LSB INDUSTRIES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
The Board of Directors of LSB Industries, Inc., a Delaware
corporation (the "Company"), has adopted this 1998 Stock Option
and Incentive Plan (the "Plan"), effective the 13th day of
August, 1998, as follows:
1. Purpose. This Plan permits selected officers and employees,
prospective employees, consultants and independent contractors of
the Company or any Subsidiary who bear a large measure of respon-
sibility for the success of the Company to acquire and retain a
proprietary interest in the Company and to participate in the
future of the Company as shareholders. The purpose of this Plan
is to advance the interests of the Company and its shareholders
by enabling the Company and the subsidiaries to offer to its
employee-directors, officers, employees, consultants and
independent contractors, long-term performance-based stock and/or
other equity interests in the Company, thereby enhancing its
ability to attract, retain and reward such individuals, and by
providing an incentive for employee-directors, officers,
employees to render outstanding service to the Company and to the
Company's shareholders.
2. Definitions. For purposes of the Plan, the following terms
shall be defined as set forth herein:
2.1 "Act" means the Securities Act of 1933, as amended
from time to time, or any successor statute or
statutes thereto.
2.2 "Agreement" means the agreement between the Company
and the Holder setting forth the terms and conditions
of an award under the Plan.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Change of Control" means a change of control of the
Company pursuant to Section 8.2 hereof.
2.5 "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute
or statutes thereto.
2.6 "Committee" means the Stock Option Committee of the
Board or any other committee of the Board which the
Board may designate. In all events, the Committee
shall consist only of non-employee directors of the
Company.
2.7 "Common Stock" means the Common Stock of the Company,
par value $.10 per share.
2.8 "Disability" means disability as determined under the
procedures established by the Committee for purposes
of the Plan.
2.9 "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor
statute or statutes thereto.
2.10 "Fair Market Value", unless otherwise required by any
applicable provision of the Code or any regulations
issued thereunder, means, as of any given date:
2.10.1 the closing price of the Common Stock on the
last preceding day on which the Common Stock
was traded, as reported on a national
securities exchange; and,
2.10.2 if the fair market value of the Common Stock
cannot be determined pursuant to clause (i)
hereof, such price as the Committee shall
determine.
2.11 "Formula Price Per Share" means the highest gross
price (before brokerage commissions, soliciting
dealers' fees and similar charges) paid for any share
of Common Stock at any time during the ninety (90)
day period immediately prior to the Change of Control
(whether by way of exchange, conversion,
distribution, liquidation or otherwise) paid or to be
paid for any share of Common Stock in connection with
a Change of Control. If the consideration paid or to
be paid in any transaction that results in a Change
of Control consists, in whole or in part, of
consideration, other than cash, the Board shall take
such action, as in its judgment it deems appropriate,
to establish the cash value of such consideration,
but such valuation shall not be less than the value,
if any, attributed to such consideration by any other
party to such transaction that results in a Change of
Control.
2.12 "Holder" means an eligible employee-director,
officer, employee, consultant or independent
contractor of the Company or a Subsidiary who has
received an award under the Plan.
2.13 "Incentive Stock Option" or "ISO" means any Stock
Option intended to be and designated as an "incentive
stock option" within the meaning of Section 422 of
the Code.
2.14 "Non-Qualified Stock Option" means any Stock Option
that is not an Incentive Stock Option.
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2.15 "SAR Value" means the excess of the Fair Market Value
of one share of Common Stock over the exercise price
per share specified in a related Stock Option in the
case of a Stock Appreciation Right granted in tandem
with a Stock Option and the Stock Appreciation Right
price per share in the case of a Stock Appreciation
Right awarded on a free-standing basis multiplied by
the number of shares in respect of which the Stock
Appreciation Right shall be exercised, on the date of
exercise.
2.16 "Section 16(b) Holder" means such officer or director
or ten percent (10%) beneficial owner of Common Stock
subject to Section 16(b) of the Exchange Act.
2.17 "Stock Appreciation Right" means the right, pursuant
to an award granted under Section 7 hereof, to
recover an amount equal to the SAR Value.
2.18 "Stock Option" means any Incentive Stock Option or
Non-Qualified Stock Option to purchase shares of
Common Stock which is awarded pursuant to this Plan.
2.19 "Subsidiary" means any present or future subsidiary
corporation of the Company, as such term is defined
in Section 424(f) of the Code.
3. Administration.
3.1 Board; Committee. The Board shall create a committee
consisting of three members of the Board. The Board
may also appoint one member of the Board as an
alternate member of the Committee. Upon such
appointment, the Committee shall have all the powers,
privileges and duties set forth herein. The Board
may, from time to time, appoint members of any such
Committee in substitution for, or in addition to,
members previously appointed, may fill vacancies in
the Committee and may discharge the Committee. The
Committee shall select one of its members as its
Chairman and shall hold its meetings at such times
and places as it shall deem advisable. A majority of
its members shall constitute a quorum and all
determinations shall be made by a majority of such
quorum. Any determination reduced to writing and
signed by a majority of the members of the Committee,
shall be fully effective and a valid act of the
Committee as if it had been made by a majority vote
at a meeting duly called and held. The membership of
the Committee shall at all times be constituted so as
to not adversely affect the compliance of the Plan
with the requirements of Rule 16b-3 under the
Exchange Act, to the extent it is applicable, or with
the requirements of any other applicable law, rule or
regulation.
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3.2 Power and Authority. The Committee shall have full
power and authority to do all things necessary or
appropriate to administer this Plan according to its
terms and provisions (excluding the power to appoint
members of the Committee and to terminate, modify, or
amend the Plan, except as otherwise authorized by the
Board), including, but not limited to the full power
and authority (subject to the express provisions of
this Plan):
3.2.1 to award Stock Options and Stock Appreciation
Rights, pursuant to the terms of this Plan,
to eligible individuals described under
Section 5 hereof;
3.2.2 to select the eligible individuals to whom
Stock Options or Stock Appreciation Rights,
or any combination thereof, if any, may from
time to time be awarded hereunder;
3.2.3 to determine the Incentive Stock Options,
Non-Qualified Stock Options, Stock
Appreciation Rights, or any combination
thereof, if any, to be awarded hereunder to
one or more eligible employees or persons;
3.2.4 to determine the number of shares to be
covered by each award granted hereunder;
3.2.5 to determine the terms and conditions not
inconsistent with the terms of the Plan, of
any award hereunder (including, but not
limited to, share price, any restrictions or
limitations, and any vesting, exchange, sur-
render, cancellation, acceleration, termin-
ation, exercise or forfeiture provisions, as
the Committee shall determine);
3.2.6 to determine any specified performance goals
or such other factors or criteria which need
to be attained for the vesting of an award
granted hereunder;
3.2.7 to determine the terms and conditions under
which awards hereunder are to operate on a
tandem basis and/or in conjunction with or
apart from other equity awarded under this
Plan and cash awards made by the Company or
any Subsidiary outside of this Plan;
3.2.8 to determine the extent and circumstances
under which Common Stock and other amounts
payable with respect to an award hereunder
shall be deferred, which may be either
automatic or at the election of the Holder;
and
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3.2.9 to substitute (i) new Stock Options for pre-
viously granted Stock Options, which previ-
ously granted Stock Options have higher
option exercise prices and/or contain other
less favorable terms, and (ii) new awards of
any other type for previously granted awards
of the same or other type, which previously
granted awards are upon less favorable terms.
3.3 Interpretation of Plan.
3.3.1 Subject to Sections 3.2 and 9 hereof, the
Committee shall have the authority at its
discretion to adopt, alter and repeal such
general and special administrative rules,
regulations, and practices governing the Plan
as it shall, from time to time, deem advis-
able, to construe and interpret the terms and
provisions of this Plan and any award issued
under this Plan (and to determine the form
and substance of all Agreements relating
thereto), and to otherwise supervise the
administration of this Plan.
3.3.2 Anything in this Plan to the contrary
notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall
any discretion or authority granted under
this Plan be so exercised, so as to
disqualify the Plan under Section 422 of the
Code, or, without the consent of the
Holder(s) affected, to disqualify any
Incentive Stock Option under Section 422 of
the Code.
3.3.3 Subject to Sections 3.2 and 9 hereof, all
decisions made by the Committee pursuant to
the provisions of this Plan shall be made in
the Committee's sole discretion and shall be
final and binding upon all persons granted
options pursuant to the Plan.
4. Shares Subject to Plan.
4.1 Number of Shares. The aggregate number of shares of
Common Stock reserved and available for distribution
under this Plan shall be 850,000 shares. If any
shares of Common Stock that are subject to a Stock
Option or Stock Appreciation Right cease to be
subject to such Stock Option or Stock Appreciation
Right, or any such award otherwise terminates without
a payment being made to the Holder in the form of
Common Stock, such shares shall again be available
for distribution in connection with future grants and
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awards under this Plan. The number of shares
available for distribution under this Plan shall be
reduced by the number of shares of Common Stock
issued under this Plan upon the exercise of a Stock
Option.
4.2 Character of Shares. The Company may elect to
satisfy its obligations to a Holder exercising a
Stock Option entirely by issuing authorized and
unissued shares of Common Stock to such Holder,
entirely by transferring treasury shares to such
Holder, or in part by the issue of authorized and
unissued shares and the balance by the transfer of
treasury shares.
5. Eligibility.
5.1 General. Awards under this Plan may be made to: (i)
officers and other employees of the Company or any
Subsidiary who are at the time of the grant of an
award under this Plan regularly employed by the
Company or any Subsidiary, including any full time
salaried officer or employee who is a member of the
Board (except as provided in the last sentence under
Section 3.1); and, (ii) consultants or independent
contractors whom the Board believes have contributed
or will contribute to the success of the Company.
5.2 Multiple Awards. The Committee shall from time to
time designate such employees, consultants or
independent contractors to whom options are to be
granted, and the number of shares to be subject to
each option. The Committee may at any time grant one
or more Stock Options or Stock Appreciation Rights or
a combination thereof to an individual to whom a
Stock Option or Stock Appreciation Right has
previously been granted under this or any other stock
option plan of the Company, whether or not such
previously granted Stock Option or Stock Appreciation
Right has been fully exercised.
5.3 Ineligibility for Awards. No person designated by
the Board to serve on the Committee, effective at
such future time so that he qualifies as a
"disinterested person" within the meaning of Rule
16b-3(c) of the Exchange Act, shall be eligible to
receive any awards under the Plan during the period
from the date such designation is made to the date
such designation becomes effective. Notwithstanding
Section 5.1 hereof, no member of the Committee, while
serving as such, shall be eligible to receive an
award under the Plan.
6. Stock Options.
6.1 Grant and Exercise. Stock Options granted under the
Plan may be of two types: (i) Incentive Stock Options
and (ii) Non-Qualified Stock Options. Only full-time
salaried officers or employees may be granted
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Incentive Stock Options. Any individual eligible to
participate under this Plan may be granted Non-
Qualified Stock Options. Any Stock Option granted
under the Plan shall contain such terms, not
inconsistent with this Plan, as the Committee may
from time to time approve. The Committee shall have
the authority to grant to any eligible individual
Incentive Stock Options, Non-Qualified Stock Options,
or both types of Stock Options and, in each case, may
be granted alone, in tandem with, or without, or in
addition to Stock Appreciation Rights. To the extent
that any Stock Option (or portion thereof) does not
qualify as an Incentive Stock Option, it shall con-
stitute a separate Non-Qualified Stock Option.
Unless granted in substitution for another
outstanding award, Stock Options shall be granted for
no consideration other than services to the Company
or a Subsidiary.
6.2 Exercise Price.
6.2.1 Less Than 10% Shareholder. The exercise
price in any option granted under this Plan
to an individual who, at the time the Stock
Option is granted, does not own stock
possessing more than ten percent (10%) of the
total combined voting power of all classes of
stock of the Company or of any Subsidiary
(computed in accordance with the provisions
applicable to Section 422(b)(6) of the Code)
(a "less than 10% Shareholder") shall be not
less than the Fair Market Value of the shares
of Common Stock subject to the Stock Option
at the time the Stock Option is granted,
determined by the Committee in accordance
with the applicable regulations and rulings
of the Commissioner of the Internal Revenue
Service in effect at the time the Stock
Option is granted.
6.2.2 10% Shareholder. The exercise price in any
option granted under the Plan to an indi-
vidual who is not a less than ten percent
(10%) Shareholder (a "10% Shareholder") shall
be not less than one hundred ten percent
(110%) of the Fair Market Value of the shares
of Common Stock subject to the Stock Option
at the time the Stock Option is granted,
determined in accordance with the applicable
regulations and rulings of the Commissioner
of the Internal Revenue Service in effect at
the time the Stock Option is granted.
6.3 Option Term. The term of each Stock Option shall be
fixed by the Board, but no Stock Option shall be
exercisable more than ten (10) years (five (5) years,
in the case of an Incentive Stock Option granted to a
10% Shareholder) after the date on which the Stock
Option is granted.
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6.4 Exercise of Non-Qualified Stock Options. Non-
Qualified Stock Options shall be exercisable at such
time or times and subject to such terms and
conditions as shall be determined by the Committee;
provided, however, that no Non-Qualified Stock Option
granted under this Plan may be exercised until after
the expiration of six (6) months from the date the
Stock Option is granted. If the Committee provides,
in its discretion, that any Stock Option is
exercisable only in installments, the Committee may
waive such installment exercise provisions at any
time at or after the time of grant in whole or in
part, based upon such factors as the Committee shall
determine; provided that the Committee cannot waive
the requirement that the Stock Option may not be
exercised until after the expiration of six (6)
months from the date the Stock Option is granted.
6.5 Exercise of Incentive Stock Options.
6.5.1 By an Employee. No Incentive Stock Option
granted under this Plan shall be exercisable
after the expiration of ten (10) years from
the date such ISO is granted, except that no
ISO granted to a person who is not a less
than 10% Shareholder shall be exercisable
after the expiration of five (5) years from
the date such option is granted. Employment
by a Subsidiary shall be employment by the
Company. Unless such requirements are waived
by the Committee, the employee, while still
in the employment of the Company, may
exercise the options as follows:
6.5.1.1 at any time after one (1) year of
continuous employment from the date
such ISO is granted, as to twenty
percent (20%) of the shares subject
to the option;
6.5.1.2 at any time after two (2) years of
such continuous employment from the
date such ISO is granted, as to an
additional twenty percent (20%) of
the shares subject to the option;
6.5.1.3 at any time after three (3) years
of such continuous employment from
the date such ISO is granted, as to
an additional thirty percent (30%)
of the shares subject to the
option; and
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6.5.1.4 at any time after four (4) years of
such continuous employment from the
date such ISO is granted, as to all
of the shares remaining subject to
the option.
The Committee may decide in each case to what
extent leaves of absence for government or
military service, illness, temporary dis-
ability, or other reasons, shall not inter-
rupt continuous employment.
6.5.2 Termination of Employment. Except as other-
wise expressly provided in Sections 6.5.3 and
6.5.4 of this Plan or in the Agreement, no
Stock Option may be exercised at any time
unless the Holder thereof is then an employee
of the Company or a Subsidiary.
6.5.3 By a Former Employee. No person may exercise
an ISO after he is no longer an employee of
the Company or any Subsidiary; except that if
an employee ceases to be an employee on
account of physical or mental disability as
defined in Section 22(e)(3) of the Code
("Former Employee"), he may exercise the ISO
within twelve (12) months after the date on
which he ceased to be an employee, for the
number of shares for which he could have
exercised at the time he ceased to be an
employee. No ISO granted under this Plan
shall in any event be exercised by such
Former Employee after the expiration of ten
(10) years from the date such ISO is granted,
except that no ISO granted to a person who is
a 10% Shareholder may be exercisable after
the expiration of five (5) years from the
date such ISO is granted.
6.5.4 In Case of Death. If any employee or Former
Employee who was granted an ISO dies prior to
the termination of such ISO, such ISO may be
exercised within twelve (12) months after the
death of the employee or Former Employee by
his estate, or by a person who acquired the
right to exercise such ISO by bequest or
inheritance, or by reason of the death of
such employee or Former Employee, provided
that:
6.5.4.1 such employee died while an
employee of the Company or a
Subsidiary; or
6.5.4.2 such Former Employee had ceased to
be an employee of the Company or a
Subsidiary on account of physical
or mental disability and died
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within three (3) months after the
date on which he ceased to be such
employee.
Such ISO may be exercised only as to the
number of shares for which he could have
exercised at the time the employee or Former
Employee died. No ISO granted under this
Plan shall in any event be exercised in case
of death of an employee or Former Employee
after the expiration of ten (10) years from
the date such ISO is granted, except that no
ISO granted to a 10% Shareholder shall be
exercisable after the expiration of five (5)
years from the date such ISO is granted.
6.5.5 The Committee may, in its discretion, waive
the installment exercise provisions at any
time at or after the time of grant, in whole
or in part, based on such factors as the
Committee shall determine; provided that at
all times no ISO may be exercised until the
expiration of six (6) months from the date
that the Stock Option was granted.
6.6 Termination of Options. A Stock Option granted under
this Plan shall be considered terminated, in whole or
in part, to the extent that it can no longer be exer-
cised for shares originally subject to it, provided
that a Stock Option granted shall be considered
terminated at an earlier date upon surrender for
cancellation by the Holder to whom such Stock Option
was granted.
6.7 Notice of Exercise and Payment. Subject to any
installment, exercise and waiting period provisions
that are applicable in a particular case, Stock
Options granted under this Plan may be exercised, in
whole or in part, at any time during the term of the
Stock Option, by giving written notice of such
exercise to the Company identifying the Stock Option
being exercised and specifying the number of shares
then being purchased. Such notice shall be
accompanied by payment in full of the exercise price,
which shall be in cash or, unless otherwise provided
in the Agreement, in whole shares of Common Stock
which are already owned by the Holder of the Stock
Option or, unless otherwise provided in the
Agreement, partly in cash and partly in such Common
Stock. Cash payments shall be made by wire transfer,
certified check or bank check or personal check, in
each case payable to the order of the Company; pro-
vided, however, that the Company shall not be
required to deliver certificates for shares of Common
Stock with respect to which a Stock Option is
exercised until the Company has confirmed the receipt
of good and valuable funds in payment of the purchase
price thereof. Payments in the form of Common Stock
(which shall be valued at the Fair Market Value of a
share of Common Stock on the date of exercise) shall
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be made by delivery of stock certificates in
negotiable form which are effective to transfer good
and valid title thereto to the Company, free of any
liens or encumbrances, with signature guaranteed by a
bank or investment banking firm.
6.8 Issuance of Shares. As soon as practicable after its
receipt of such notice and payment, the Company shall
cause one or more certificates for the shares so pur-
chased to be delivered to the Holder or his or her
estate, as the case may be. No Holder or estate
shall have any of the rights of a shareholder with
reference to shares of Common Stock subject to a
Stock Option until after the Stock Option has been
exercised in accordance with Section 6.7 and certifi-
cates representing the shares of Common Stock so pur-
chased by the Holder pursuant to the Stock Option
have been delivered to the Holder or estate.
6.9 Partial Exercise. A Stock Option granted under this
Plan may be exercised as to any part of the shares
for which it could be exercised. Such a partial
exercise of a Stock Option shall not affect the right
to exercise the Stock Option from time to time in
accordance with this Plan as to the remaining shares
of Common Stock subject to the Stock Option.
6.10 $100,000 Per Year Limitation. To the extent that the
aggregate Fair Market Value of Common Stock with
respect to which Incentive Stock Options are exer-
cisable for the first time by a Holder during any
calendar year (under all of the Company's plans)
exceeds $100,000, such excess Stock Options shall be
treated as Non-Qualified Stock Options for purposes
of Section 422 of the Code.
6.11 Buyout and Settlement Provisions. The Committee may
at any time offer to buy out for cash or otherwise
settle a Stock Option previously granted, based upon
such terms and conditions as the Committee shall
establish and communicate to the Holder at the time
that such offer is made, including a settlement for
exchange of a different award under the Plan for the
surrender of the Stock Option.
7. Stock Appreciation Rights.
7.1 Grant and Exercise. Stock Appreciation Rights may be
granted in tandem with ("Tandem Stock Appreciation
Right") or in conjunction with all or part of any
Stock Option granted under this Plan or may be
granted on a free-standing basis. In the case of a
Non-Qualified Stock Option, a Tandem Stock
Appreciation Right may be granted either at or after
the time of the grant of such Non-Qualified Stock
Option. In the case of an Incentive Stock Option, a
Tandem Stock Appreciation Right may be granted only
at the time of the grant of such Incentive Stock
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Option. Unless granted in substitution for another
outstanding award, Stock Appreciation Rights shall be
granted for no consideration other than services to
the Company or a Subsidiary.
7.2 Termination. A Tandem Stock Appreciation Right shall
terminate and shall no longer be exercisable upon the
termination or exercise of the related Stock Option,
except that, unless otherwise determined by the
Board, a Tandem Stock Appreciation Right granted with
respect to less than the full number of shares
covered by a related Stock Option shall not be
reduced until after the number of shares remaining
under the related Stock Option equals the number of
shares covered by the Tandem Stock Appreciation
Right.
7.3 Method of Exercise. A Tandem Stock Appreciation
Right may be exercised by a Holder, in accordance
with Section 7.4 hereof, by surrendering the
applicable portion of the related Stock Option. Upon
such exercise and surrender, the Holder shall be
entitled to receive such amount in the form of
payment determined in the manner prescribed in
Section 7.5 hereof. Stock Options which have been so
surrendered, in whole or in part, shall no longer be
exercisable to the extent Tandem Stock Appreciation
Rights have been exercised.
7.4 Exercisability. Tandem Stock Appreciation Rights
shall be exercisable only at such time or times and
to the extent that the Stock Options to which they
relate shall be exercisable in accordance with the
provisions of Section 6 hereof and this Section 7,
and may be subject to such additional limitations on
exercisability as shall be determined by the
Committee and set forth in the Agreement. Other
Stock Appreciation Rights shall be exercisable at
such time or times and subject to such terms and
conditions as shall be determined by the Committee
and set forth in the Agreement. Notwithstanding
anything to the contrary contained herein (including
the provisions of Section 8.1 hereof), any Stock
Appreciation Right granted to a Section 16(b) Holder
to be settled wholly or partially in cash (i) shall
not be exercisable during the first six (6) months of
the term of such Stock Appreciation Right, except
that this special limitation shall not apply in the
event of death or disability of such Holder prior to
the expiration of the six (6) month period, and (ii)
shall only be exercisable during the period beginning
on the third business day following the date of
release for publication of the Company of quarterly
or annual summary statements of sales and earnings
and ending on the twelfth (12) business day following
such date.
7.5 Receipt of SAR Value. Upon the exercise of a Stock
Appreciation Right, a Holder shall be entitled to
receive up to, but not more than, an amount in cash
and/or shares of Common Stock equal to the SAR Value
with the Committee having the right to determine the
form of payment.
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7.6 Shares Affected Under Plan. Upon the exercise of a
Tandem Stock Appreciation Right, the Stock Option or
part thereof to which such Tandem Stock Appreciation
Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth
in Section 4.1 hereof on the number of shares of
Common Stock to be issued under the Plan, but only to
the extent of the number of shares, if any, issued
under the Tandem Stock Appreciation Right at the time
of exercise based upon the SAR Value.
7.7 Limited Stock Appreciation Rights. The Committee may
grant "Limited Stock Appreciation Rights", i.e.,
Stock Appreciation Rights that become exercisable
upon the occurrence of one or more of the events
which trigger a Change of Control as defined in
Section 8.2 hereof, and shall be settled in an amount
equal to the Formula Price Per Share, subject to such
other terms and conditions as the Committee may
specify; provided, however, if any Limited Stock
Appreciation Right is granted to a Section 16(b)
Holder such Limited Stock Appreciation Right (i)
shall only be exercisable within sixty (60) days
after the event triggering the Change of Control; and
(ii) may not be exercised during the first six (6)
months after the date of grant of such Limited Stock
Appreciation Right (except in the event of death or
disability of such Holder prior to the expiration of
the six (6) month period); and (iii) shall only be
exercisable in the event that the date of the Change
of Control was outside the control of such Holder;
and (iv) shall only be settled in cash in an amount
equal to the Formula Price Per Share.
8. Acceleration.
8.1 Acceleration Upon Change of Control. Unless the
award Agreement provides otherwise or unless the
Holder waives the application of this Section 8.1
prior to a Change of Control (as hereinafter
defined), in the event of a Change of Control, each
outstanding Stock Option, Stock Appreciation Right
and Limited Stock Appreciation Right granted under
the Plan shall immediately become exercisable in full
notwithstanding the vesting or exercise provisions
contained in the Agreement.
8.2 Change of Control Defined. A "Change of control"
shall be deemed to have occurred upon any of the
following events:
8.2.1 The consummation of any of the following
transactions: any merger, reverse stock
split, recapitalization or other business
combination of the Company, with or into
another corporation, or an acquisition of
securities or assets by the Company, pursuant
to which the Company is not the continuing or
surviving corporation or pursuant to which
shares of Common Stock would be converted
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into cash, securities or other property,
other than a transaction in which the
majority of the holders of Common Stock
immediately prior to such transaction will
own at least fifty percent (50%) of the total
voting power of the then-outstanding
securities of the surviving corporation
immediately after such transaction; or
8.2.2 A transaction in which any person (as such
term is defined in Sections 13(d)(3) and
14(d)(2) of the Exchange Act), corporation or
other entity (other than the Company, or any
profit-sharing, employee ownership or other
employee benefit plan sponsored by the
Company or any Subsidiary, or any trustee of
or fiduciary with respect to any such plan
when acting in such capacity, or any group
comprised solely of such entities): (i) shall
purchase any Common Stock (or securities con-
vertible into Common Stock) for cash, secur-
ities or any other consideration pursuant to
a tender offer or exchange offer, without the
prior consent of the Board, or (ii) shall
become the "beneficial owner" (as such term
is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly (in one
transaction or a series of transactions), of
securities of the Company representing fifty
percent (50%) or more of the total voting
power of the then-outstanding securities of
the Company ordinarily (and apart from the
rights accruing under special circumstances)
having the right to vote in the election of
directors (calculated as provided in Rule
13d-3(d) in the case of rights to acquire the
Company's securities); or
8.2.3 If, during any period of two consecutive
years, individuals who at the beginning of
such period constituted the entire Board and
any new director whose election by the Board,
or nomination for election by the Company's
stockholders was approved by a vote of at
least two-thirds of the directors then still
in office who either were directors at the
beginning of the period or whose election or
nomination for election by the stockholders
was previously so approved, cease for any
reason to constitute a majority thereof.
8.3 General Waiver by Board. The Committee may, after
grant of an award, accelerate the vesting of all or
any part of any Stock Option, and/or waive any
limitations or restrictions, if any, for all or any
part of an award.
8.4 Acceleration Upon Termination of Employment. In the
case of a Holder whose employment or affiliation with
the Company or a Subsidiary is involuntarily
terminated for any reason (other than for cause), the
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Committee may, at its option and in its sole
discretion, accelerate the vesting of all or any part
of any award and/or waive, in whole or in part, any
or all of the remaining deferral limitations or
restrictions imposed hereunder or pursuant to the
Agreement.
9. Amendments and Termination.
9.1 Amendments to Plan; Termination. The Board may at
any time, and from time to time, amend any of the
provisions of the Plan, and may at any time suspend
or terminate the Plan; provided, however, that no
such amendment shall be effective unless and until it
has been duly approved by the stockholders of the
outstanding shares of Common Stock if (i) such amend-
ment materially increases the benefits accruing to
participants under this Plan; (ii) such amendment
materially increases the number of securities which
may be issued under this Plan; (iii) such amendment
materially modifies the requirements as to
eligibility for participation in this Plan; or, (iv)
the failure to obtain such approval would adversely
affect the compliance of the Plan with the
requirements of Rule 16b-3 under the Exchange Act, or
with the requirements of any other applicable law,
rule or regulation.
9.2 Amendments to Individual Awards. The Board may amend
the terms of any award granted under the Plan; pro-
vided, however, that subject to Section 11 hereof, no
such amendment may be made by the Board which in any
material respect impairs the rights of the Holder
without the Holder's consent.
10. Term of Plan.
10.1 Effective Date. The Plan shall be effective as of
August 13, 1998 ("Effective Date"), subject to the
approval of the Plan by the stockholders of the
Company within one year after the Effective Date.
Any awards granted under the Plan prior to such
approval shall be effective when made (unless other-
wise specified by the Committee at the time of grant)
but shall be conditioned upon, and subject to, such
approval of the Plan by the Company's stockholders
and approval of the Company's application to list the
shares of the Company's Common Stock covered by the
Plan on the New York Stock Exchange (and no awards
shall vest or otherwise become free of restrictions
prior to such approvals).
10.2 Termination Date. No award shall be granted pursuant
to the Plan on or after the tenth (10th) anniversary
of the Effective Date, but awards granted prior to
such tenth (10th) anniversary may extend beyond that
date. The Plan shall terminate at such time as no
further awards may be granted and all awards granted
under the Plan are no longer outstanding.
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11. Adjustment Upon Change of Shares. Subject to any required
action by the stockholders of the Company, the number of
shares of Common Stock for which Stock Options may
thereafter be granted, and the number of shares of Common
Stock then subject to Stock Options previously granted, and
the price per share payable upon exercise of such Stock
Option and the number of shares and exercise price relating
to Stock Appreciation Rights, shall be proportionately
adjusted for any increase or decrease in the number of
issued shares of Common Stock of the Company resulting from
a subdivision or consolidation of shares of Common Stock or
the payment of a stock dividend (but only on the Common
Stock) or any other increase or decrease in the number of
shares of Common Stock effected without receipt of
consideration by the Company.
11.1 If the Company is reorganized or consolidated or
merged with another corporation, in which the Company
is the non-surviving corporation, a Holder of an out-
standing Stock Option and/or Stock Appreciation Right
granted under this Plan shall be entitled (subject to
the provisions of this Section 11) to receive options
and/or stock appreciation rights covering shares of
such reorganized, consolidated or merged corporation
in the same proportion as granted to Holder prior to
such reorganization, consolidation or merger at an
equivalent exercise price, and subject to the same
terms and conditions as this Plan. For purposes of
the preceding sentence, the excess of the aggregate
Fair Market Value of shares subject to the option
immediately after the reorganization, consolidation
or merger over the aggregate exercise price of such
shares shall not be more than the excess of the
aggregate Fair Market Value of all shares of Common
Stock subject to the option or Stock Appreciation
Right immediately before such reorganization, con-
solidation or merger over the aggregate exercise
price of such shares of Common Stock, and the new
stock option or stock appreciation right or assump-
tion of the old Stock Option or old Stock
Appreciation Right by any surviving corporation shall
not give the Holder additional benefits which he did
not have under the old Stock Option or Stock
Appreciation Right.
11.2 To the extent that the foregoing adjustments relate
to the shares of Common Stock of the Company, such
adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding
and conclusive, provided that each Incentive Stock
Option granted pursuant to this Plan shall not be
adjusted in a manner that causes the Incentive Stock
Option to fail to continue to qualify as an incentive
stock option within the meaning of Section 422 of the
Code.
11.3 Except as expressly provided in this Section 11, the
Holder shall have no rights by reason of any sub-
division or consolidation of shares of stock of any
class or the payment of any stock dividend or any
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other increase or decrease in the number of shares of
stock of any class or by reason of any dissolution,
liquidation, merger, consolidation, reorganization or
spin-off of assets or stock of another corporation,
and any issue by the Company of shares of stock of
any class, or securities convertible into shares of
stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common
Stock subject to the Stock Option or the number or
price of Stock Appreciation Rights granted under this
Plan.
11.4 The grant of a Stock Option or Stock Appreciation
Right pursuant to this Plan shall not affect in any
way the right or power of the Company to make
adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to
merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or
assets.
12. General Provisions.
12.1 Investment Representations. The Committee may
require each person acquiring shares of Common Stock
pursuant to an award under this Plan to represent to
and agree with the Company in writing that the Holder
is acquiring the shares for investment without a view
to distribution thereof.
12.2 Additional Incentive Arrangements. Nothing contained
in this Plan shall prevent the Board from adopting
such other or additional incentive arrangements as it
may deem desirable, including, but not limited to,
the granting of Stock Options and the awarding of
stock and cash otherwise than under this Plan; and
such arrangements may be either generally applicable
or applicable only in specific cases.
12.3 No Right of Employment. Nothing contained in this
Plan or in any award hereunder shall be deemed to
confer upon any employee of the Company or any
Subsidiary any right to continued employment with the
Company or any Subsidiary, nor shall it interfere in
any way with the right of the Company or any
Subsidiary to terminate the employment of any of its
employees at any time.
12.4 Withholding Taxes. Not later than the date as of
which an amount first becomes includible in the gross
income of the Holder for federal income tax purposes
with respect to any award under the Plan, the Holder
shall pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of,
any federal, state and local taxes of any kind
required by law to be withheld or paid with respect
to such amount. If permitted by the Board, tax
withholding or payment obligations may be settled
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with Common Stock, including Common Stock that is
part of the award that gives rise to the withholding
requirement. The obligations of the Company under
this Plan shall be conditional upon such payment or
arrangements and the Company shall, to the extent
permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to
the Holder from the Company.
12.5 Governing Law. This Plan and all awards made and
actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of
Delaware (without regard to choice of law
provisions).
12.6 Other Benefit Plans. Any award granted under this
Plan shall not be deemed compensation for purposes of
computing benefits under any retirement plan of the
Company or any Subsidiary and shall not affect any
benefits under any other benefit plan now or subse-
quently in effect under which the availability or
amount of benefits is related to the level of
compensation (unless required by specific reference
in any such other plan to awards under this Plan).
12.7 Employee Status. A leave of absence, unless
otherwise determined by the Board prior to the
commencement thereof, shall not be considered a
termination of employment. Any awards granted under
this Plan shall not be affected by any change of
employment, so long as the Holder continues to be an
employee of the Company or any Subsidiary.
12.8 Non-Transferability. Other than the transfer of a
Stock Option or Stock Appreciation Right by will or
by the laws of descent and distribution, no award
under this Plan may be alienated, sold, assigned,
hypothecated, pledged, exchanged, transferred,
encumbered or charged, and any attempt to alienate,
sell, assign, hypothecate, pledge, exchange,
transfer, encumber or charge the same shall be void.
No right or benefit hereunder shall in any manner be
liable for or subject to the debts, contracts,
liabilities or torts of the person entitled to such
benefit. Unless otherwise provided in this Plan or
the Agreement, any Stock Option or Stock Appreciation
Right granted under this Plan is only exercisable
during the lifetime of the Holder by the Holder or by
his guardian or legal representative.
12.9 Applicable Laws. The obligations of the Company with
respect to all awards under this Plan shall be
subject to (i) all applicable laws, rules and
regulations, including, without limitation, the
requirements of all federal securities laws, rules
and regulations and state securities and blue sky
laws, rules and regulations, and such approvals by
any governmental agencies as may be required,
including, without limitation, the effectiveness of a
registration statement under the Act, and (ii) the
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rules and regulations of any national securities
exchange on which the Common Stock may be listed or
the NASDAQ National Market System if the Common Stock
is designated for quotation thereon.
12.10 Conflicts. If any of the terms or provisions of the
Plan conflict with the requirements of Rule 16b-3
under the Exchange Act, or with the requirements of
any other applicable law, rule or regulation, and/or
with respect to Incentive Stock Options, Section 422
of the Code, then such terms or provisions shall be
deemed inoperative to the extent they so conflict
with the requirements of said Rule 16b-3, and/or with
respect to Incentive Stock Options, Section 422 of
the Code. With respect to Incentive Stock Options,
if this Plan does not contain any provision required
to be included herein under Section 422 of the Code,
such provision shall be deemed to be incorporated
herein with the same force and effect as if such
provision had been set out at length herein.
12.11 Written Agreements. Each award granted under this
Plan shall be confirmed by, and shall be subject to
the terms of the Agreement approved by the Committee
and executed by the Company and the Holder. The
Committee may terminate any award made under this
Plan if the Agreement relating thereto is not
executed and returned to the Company within sixty
(60) days after the Agreement has been delivered to
the Holder for his or her execution.
12.12 Indemnification of Committee. In addition to such
other rights of indemnification as they may have as
directors or as members of the Committee, the members
of the Committee shall be indemnified by the Company
against the reasonable expenses, including attorneys'
fees actually and necessarily incurred in connection
with the defense of any action, suit or proceeding,
or in connection with any appeal therein, to which
they or any of them may be a party by reason of any
action taken or failure to act under or in connection
with the Plan or any award granted thereunder, and
against all amounts paid by them in settlement
thereof (provided such settlement is approved by
independent legal counsel selected by the Company) or
paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation
to matters as to which it shall be adjudged in such
action, suit or proceeding that such Committee member
is liable for negligence or misconduct in the
performance of his duties; provided that within sixty
(60) days after institution of any such action, suit
or proceeding a Committee member shall in writing
offer the Company the opportunity, at its own
expense, to handle and defend the same.
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12.13 Consideration for Common Stock. The Committee may
not grant any awards under this Plan pursuant to
which the Company will be required to issue any
shares of Common Stock unless the Company will
receive consideration for the shares of Common Stock
sufficient under the laws of the State of Delaware so
that such shares of Common Stock will be, when
issued, validly issued and fully paid and
nonassessable when issued.
12.14 Common Stock Certificates. All certificates for
shares of Common Stock delivered under this Plan
shall be subject to such stop-transfer orders and
other restrictions as the Committee may deem
advisable under the rules, regulations, and other
requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common
Stock is then listed, any applicable federal or state
securities law and any applicable corporate law, and
the Committee may cause a legend or legends to be put
on any such certificates to make appropriate refer-
ence to such restrictions. Notwithstanding anything
to the contrary contained herein, whenever
certificates representing shares of Common Stock
subject to an award are required to be delivered
pursuant to the terms of this Plan, the Company may,
in lieu of such delivery requirement, comply with the
provisions of Section 158 of the Delaware General
Corporation Law.
12.15 Unfunded Status of Plan. This Plan is intended to
constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments
not yet made to a Holder by the Company, nothing
contained herein shall give any such Holder any
rights that are greater than those of a general
creditor of the Company.
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