a combination thereof as determined
by the Committee. The Participant will be entitled to payment of
vested Performance Shares for a performance period only if (i) he
remains employed by the Company or Subsidiary (or their
respective successors) until the date that would have
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been the last day of the performance period, at which time the
payment of the Performance Shares shall be made, or (ii) prior to
the end of the performance period, his employment is terminated
by the Company or Subsidiary without Cause, he terminates
employment for a reason other than Cause or he retires (whether
early, normal or late) under the Innotrac Corporation Employee
Retirement Plan or any successor plan thereto, dies or becomes
Disabled. In any of these cases, payment of vested Performance
Shares shall be made as soon as possible after the Participant
ceases active employment.
(c) Unless otherwise provided in the Award Agreement, all
restrictions on an Award of Restricted Stock shall lapse and such
Restricted Stock shall be delivered to the Participant in
accordance with Section 8.4; and
(d) Subject to Article 14 hereof the Committee shall have the
authority to make any modifications to the Awards or Grants as
determined by the Committee to be appropriate before the
effective date of the Change in Control or the date of the
Participant's termination by the Company or Subsidiary other than
for Cause.
13.2 Definition. For purposes of the Plan, a "Change in Control" shall be
deemed to have occurred if:
(a) the Company consolidates or merges with or into another company,
or is otherwise reorganized, if the Company is not the surviving
company in such transaction, or, if after such transaction, any
other company, association or other person, entity or group or
the shareholders thereof that did not own fifty percent (50%) or
more of the then outstanding Shares prior to such transaction,
then own, directly and/or indirectly, more than fifty percent
(50%) of the then outstanding Shares of the Company or more than
fifty percent (50%) of the assets of the Company; or
(b) more than 35% of the Shares of the Company are, in a single
transaction or in a series of related transactions, sold or
otherwise transferred to or are acquired by (except as collateral
security for a loan) any other company, association or other
person, entity or group, whether or not any such shareholder or
any shareholders included in such group were shareholders of the
Company prior to the Change in Control, provided however that a
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"Change in Control" shall not be deemed to have occurred as a
result of any transaction wherein any person, entity or group
that owns more than sixty-five percent (65%) of the then
outstanding Shares prior to such transaction continues to own
sixty-five percent (65%) or more after such transaction; or
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(c) all or substantially all of the assets of the Company are sold or
otherwise transferred to or otherwise acquired by any other
company, association or other person, entity or group; or
(d) the occurrence of any other event or circumstance which is not
covered by (a) through (c) above which the Committee determines
affects control of the Company and constitutes a Change in
Control for purpose of the Plan.
13.3 Pooling of Interests Accounting. No Award or Grant made under this
Plan shall have a scheduled vesting date which is earlier than the date that is
two (2) years following the Effective Date. During the two (2) year period
commencing on the Effective Date, the acceleration of vesting provided for in
Section 13.1 shall not apply in a transaction involving a Change in Control if
both of the following circumstances exist:
(a) The provisions contained in Section 13.1 create conditions which
would preclude the use of pooling of interests accounting, and
(b) The completion of the transaction is subject to the use of
pooling of interests accounting.
ARTICLE 14. AMENDMENT, MODIFICATION AND TERMINATION
14.1 Amendment, Modification and Termination. The Board may, at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, that, unless approved by the holders of a majority of the
total number of Shares of the Company represented and entitled to vote at a
meeting at which a quorum is present, no amendment shall be made to the Plan if
such amendment would (a) materially modify the eligibility requirements provided
in Article 5; (b) increase the total number of Shares (except as provided in
Section 4.3) which may be granted or awarded under the Plan, as provided in
Section 4. 1; (c) extend the term of the Plan; or (d) amend the Plan in any
other manner which the Board, in its discretion, determines should become
effective only if approved by the shareholders even though such shareholder
approval is not expressly required by the Plan or by law.
14.2 Grants or Awards Previously Granted. No termination, amendment or
modification of the Plan shall adversely affect in any material way any Award or
Grant previously made under the Plan, without the written consent of the
Participant holding such Award or Grant. The Committee shall, with the written
consent of the Participant holding such Award or Grant, have the authority to
cancel Awards or Grants outstanding and grant replacement Awards or Grants
therefor.
14.3 Compliance With Code Section 162(m). It is the intent of the Board
that all Awards or Grants made under this Plan shall comply with the
requirements of Code Section 162(m). In the event changes are made to Code
Section 162(m) to permit greater flexibility with respect to any Award or Grant
under the Plan, the Committee may, subject to this Article 14, make any
adjustments it deems appropriate in such Award or Grant.
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ARTICLE 15. WITHHOLDING
15.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising in connection with an Award or Grant under this Plan.
15.2 Share Withholding. With respect to withholding required upon the
exercise of Options, or upon any other taxable event arising as a result of
Awards or Grants made hereunder which are to be paid in the form of Shares,
Participants may request subject to the approval of the Committee, to satisfy
the withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the Award or Grant.
All such requests shall be irrevocable, made in writing, and signed by the
Participant, and requests by Insiders shall additionally comply with all legal
requirements applicable to Share transactions by such Participants.
ARTICLE 16. SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards or
Grants made hereunder, shall be binding on any successor to the Company, whether
the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 17. LEGAL CONSTRUCTION
17.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
17.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
17.3 Requirements of Law. The making of Awards or Grants and the issuance
of Shares under the Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
17.4 Regulatory Approvals and Listing. The Company shall not be
required to issue any certificate or certificates for Shares under the Plan
prior to (i) obtaining any approval from any governmental agency which the
Company shall, in its discretion, determine to be necessary or
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advisable, (ii) the admission of such shares to listing on any national
securities exchange on which the Company's Shares may be listed, and (iii) the
completion of any registration or other qualification of such Shares under any
state or federal law or ruling or regulations of any governmental body which the
Company shall, in its sole discretion, determine to be necessary or advisable.
Notwithstanding any other provision set forth in the Plan, if required by
the then-current Section 16 of the Exchange Act, any "derivative security" or
"equity security" offered pursuant to the Plan to any Insider may not be sold or
transferred for at least six (6) months after the date of grant of such Award.
The terms "equity security" and "derivative security" shall have the meanings
ascribed to them in the then-current Rule 16(a) under the Exchange Act.
The Committee may impose such restrictions on any Shares acquired pursuant
to the Plan as it may deem advisable, including, without limitation,
restrictions under applicable Federal securities laws, under the requirements of
any stock exchange or market upon which such Shares are then listed and/or
traded and under any blue sky or state securities laws applicable to such
Shares.
17.5 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provisions of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
17.6 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Georgia, without reference to its conflict of laws
rules.
17.7 Disputes and Expenses. After a Change in Control, if a Participant
affected by such Change in Control incurs legal fees or other expenses in
seeking to obtain or enforce any rights to benefits under this Plan and is
successful, in whole or in part, in obtaining or enforcing any such rights
through settlement, litigation, arbitration or otherwise, the Company shall
promptly pay the affected Participant's reasonable legal fees and expenses
incurred in enforcing his rights under the Plan.
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AS APPROVED BY THE SOLE MEMBER OF THE BOARD OF DIRECTORS AND THE SOLE
SHAREHOLDER OF INNOTRAC CORPORATION ON NOVEMBER 24, 1997.
INNOTRAC CORPORATION
By: /s/ Scott Dorfman
---------------------------
SCOTT DORFMAN
PRESIDENT
ATTEST:
By: /s/ David Ellin
-------------------------------
DAVID ELLIN
VICE PRESIDENT
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