NOBEL EDUCATION DYNAMICS, INC.
1995 STOCK INCENTIVE PLAN
EFFECTIVE DATE: JUNE 21, 1995
TABLE OF CONTENTS
PAGE
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SECTION 1 Purpose..................................................... 1
SECTION 2 Administration.............................................. 1
SECTION 3 Eligibility................................................. 2
SECTION 4 Stock....................................................... 3
SECTION 5 Granting of Options to Key Employees........................ 3
SECTION 6 Granting of NQSOs to Outside Directors...................... 4
SECTION 7 Annual Limit for ISOs....................................... 4
SECTION 8 Options and SARs............................................ 5
SECTION 9 Restricted Stock Awards..................................... 12
SECTION 10 Unrestricted Stock Awards................................... 14
SECTION 11 Capital Adjustments......................................... 14
SECTION 12 Change in Control........................................... 15
SECTION 13 Amendment or Discontinuance of the Plan..................... 16
SECTION 14 Termination of Plan......................................... 17
SECTION 15 Shareholder Approval........................................ 17
SECTION 16 Miscellaneous............................................... 17
NOBEL EDUCATION DYNAMICS, INC.
1995 STOCK INCENTIVE PLAN
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SECTION 1
PURPOSE
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This NOBEL EDUCATION DYNAMICS, INC. 1995 STOCK INCENTIVE PLAN ("Plan")
is intended to provide a means whereby NOBEL EDUCATION DYNAMICS, INC.
("Company") and any Subsidiary of the Company (as hereinafter defined) may,
through the grant of incentive stock options and non-qualified stock options
(collectively "Options"), stock appreciation rights ("SARs"), stock subject to
restrictions ("Restricted Stock") and stock not subject to restrictions
("Unrestricted Stock") to Key Employees and Outside Directors (both as defined
in Section 3), attract and retain such Key Employees and Outside Directors and
motivate such individuals to exercise their best efforts on behalf of the
Company and of any Subsidiary.
As used in the Plan, the term "incentive stock option" ("ISO") means
an Option which qualifies as an incentive stock option within the meaning of
section 422 of the Internal Revenue Code of 1986, as amended from time to time
(the "Code"), at the time it is granted and which is either designated as an ISO
in the Option Agreement (as hereinafter defined) covering such Option or which
is designated as an ISO by the Committee (as defined in Section 2 hereof) at the
time of grant. The term "non-qualified stock option" ("NQSO") means any other
Option granted under the Plan. The term "Subsidiary" means any corporation
(whether or not in existence at the time the Plan is adopted) which, at the time
an Award is granted, is a subsidiary of the Company under the definition of
"subsidiary corporation" contained in section 424(f) of the Code, or any
successor thereto.
SECTION 2
ADMINISTRATION
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The Plan shall be administered by the Company's Compensation Committee
(the "Committee"), which shall consist of two or more Outside Directors who
shall be appointed by, and shall serve at the pleasure of, the Company's Board
of Directors (the "Board"). Each member of the Committee, while serving as
such, shall be deemed to be acting in his capacity as a director of the Company.
Except as otherwise permitted under Section 6 and under section 16(b) of the
Securities Exchange Act of 1934 (the "Exchange Act"), and paragraph (c)(2)(i) of
Rule 16b-3 thereunder, no member of the Committee shall be granted, nor shall
have been granted, Awards (as defined below) pursuant to the Plan or equity
securities (within the meaning of 17 C.F.R.
(S)240.16a-1(d)) pursuant to any other plan of the Company or of any of its
affiliates, as defined in or under the Exchange Act, at any time during the
period commencing with the date which is one year prior to the date his service
on the Committee began and ending on the date which is one day after the date on
which his service on the Committee ceased. Each member of the Committee shall
also be an "outside director" within the meaning of Prop. Treas. Reg. (S) 1.162-
27(e)(3), or any successor thereto.
The Committee shall have full and final authority in its absolute
discretion, subject to the terms of the Plan, to select the Key Employees to be
granted ISOs, NQSOs, SARs, Restricted Stock and Unrestricted Stock (collectively
"Awards") under the Plan, to grant Awards on behalf of the Company, and to set
the date of grant and the other terms of such Awards. With respect to the
eligibility of Outside Directors, the Plan is intended to comply with Rule 16b-3
and its successors promulgated under the Exchange Act as a "formula award" plan
described in Rule 16b-3(c)(2)(ii), and any provision of this Plan applicable to
Outside Directors that is to the contrary shall be deemed null and void.
Consequently, the award of Options to Outside Directors shall be as set forth in
Section 6, and the Committee shall not have any discretionary authority with
respect thereto.
The Committee may correct any defect, supply any omission and
reconcile any inconsistency in the Plan and in any Award granted hereunder in
the manner and to the extent it shall deem desirable. The Committee also shall
have the authority to establish such rules and regulations, not inconsistent
with the provisions of the Plan, for the proper administration of the Plan, and
to amend, modify or rescind any such rules and regulations, and to make such
determinations and interpretations under, or in connection with, the Plan, as it
deems necessary or advisable. All such rules, regulations, determinations and
interpretations shall be binding and conclusive upon the Company, its
shareholders and all officers and employees and former officers and employees,
and upon their respective legal representatives, beneficiaries, successors and
assigns and upon all other persons claiming under or through any of them.
No member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Award
granted hereunder.
SECTION 3
ELIGIBILITY
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(a) IN GENERAL. Key Employees and Outside Directors shall be eligible
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to receive Awards under the Plan. Key Employees and Outside Directors who
have been granted an
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Award under the Plan shall be referred to as "Grantees." More than one
Award may be made to a Grantee under the Plan.
(b) KEY EMPLOYEES. Key Employees are (1) officers of the Company or a
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Subsidiary, (2) school principals, center directors, and regional managers
of the Company or a Subsidiary, and (3) any other employees of the Company
or a Subsidiary so designated by the Committee. Key Employees shall be
eligible to receive any type of Award available under the Plan.
(c) OUTSIDE DIRECTORS. Outside Directors are directors of the Company
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who are not officers or employees thereof. Outside Directors shall only be
eligible to receive NQSOs pursuant to Section 6.
SECTION 4
STOCK
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The number of common shares of the Company, par value $.001 per
share ("Common Shares"), that may be subject to Awards under the Plan shall be
1,500,000 shares, subject to adjustment as hereinafter provided; provided,
however, that no Key Employee shall receive Options for more than 100,000 Common
Shares over any one-year period. Common Shares issuable under the Plan may be
authorized but unissued shares or reacquired shares, as the Company may
determine from time to time.
Any Common Shares subject to an Option which expires or otherwise
terminates for any reason whatever (including, without limitation, the Key
Employee's surrender thereof) without having been exercised, and any shares of
Restricted Stock which are forfeited, shall continue to be available for the
granting of Awards under the Plan; provided, however, that (a) if an Option is
cancelled, the Common Shares covered by the cancelled Option shall be counted
against the maximum number of shares specified in this Section 4 for which
Options may be granted to a single Key Employee, and (b) if the exercise price
of an Option is reduced after the date of grant, the transaction shall be
treated as a cancellation of the original Option and the grant of a new Option
for purposes of counting the maximum number of shares for which Options may be
granted to a Key Employee. Common Shares subject to an Option cancelled upon
the exercise of a SAR shall not again be available for Awards under the Plan.
SECTION 5
GRANTING OF OPTIONS TO KEY EMPLOYEES
------------------------------------
From time to time until the expiration or earlier suspension or
discontinuance of the Plan, the Committee may, on
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behalf of the Company, grant to Key Employees under the Plan such Options as it
determines are warranted, subject to the limitations of the Plan; provided,
however, that grants of ISOs and NQSOs shall be separate and not in tandem. The
granting of an Option under the Plan shall not be deemed either to entitle the
Key Employee to, or to disqualify the Key Employee from, any other Awards under
the Plan. In making any determination as to whether a Key Employee shall be
granted an Option, the type of Option to be granted, and the number of Common
Shares to be covered by the Option, the Committee shall take into account the
duties of the Key Employee, his present and potential contributions to the
success of the Company or a Subsidiary, the tax implications to the Company and
the Key Employee of any Options granted, and such other factors as the Committee
shall deem relevant in accomplishing the purposes of the Plan. Moreover, the
Committee may provide in the Option Agreement that the Option may be exercised
only if certain conditions, as determined by the Committee, are fulfilled.
SECTION 6
GRANTING OF NQSOS TO OUTSIDE DIRECTORS
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As of March 31, 1996 and each March 31 thereafter until the expiration
or earlier suspension or discontinuance of the Plan, each individual serving as
an Outside Director on such date shall be granted a NQSO to purchase 2,000
Common Shares (as adjusted pursuant to section 11, if necessary), provided that
(a) the individual served as a director for the entire fiscal year immediately
preceding such March 31, and (b) the Company's pre-tax income for such fiscal
year exceeds by at least 20% the Company's pre-tax income for the previous
fiscal year, as calculated in accordance with generally accepted accounting
principles ("GAAP").
SECTION 7
ANNUAL LIMIT FOR ISOS
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(a) ANNUAL LIMIT. The aggregate Fair Market Value (determined as of
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the date the ISO is granted) of the Common Shares with respect to which
ISOs become exercisable for the first time by a Key Employee during any
calendar year (under this Plan and any other ISO plan of the Company or any
parent corporation (within the meaning of section 424(e) of the Code
("Parent")) or Subsidiary) shall not exceed $100,000. The term "Fair
Market Value" shall mean the value of the Common Shares arrived at by a
good faith determination of the Committee and shall be:
(1) The mean between the highest and lowest quoted selling price,
if there is a market for the
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Common Shares on a registered securities exchange or in an over the
counter market, on the date specified;
(2) The weighted average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the
specified date, if there are no such sales on the specified date but
there are such sales on dates within a reasonable period both before
and after the specified date;
(3) The mean between the bid and asked prices, as reported by the
National Quotation Bureau on the specified date, if actual sales are
not available during a reasonable period beginning before and ending
after the specified date; or
(4) Such other method of determining Fair Market Value as shall
be authorized by the Code, or the rules or regulations thereunder, and
adopted by the Committee.
Where the Fair Market Value of Common Shares is determined under
(2) above, the average of the means between the highest and lowest
sales on the nearest date before and the nearest date after the
specified date shall be weighted inversely by the respective numbers
of trading days between the dates of reported sales and the specified
date (i.e., the valuation date), in accordance with Treas. Reg. (S)
----
20.2031-2(b)(1), or any successor thereto.
(b) OPTIONS OVER ANNUAL LIMIT. If an Option intended as an ISO is
-------------------------
granted to a Key Employee and such Option may not be treated in whole or in
part as an ISO pursuant to the limitation in (a) above, such Option shall
be treated as an ISO to the extent it may be so treated under such
limitation and as a NQSO as to the remainder. For purposes of determining
whether an ISO would cause such limitation to be exceeded, ISOs shall be
taken into account in the order granted.
(c) NQSOS, SARS, RESTRICTED STOCK AND UNRESTRICTED STOCK. The annual
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limit set forth above for ISOs shall not apply to NQSOs, SARs, Restricted
Stock and Unrestricted Stock.
SECTION 8
OPTIONS AND SARS
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(a) TERMS AND CONDITIONS OF OPTIONS. The Options granted pursuant to
-------------------------------
the Plan shall include expressly or by
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reference the following terms and conditions, as well as such other
provisions not inconsistent with the provisions of this Plan as the
Committee shall deem desirable, and for ISOs granted under this Plan, the
provisions of section 422(b) of the Code:
(1) NUMBER OF COMMON SHARES. The Option Agreement shall state
-----------------------
the number of Common Shares to which the Option pertains.
(2) PRICE.
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(A) KEY EMPLOYEES. With respect to Options granted to Key
-------------
Employees, the Option exercise price shall be determined and
fixed by the Committee in its discretion at the time of grant,
but shall not be less 100% (110% in the case of an ISO granted to
a more than 10% shareholder as provided in Subsection (10) below)
of the Fair Market Value of the optioned Common Shares on the
date the Option is granted.
(B) OUTSIDE DIRECTORS. With respect to Options granted to
-----------------
Outside Directors, the Option exercise price shall be the Fair
Market Value of the optioned Common Shares on the date the Option
is granted.
(3) TERM.
----
(A) ISOS. Subject to earlier termination as provided in
----
Subsections (5), (6) and (7) below, the term of each ISO shall be
not more than 10 years (5 years in the case of a more than 10%
shareholder as provided in Subsection (10) below) from the date
of grant.
(B) NQSOS GRANTED TO KEY EMPLOYEES. Subject to earlier
------------------------------
termination as provided in Subsections (5), (6) and (7) below,
the term of each NQSO granted to a Key Employee shall be not more
than 10 years from the date of grant.
(C) NQSOS GRANTED TO OUTSIDE DIRECTORS. Subject to earlier
----------------------------------
termination as provided in Subsection (8) below, the term of each
NQSO granted to an Outside Director shall be 10 years from the
date of grant.
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(4) EXERCISE.
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(A) OPTIONS GRANTED TO KEY EMPLOYEES. Options granted to
--------------------------------
Key Employees shall be exercisable in such installments and on
such dates, commencing not earlier than 6 months from the later
of the date of grant or the date the Plan is approved by the
Company's shareholders, as the Committee may specify, provided
that:
(i) In the case of new Options granted to a Key
Employee in replacement for options (whether granted under
the Plan or otherwise) held by the Key Employee, the new
Options may be made exercisable, if so determined by the
Committee, in its discretion, at the earliest date the
replaced options were exercisable; and
(ii) The Committee may accelerate the exercise date
of any outstanding Options granted to Key Employees in its
discretion, if it deems such acceleration to be desirable.
(B) OPTIONS GRANTED TO OUTSIDE DIRECTORS. Options granted
------------------------------------
to Outside Directors shall be exercisable commencing six months
after the later of the date of grant or the date the Plan is
approved by the Company's shareholders.
(C) GENERAL. Any Common Shares, the right to the purchase
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of which has accrued, under an Option may be purchased at any
time up to the expiration or termination of the Option.
Exercisable Options may be exercised, in whole or in part, from
time to time by giving written notice of exercise to the Company
at its principal office, specifying the number of Common Shares
to be purchased and accompanied by payment in full of the
aggregate Option exercise price for such shares. Only full
shares shall be issued under the Plan, and any fractional share
which might otherwise be issuable upon the exercise of an Option
granted hereunder shall be forfeited.
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(D) MANNER OF PAYMENT. The Option price of an Option
-----------------
granted to an Outside Director shall be payable in cash or its
equivalent.
The Option price of an Option granted to a Key Employee
shall be payable:
(i) In cash or its equivalent;
(ii) In the case of an ISO, if the Committee, in its
discretion, causes the Option Agreement so to provide, and
in the case of a NQSO if the Committee, in its discretion,
so determines at or prior to the time of exercise, in Common
Shares previously acquired by the Grantee, provided that (1)
if such shares were acquired through the exercise of an ISO
and are used to pay the Option exercise price of an ISO,
such shares have been held by the Key Employee for a period
of not less than the holding period described in section
422(a)(1) of the Code on the date of exercise, or (2) if
such shares were acquired through the exercise of a NQSO and
are used to pay the Option exercise price of an ISO, or if
such shares were acquired through exercise of a NQSO or of
an option under a similar plan or through exercise of an ISO
and are used to pay the Option exercise price of a NQSO, or
if such shares were acquired under a SAR, or through the
grant of Restricted or Unrestricted Stock, such shares have
been held by the Key Employee for a period of more than 12
months on the date of exercise; or
(iii) In the discretion of the Committee, in any
combination of (i) and (ii) above.
In the event such Option exercise price is paid, in whole or
in part, with Common Shares, the portion of the Option exercise
price so paid shall equal the Fair Market Value on the date of
exercise of the Common Shares surrendered in payment of such
Option exercise price.
(5) EXERCISE UPON TERMINATION OF KEY EMPLOYEE. If a Key
-----------------------------------------
Employee's employment by the Company (and Subsidiaries) is terminated
by either party prior to the expiration date fixed for his or her
Option for any reason other than death or disability, such Option may
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be exercised, to the extent of the number of Common Shares with
respect to which the Key Employee could have exercised it on the date
of such termination, or to any greater extent permitted by the
Committee, by the Key Employee at any time prior to the earlier of:
(A) The expiration date specified in such Option; or
(B) Three months after the date of such termination of
employment.
(6) EXERCISE UPON DISABILITY OF KEY EMPLOYEE. If a Key Employee
----------------------------------------
shall become disabled (within the meaning of section 22(e)(3) of the
Code) during his or her employment and, prior to the expiration date
fixed for his or her Option, his or her employment is terminated as a
consequence of such disability, such Option may be exercised, to the
extent of the number of Common Shares with respect to which the Key
Employee could have exercised it on the date of such termination, or
to any greater extent permitted by the Committee, by the Key Employee
at any time prior to the earlier of:
(A) The expiration date specified in such Option; or
(B) One year after the date of such termination of
employment.
In the event of the Key Employee's legal disability, such Option
may be so exercised by the Key Employee's legal representative.
(7) EXERCISE UPON DEATH OF KEY EMPLOYEE. If a Key Employee shall
-----------------------------------
die during his or her employment and prior to the expiration date
fixed for his or her Option, or if a Key Employee whose employment is
terminated for any reason shall die following his or her termination
of employment but prior to the earliest of:
(A) The expiration date fixed for his or her Option;
(B) The expiration of the period determined under
Subsections (5) and (6) above; or
(C) In the case of an ISO, three months following
termination of employment,
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such Option may be exercised, to the extent of the number of Common
Shares with respect to which the Key Employee could have exercised it
on the date of his or her death, or to any greater extent permitted by
the Committee, by the Key Employee's estate, personal representative
or beneficiary who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of the Key Employee,
at any time prior to the earlier of:
(i) The expiration date specified in such Option; or
(ii) One year after the date of death.
(8) EXERCISE UPON TERMINATION OF OUTSIDE DIRECTOR'S SERVICE. If
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an Outside Director's service on the Board is terminated prior to the
expiration date fixed for his or her Option, such Option may be
exercised by the Outside Director at any time prior to the earlier of:
(A) The expiration date specified in such Option; or
(B) One year after such termination of service.
Notwithstanding the above, if an Outside Director dies during
this period, such Option may be exercised, to the extent of the number
of Common Shares with respect to which the Outside Director could have
exercised it on the date of his or her death, by the Outside
Director's estate, personal representative or beneficiary who acquired
the right to exercise such Option by bequest or inheritance or by
reason of the death of the Outside Director, at any time prior to the
earlier of:
(i) The expiration date specified in such Option; or
(ii) One year after the date of the Outside Director's
death.
(9) RIGHTS AS A SHAREHOLDER. A Grantee shall have no rights as a
-----------------------
shareholder with respect to any Common Shares covered by his or her
Option until the issuance of a stock certificate to him or her for
such shares.
(10) TEN PERCENT SHAREHOLDER. If a Key Employee owns more than
-----------------------
10% of the total combined voting power
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of all shares of stock of the Company or of a Subsidiary or Parent at
the time an ISO is granted to such Key Employee, the Option exercise
price for the ISO shall be not less than 110% of the Fair Market Value
of the optioned Common Shares on the date the ISO is granted, and such
ISO, by its terms, shall not be exercisable after the expiration of
five years from the date the ISO is granted. The conditions set forth
in this Subsection (10) shall not apply to NQSOs.
(11) OPTION AGREEMENTS. Options granted under the Plan shall be
-----------------
evidenced by written documents ("Option Agreements") in such form as
the Committee shall, from time to time, approve. Option Agreements
shall contain such provisions, not inconsistent with the provisions of
the Plan for NQSOs granted pursuant to the Plan, and such conditions,
not inconsistent with section 422(b) of the Code or the provisions of
the Plan, for ISOs granted pursuant to the Plan, as the Committee
shall deem advisable. An Option Agreement shall specify whether the
Option is an ISO or NQSO; provided, however, if the Option is not
designated in the Option Agreement as an ISO or NQSO, the Option shall
constitute an ISO if it complies with the terms of section 422 of the
Code, and otherwise, it shall constitute a NQSO. Each Grantee who
receives an Option shall enter into, and be bound by, the terms of an
Option Agreement.
(b) SARS. An Option Agreement may, in the discretion of the
----
Committee, include a provision under which a Key Employee shall have the
right, in lieu of exercising all or a portion of the Key Employee's Option,
to elect instead to receive an amount equal to the difference between the
Fair Market Value of all, or a specified number, of the Common Shares
subject to such Option on the date such right is exercised and the exercise
price under such Option, such amount to be paid in cash or in Common Shares
(based on their Fair Market Value on the date such right is exercised), or
in a combination of cash and Common Shares, as the Committee shall
determine. Such right is referred to in this Plan as a stock appreciation
right ("SAR"). Any SAR shall be exercisable only at a time when the Option
to which it is related is exercisable; provided, however, that if the Key
Employee is a director or officer of the Company within the meaning of
Section 16 of the Exchange Act, cash may be paid to the Key Employee upon
the exercise of a SAR only if the Key Employee exercises the SAR (by giving
the notice described in Section 8(a)(4)(C) hereof) during the period
beginning on the third business day following the release for publication
of the Company's quarterly and annual
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summary statements of sales and earnings, and ending on the twelfth
business day following such date.
A SAR shall be granted in tandem with the related Option, and the
Option-SAR shall be considered exercised when, and to the extent that,
either the underlying Option or the SAR is exercised. Any SAR shall be
subject to the following additional conditions:
(1) The SAR will expire no later than the termination of the
Option to which it relates;
(2) The SAR will be transferable only if and when the underlying
Option is transferable, and under the same conditions; and
(3) The SAR may be exercised only when there is a positive
spread, i.e., when the Fair Market Value of the Common Shares subject
----
to the Option exceeds the exercise price of such Option.
SECTION 9
RESTRICTED STOCK AWARDS
-----------------------
From time to time until the expiration or earlier termination of the
Plan, the Committee may, on behalf of the Company, make such Restricted Stock
Awards under the Plan to Key Employees as it determines are warranted.
Restricted Stock Awards shall be subject to the following terms and conditions,
as well as such other terms and conditions as the Committee may prescribe:
(a) VESTING PERIOD; CONDITIONS. At the time of granting a Restricted
--------------------------
Stock Award, the Committee may establish one or more vesting periods
("Vesting Periods") with respect to the Common Shares covered by the Award.
The length of any such Vesting Period(s) applicable to a Restricted Stock
Award shall be within the discretion of the Committee. At the time of
grant, the Committee may also establish such additional conditions to the
payment of a Restricted Stock Award ("Conditions") as it may deem advisable
in its sole discretion, such as the achievement of corporate or individual
goals. Subject to the provisions of this Section 9 and any other
Conditions prescribed by the Committee, Common Shares subject to a
Restricted Stock Award shall vest in the Key Employee upon the expiration
of the Vesting Period with respect to such Common Shares. The Committee
may accelerate the vesting date of any unvested Common Shares subject to a
Restricted Stock Award in its discretion, if it deems such acceleration to
be desirable.
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(b) ISSUANCE AND DELIVERY OF CERTIFICATES. Upon the granting of a
-------------------------------------
Restricted Stock Award, the Company may, if so determined by the Committee
at the time of the grant, issue certificates representing the Common Shares
subject to the Restricted Stock Award in the name of the Key Employee. Any
such Common Shares shall bear a legend indicating that they are subject to
the terms of the Plan and the Restricted Stock Award Agreement (as
hereinafter defined) and that they may not be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of except in accordance with
the terms of the Plan and the Restricted Stock Award Agreement. Upon
issuance of such certificates, the Key Employee shall immediately execute a
stock power or other instrument of transfer, appropriately endorsed in
blank, to be held with the certificates by the Company pursuant to the
terms of the Plan and the Restricted Stock Award Agreement. Only full
shares shall be issued, and any fractional shares which might otherwise be
issuable pursuant to a Restricted Stock Award shall be forfeited. After
the Key Employee becomes vested in Common Shares subject to the Restricted
Stock Award, the Company shall deliver the vested Common Shares to the Key
Employee or his or her beneficiary or estate, as applicable.
(c) RIGHTS AS A SHAREHOLDER. If the Company issues certificates
-----------------------
representing the Common Shares subject to a Restricted Stock Award prior to
the expiration of the Vesting Period for the Common Shares subject to such
Award or prior to the satisfaction of the Conditions, if any, pertaining to
such Award, the Key Employee shall be entitled to receive dividends paid on
such Common Shares, shall have the right to vote such Common Shares, and
shall have all other shareholder's rights with respect to such Common
Shares, except that (1) the Key Employee will not be entitled to delivery
of the stock certificate, (2) the Company will retain custody of the Common
Shares, and (3) the Common Shares subject to the Restricted Stock Award
will revert to the Company to the extent all Vesting Periods and Conditions
applicable to such Award are not satisfied.
(d) TERMINATION OF EMPLOYMENT. At the time of granting a Restricted
-------------------------
Stock Award, the Committee shall specify in the Restricted Stock Award
Agreement, the manner of determining the number, if any, of the unvested
Common Shares subject to the Award which shall become vested in the Key
Employee, or in his or her beneficiary or estate, if the Key Employee's
employment by the Company (and Subsidiaries) is terminated prior to the
later of the expiration of the Vesting Period or the satisfaction of all of
the Conditions with respect to such Common Shares. Any Restricted Stock
Award Agreement may provide different vesting provisions upon a Key
Employee's termination due to death or
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disability. Any remaining unvested Common Shares covered by the Key
Employee's Restricted Stock Award shall immediately be forfeited upon
termination of employment, except that the Committee, if it determines that
the circumstances warrant, may direct that all or a portion of such
remaining unvested Common Shares also be vested in the Key Employee, or in
his or her beneficiary or estate, subject to such further terms and
conditions, if any, as the Committee may determine.
(e) PAYMENT FOR RESTRICTED STOCK. The Committee may, on behalf of the
----------------------------
Company, grant Restricted Stock Awards under which the Key Employee shall
not be required to make any payment for the Restricted Stock or, in the
alternative, under which the Key Employee, as a condition to the Restricted
Stock Award, shall pay all (or any lesser amount than all) of the Fair
Market Value of the Common Stock, determined as of the date the Restricted
Stock Award is granted. If the latter, such purchase price shall be paid
as provided in the Restricted Stock Award Agreement.
(f) RESTRICTED STOCK AWARD AGREEMENT. Restricted Stock Awards under
--------------------------------
the Plan shall be evidenced by written documents ("Restricted Stock Award
Agreements") in such form as the Committee shall, from time to time,
approve. Restricted Stock Award Agreements shall contain such provisions,
not inconsistent with the provisions of the Plan, as the Committee shall
deem advisable. Each Key Employee granted a Restricted Stock Award shall
enter into, and be bound by the terms of, a Restricted Stock Award
Agreement.
SECTION 10
UNRESTRICTED STOCK AWARDS
-------------------------
(a) AWARDS OF UNRESTRICTED STOCK. From time to time until the
----------------------------
expiration or earlier termination of the Plan, the Committee may, on behalf
of the Company, make such Unrestricted Stock Awards under the Plan to Key
Employees as it determines are warranted.
(b) REGISTRATION. Each certificate for unrestricted Common Shares
------------
shall be registered in the name of the Key Employee and immediately be
delivered to him or her.
SECTION 11
CAPITAL ADJUSTMENTS
-------------------
The number of Common Shares which may be issued under the Plan, the
maximum number of Common Shares with respect to which Options may be granted to
any Key Employee under the Plan,
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both as stated in Section 4 hereof, the number of Common Shares per NQSO granted
to an Outside Director as stated in Section 6, the number of Common Shares
issuable upon the exercise of outstanding Options under the Plan (as well as the
Option exercise price per share under such outstanding Options), and the number
of Common Shares to be delivered upon the vesting of outstanding Restricted
Stock Awards (as well as the purchase price, if any, for such Common Shares)
shall, subject to the provisions of section 424(a) of the Code, be adjusted to
reflect any stock dividend, stock split, share combination, or similar change in
the capitalization of the Company.
In the event of a corporate transaction (as that term is described in
section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation), each outstanding Award shall be
assumed by the surviving or successor corporation; provided, however, that, in
the event of a proposed corporate transaction, the Committee may terminate all
or a portion of the outstanding Options granted to Key Employees if it
determines that such termination is in the best interests of the Company. If
the Committee decides to terminate such outstanding Options, the Committee shall
give each Key Employee holding an Option to be terminated not less than seven
days' notice prior to any such termination by reason of such a corporate
transaction, and any such Option which is to be so terminated may be exercised
(if and only to the extent that it is then exercisable) up to, and including the
date immediately preceding such termination. Further, as provided in Section
8(b)(4)(A)(ii) hereof, the Committee, in its discretion, may accelerate, in
whole or in part, the date on which any or all Options granted to Key Employees
become exercisable.
The Committee also may, in its discretion, change the terms of any
outstanding Awards granted to Key Employees to reflect any such corporate
transaction, provided that, in the case of ISOs, such change is excluded from
the definition of a "modification" under section 424(h) of the Code.
SECTION 12
CHANGE IN CONTROL
-----------------
Upon a Change in Control, the Committee (as it is constituted on the
day preceding the date of the Change in Control) may, in its discretion,
accelerate the vesting and exercisability of outstanding Options and SARs
granted to Key Employees and accelerate the vesting of Restricted Stock Awards
granted to Key Employees. "Change in Control" shall mean the point in time when
any person (as such term is used in Section 13 of the Exchange Act and the rules
and regulations thereunder and
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including any Affiliate or Associate of such person, as defined in Rule 12b-2
under the Exchange Act, and any person acting in concert with such person)
directly or indirectly acquires or otherwise becomes entitled to vote more than
50 percent of the voting power entitled to be cast at elections for directors of
the Company.
SECTION 13
AMENDMENT OR DISCONTINUANCE OF THE PLAN
---------------------------------------
(a) IN GENERAL. The Board from time to time may suspend or
----------
discontinue the Plan or amend it in any respect whatsoever, except that,
without the approval of the shareholders (given in the manner set forth in
Subsection (b) below): (1) the class of persons eligible to receive Awards
shall not be changed nor shall any other requirement as to eligibility for
participation in the Plan be materially modified; (2) the maximum number of
Common Shares with respect to which Awards may be granted under the Plan
shall not be increased except as permitted under Section 11; (3) the
benefits accruing to individuals participating in the Plan shall not be
materially increased; (4) the duration of the Plan under Section 14 shall
not be extended; and (5) no amendment which would require shareholder
approval pursuant to Prop. Treas. Reg. (S) 1.162-27(e)(4)(vi), or any
successor thereto, may be made.
(b) MANNER OF SHAREHOLDER APPROVAL.
------------------------------
(1) The approval of shareholders must be by a majority of the
outstanding Common Shares present, or represented, and entitled to
vote at a meeting duly held in accordance with the applicable laws of
the state of Delaware; and
(2) The approval of shareholders must occur --
(i) By a method and in a degree that would be treated as
adequate under applicable state law in the case of an action
requiring shareholder approval (i.e., an action on which
shareholders would be entitled to vote if the action were taken
at a duly held shareholders' meeting); or
(ii) By a majority of the votes cast at a duly held
shareholders' meeting at which a quorum representing a majority
of all outstanding voting stock is, either in person or by proxy,
present and voting on the Plan.
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(c) AMENDMENTS AFFECTING OUTSIDE DIRECTORS. Notwithstanding the
--------------------------------------
foregoing, no amendment to any provision of the Plan that would affect (1)
the amount and price of Common Shares subject to NQSOs to be awarded to
Outside Directors, (2) the timing of such grants to Outside Directors, or
(3) the formula, if any, that determines the amount, price, and timing of
NQSO grants to Outside Directors, shall be made more than once every six
months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act, or the rules promulgated thereunder.
Notwithstanding the foregoing, no such suspension, discontinuance or
amendment shall terminate or affect the continued existence of rights created
under Awards issued and outstanding or materially impair the rights of any
holder of an outstanding Award without the consent of such holder.
SECTION 14
TERMINATION OF PLAN
-------------------
Unless earlier terminated as provided in the Plan, the Plan and all
authority granted hereunder shall terminate absolutely at 12:00 midnight on May
31, 2005, which date is within 10 years after the date the Plan was adopted by
the Board, and no Awards hereunder shall be granted thereafter. Nothing
contained in this Section 14, however, shall terminate or affect the continued
existence of rights created under Awards issued hereunder and outstanding on May
31, 2005 which by their terms extend beyond such date.
SECTION 15
SHAREHOLDER APPROVAL
--------------------
This Plan shall become effective on June 21, 1995 (the date the Plan
was adopted by the Board); provided, however, that if the Plan is not approved
by the shareholders, in the manner described in Section 13(b), within 12 months
after said date, the Plan and all Awards granted hereunder shall be null and
void and no additional Awards shall be granted hereunder.
SECTION 16
MISCELLANEOUS
-------------
(a) GOVERNING LAW. The Plan, and the Option Agreements and Restricted
-------------
Stock Award Agreements (collectively the "Award Agreements") entered into,
and the Awards granted thereunder, shall be governed by the applicable Code
provisions to the maximum extent possible.
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Otherwise, the operation of, and the rights of Grantees under, the Plan,
the Award Agreements, and the Awards shall be governed by applicable
federal law and otherwise by the laws of the state of Delaware.
(b) RIGHTS. Neither the adoption of the Plan nor any action of the
------
Board or the Committee shall be deemed to give any individual any right to
be granted an Award, or any other right hereunder, unless and until the
Committee shall have granted such individual an Award, and then his or her
rights shall be only such as are provided by the Plan and the Award
Agreement.
Any Option under the Plan shall not entitle the holder thereof to any
rights as a shareholder of the Company prior to the exercise of such Option
and the issuance of the Common Shares pursuant thereto. Further,
notwithstanding any provisions of the Plan or any Award Agreement with a
Key Employee, the Company shall have the right, in its discretion, to
retire a Key Employee at any time pursuant to its retirement rules or
otherwise to terminate his or her employment at any time for any reason
whatsoever.
(c) NO OBLIGATION TO EXERCISE OPTION. The granting of an Option shall
--------------------------------
impose no obligation upon a Grantee to exercise such Option.
(d) NON-TRANSFERABILITY. Other than Unrestricted Stock Awards, no
-------------------
Award shall be assignable or transferable by a Grantee otherwise than by
will or by the laws of descent and distribution, and during the lifetime of
the Grantee, any Options or related SARs shall be exercisable only by the
Grantee or by his or her guardian or legal representative. If a Grantee is
married at the time of exercise of an Option and if the Grantee so requests
at the time of exercise, the certificate or certificates issued shall be
registered in the name of the Grantee and the Grantee's spouse, jointly,
with right of survivorship.
(e) WITHHOLDING AND USE OF COMMON SHARES TO SATISFY TAX OBLIGATIONS.
---------------------------------------------------------------
The obligation of the Company to deliver Common Shares or pay cash to a Key
Employee pursuant to any Award under the Plan shall be subject to
applicable federal, state and local tax withholding requirements.
In connection with an Award in the form of Common Shares, subject to
the withholding requirements of applicable federal tax laws, the Committee,
in its discretion (and subject to such withholding rules ("Withholding
Rules") as shall be adopted by the Committee), may permit the Key Employee
to satisfy the minimum required federal withholding tax, in whole or in
part, by electing to
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have the Company withhold (or by returning to the Company) Common Shares,
which shares shall be valued, for this purpose, at their Fair Market Value
on the date of exercise of the Option or the date of vesting in the case of
Restricted Stock (or if later, the date on which the Key Employee
recognizes ordinary income with respect to such Option or Restricted Stock)
(the "Determination Date"); provided, however, that with respect to Key
Employees who are subject to section 16 of the Exchange Act, any such
amount of minimum federal taxes required to be withheld shall be satisfied
by withholding Common Shares. An election to use Common Shares to satisfy
federal tax withholding requirements must be made in compliance with and
subject to the Withholding Rules. The Company may not withhold Common
Shares in excess of the number necessary to satisfy the minimum federal
income tax withholding requirements. In the event Common Shares acquired
under the exercise of an ISO are used to satisfy such withholding
requirement, such Common Shares must have been held by the Key Employee for
a period of not less than the holding period described in section 422(a)(1)
of the Code on the Determination Date, or if such Common Shares were
acquired through the exercise of a NQSO or of an option under a similar
plan, such option must have been granted to the Key Employee at least six
months prior to the Determination Date.
(f) LISTING AND REGISTRATION OF COMMON SHARES. Each Award shall be
-----------------------------------------
subject to the requirement that, if at any time the Committee shall
determine, in its discretion, that the listing, registration or
qualification of the Common Shares covered thereby upon any securities
exchange or under any state or federal law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, the granting of such Award or the purchase or
vesting of Common Shares thereunder, or that action by the Company or by
the Grantee should be taken in order to obtain an exemption from any such
requirement, no such Option may be exercised, in whole or in part, and no
Common Shares shall be delivered pursuant to a Restricted or Unrestricted
Stock Award, unless and until such listing, registration, qualification,
consent, approval, or action shall have been effected, obtained, or taken
under conditions acceptable to the Committee. Without limiting the
generality of the foregoing, each Grantee or his or her legal
representative or beneficiary may also be required to give satisfactory
assurance that Common Shares purchased upon exercise of an Option or
received pursuant to a Restricted or Unrestricted Stock Award are being
purchased for investment and not with a view to distribution, and
certificates representing such Common Shares may be legended accordingly.
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