Exhibit 10.4
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GRC INTERNATIONAL, INC.
CASH COMPENSATION REPLACEMENT PLAN
1. PURPOSE
The loyal and dedicated service of key executives is essential to the
growth and progress of any public company. Accordingly, the Cash Compensation
Replacement Plan (the "Plan") of GRC International, Inc. (the "Company") has
been adopted to better enable the Company to retain and attract qualified key
executives, while reducing the Company's cash outlay for executive compensation.
The Plan is also designed to provide a stronger nexus between the contributions
made to the Company by its key executives and the value of the compensation they
receive.
2. ADMINISTRATION
The Plan will be administered on a calendar quarter basis. The Plan
will be administered by a committee of three or more persons (the "Committee").
Such persons shall not be eligible to participate in the Plan, and will be
appointed by the Board of Directors of the Company. Awards of the Company's
Common Stock, par value $.10 per share ("Stock"), and options to purchase the
Stock ("Options"), and the amount and nature of the Stock and Options so
awarded, will be automatic, as provided in Sections 5 and 6 of the Plan. All
questions of interpretation of the Plan will be determined by the Committee.
Such determinations will be final and binding upon all persons having an
interest in the Plan.
3. PARTICIPATION IN THE PLAN
Employees of the Company (or subsidiaries thereof) who are determined
by the Committee to be "key executives" for the purposes of this Plan, whether
or not such employees are officers of the Company or any subsidiary of the
Company, are eligible to participate in the Plan. A list of such eligible
executives will be established by majority vote of the Committee, with such list
to be revised as necessary. In determining which executives may participate in
the Plan, the Committee may take into account the nature of the services
rendered by such executives, their present and potential contributions to the
Company's success, and such other factors as the Committee in its discretion
deems relevant. Options available under the Plan may be granted to key
executives who have received options under other plans and/or may be eligible to
do so in the future.
4. STOCK SUBJECT TO THE PLAN
4.1. Total Shares Available. Up to four hundred forty thousand
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(440,000) shares (subject to adjustment under Section 8 of the Plan) of Stock
are authorized for issuance under the Plan. Such shares of Stock may be issued
(i) outright, or (ii) upon the exercise of Options. The total number of shares
of Stock awarded under (i) and (ii) shall not exceed 440,000 (subject to
adjustment). The Company may issue authorized but unissued shares of its Stock,
may repurchase shares in the open market or in private transactions, or may
otherwise make a sufficient number of shares available under the Plan. The
Company shall not be required to reserve or otherwise set aside funds or shares
of Stock for the payment of its obligations hereunder. The Company shall make
available as and when required a sufficient number of shares of Stock to meet
the needs of the Plan.
4.2. Unexercised or Expired Options. Upon the expiration or
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termination of any Option under the Plan, the Stock allocable to the unexercised
or surrendered portion of such
FORM 2(e)(3)
Option will revert to the Plan's pool of Stock, and shall be available for other
awards of Stock and Options under the Plan.
5. AWARDS OF STOCK
5.1. Fair Market Value of Stock. For purposes of determining the\
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number of shares of Stock to be awarded with respect to any calendar quarter,
the fair market value of the Stock shall be the average of the high and low sale
prices of the Stock quoted on the New York Stock Exchange Composite Transaction
Reporting System for the Fridays of such quarter ("Quarterly Fair Market
Value"). If such sale prices are not available for any such Friday, then the
average of the high and low sale prices on the next preceding day on which such
sale prices are available shall be used in lieu thereof.
5.2. Election. Quarterly awards of Stock will be made to each
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eligible key executive who has submitted to the Committee at least six (6)
months prior to the end of the calendar quarter in question a written election
to receive Stock in lieu of up to twenty five percent (25%) of salary and up to
one hundred percent (100%) of bonus payable during such quarter. Each such
election shall be effective until revoked by a later written election, but no
such later election shall become effective until the first calendar quarter to
end at least six (6) months after the later election is received by the Company.
The amount of salary and bonus to be applied to Stock awards, in accordance with
a key executive's election, shall be the "Stock Award Compensation".
5.3. Stock Awards and Formula. Shortly after the end of each calendar
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quarter, there shall be awarded to each key executive who has previously
submitted an appropriate election in accordance with Section 5.2 above, the
nearest whole number of shares of Stock which most closely approximates the key
executive's Stock Award Compensation for the quarter in accordance with the
following formula:
[1.25] X [Key Executive's Stock Award Compensation for the Quarter] = Number
- ------------------------------------------------------------------- of
Quarterly Fair Market Value Shares of Stock
6. Payment of Tax Withholding Obligations. The amount required to
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be withheld under applicable income tax laws in connection with any award of
Stock under the Plan shall be paid by the Company's retention of shares from the
shares of Stock to be awarded. Shares of Stock used to make such tax withholding
payments shall be valued at the average of the high and low sale prices of the
Stock quoted on the New York Stock Exchange Composite Transaction Reporting
System on the date of award (or if unavailable on such date, on the next
preceding trading date), and the number of shares to be required for payments
shall be rounded up or down to the nearest whole share so that no cash payment
to the Company shall be required by reason of any fractional amount.
6. AWARDS OF OPTIONS
All Options awarded under the Plan will be "non-statutory options,"
and therefore are not entitled to special tax treatment under Section 422 of the
Internal Revenue Code of 1986, as it may be amended from time to time (the
"Code"). Each Option awarded under the Plan will be evidenced by a written
agreement in such form as the Committee may from time to time approve,
consistent with and subject to the following terms and conditions:
6.1. Exercise Price of Options. The exercise price of Options to be
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awarded with respect to any calendar quarter shall be twenty five percent (25%)
of the Quarterly Fair Market Value for such quarter.
6.2. Election. Quarterly awards of Options will be made to each
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eligible key executive who has submitted to the Committee at least six (6)
months prior to the end of the calendar quarter in question a written election
to receive Options in lieu of up to twenty five
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percent (25%) of salary and up to one hundred percent (100%) of bonus payable
during such quarter. Each such election shall be effective until revoked by a
later written election, but no such later election shall become effective until
the first calendar quarter to end at least six (6) months after the later
election is received by the Company. The amount of salary and bonus to be
applied to Option awards, in accordance with a key executive's election, shall
be the "Option Award Compensation".
6.3. Option Awards and Formula. As of the end of each calendar
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quarter, there shall be awarded to each key executive who has previously
submitted an appropriate election in accordance with Section 6.2 above, the
nearest whole number of Options which most closely approximates the key
executive's Option Award Compensation for the quarter in accordance with the
following formula:
[1.25] X [Key Executive's Option Award Compensation for the Quarter] = Number
- -------------------------------------------------------------------- of Options
(Quarterly Fair Market Value) Minus (Exercise Price of Options)
6.4. Period of Option. Options awarded under the Plan become
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exercisable in increments. Eighty percent (80%) of each Option is exercisable
immediately; ten percent (10%) of each Option shall become exercisable on or
after the second anniversary of the date on which it was awarded; five percent
(5%) of each Option shall become exercisable on or after the third anniversary
of such date; and five percent (5%) of each Option shall become exercisable on
or after the fourth anniversary of such date; provided, however, that any Option
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awarded pursuant to the Plan will become exercisable in full upon the death or
disability of the key executive.
6.5. Exercise of Options.
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(a) To exercise an Option in whole or in part, an Optionee shall
give written notice of exercise to the Company's Stock Option Administrator
specifying the number of shares as to which the Option is being exercised,
accompanied by payment in full of the Option Price for such shares either in
cash or in such other consideration as approved by the Committee in its sole
discretion including, but not limited to, (i) shares of previously owned Common
Stock which, if acquired by exercise of an option, have been held by the
Optionee for at least six (6) months, or (ii) in the event of hardship and with
the advance approval of the Committee, the Company's retention of shares of
Common Stock otherwise issuable to the Optionee upon exercise. Shares of Stock
used to make payments under (i) and (ii) shall be valued at the average of the
high and low sale prices of the Stock quoted on the New York Stock Exchange
Composite Transaction Reporting System on the date such notice is received by
the Stock Option Administrator (or if unavailable on such date, on the next
preceding trading date), and the number of shares to be required for payments
under (I) or (ii) shall be rounded up or down to the nearest whole share so that
no cash payment shall be required by reason of any fractional amount.
(b) Notwithstanding any other provision in this Plan to the
contrary, no Option may be exercised at a time or in a manner which could result
in the loss of any tax deduction for the Company under Section 162(m) of the
Code.
6.6. Elections to Pay Withholding Taxes. Any key executive may pay
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the amount of any federal, state or local taxes required by law to be withheld
in connection with the exercise of an Option, as well as any additional taxes on
the exercise up to the key executive's marginal rate, either in cash or in such
other consideration as approved by the Committee in its sole discretion
including, but not limited to (i) shares of previously owned Stock, or (ii) the
Company's retention of shares of Stock otherwise issuable to the key executive
upon exercise; provided that only the amount of taxes required to be withheld by
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law may be paid pursuant to (ii). Shares of Stock used to make payments under
(i) and (ii) shall be valued at the average of
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the high and low sale prices of the Stock quoted on the New York Stock Exchange
Composite Transaction Reporting System on the date the exercise notice is
received by the Company's Stock Option Administrator, and the number of shares
to be required for payments under (i) or (ii) shall be rounded up or down to the
nearest whole share so that no cash payment shall be required by reason of any
fractional amount.
6.7. Termination of Options.
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(a) Options awarded pursuant to the Plan may not be exercised
after the third anniversary of a key executive's termination as an employee for
any reason, including, but not limited to, such key executive's resignation or
voluntary departure from the Company, involuntary termination by the Company of
such key executive's employment, or termination of employment by reason of
death, disability or retirement. Any Options which have not been exercised on or
before such third anniversary shall thereupon expire, except as provided in
subsection (b) below.
(b) Any Option granted a key executive under the Plan and
unexercised, in whole or in part, on the date of his death may be exercised by
the personal representative of the deceased key executive's estate, or by any
heir, devisee, or other taker who, by will or operation of law, is entitled to
said Option or any portion thereof. In each such case, such Option(s) may be
exercised at any time on or before the third anniversary of the earlier of the
key executive's termination of employment or death, as provided in subsection
(a) above.
(c) Options awarded pursuant to the Plan shall have no stated or
other expiration date except as provide in this Section 6.7. Such Options are
not forfeitable in the event of termination of employment or otherwise.
6.8. No Shareholder Rights By Reason of Options. A key executive
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shall not have any rights whatsoever as a shareholder with respect to any
unexercised Option until the Option has been duly exercised in accordance with
the procedures approved from time to time by the Committee. No adjustment will
be made for dividends or other rights with respect to which the record date
occurs prior to the date the Option has been duly exercised.
6.9. Options Not Assignable Or Transferable. Options awarded under
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the Plan are not assignable or transferable other than by will or by the laws of
intestate succession. During the lifetime of a key executive, Options awarded
under the Plan will be exercisable only by that key executive.
7. LIMITATION OF RIGHTS
7.1. No Right to Continue as an Employee. Neither the Plan, the
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awarding of any Stock or Option, nor any other action taken pursuant to the Plan
constitutes or is evidence of any agreement or understanding, express or
implied, that the Company will retain a key executive for any period of time or
at any particular rate of compensation.
7.2. No Rights to Receive Stock or Options After Eligibility Ceases.
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A key executive has no rights to receive Stock or Options under the Plan, and
will not receive any Stock or Options, with respect to any calendar quarter, or
part thereof, in which he or she is no longer considered by the Committee to be
a "key executive".
7.3. Limitation on Rights of Optionee. Except as expressly provided
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in Section 8, an Optionee shall have no rights by reason of the issuance by the
Company to any other person of (i) shares of Stock pursuant to this Plan, (ii)
additional shares of Stock, (iii) any other security or debenture convertible
into Stock, (iv) or any other equity security, including issuance pursuant to a
plan of merger, consolidation, or statutory share exchange, and no adjustment.
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by reason thereof shall be made with respect to the number of shares of Stock
subject to an Option or the exercise price.
7.4. Rights of the Company. The grant of an Option pursuant to the
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Plan shall not affect in any way the right or power of the Company to issue
additional shares of Stock or other securities; to make adjustments,
reclassifications, reorganizations or changes in its capital or business
structure; to participate in a merger, consolidation, or share exchange with
another corporation; or to dissolve, liquidate, or sell or transfer all or any
part of its business or assets.
8. ADJUSTMENTS
In the event any change is made to the Stock by reason of merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or
otherwise, including but not limited to any change whereby the Stock is
converted into or exchanged for another class of shares or shares of another
entity, appropriate and comparable adjustments will be made to the number and
kind of shares subject to the Plan, and to the number and kind of shares and
price per share of Stock subject to outstanding Options issued pursuant to the
Plan, and to the prices of Stock used in calculating the Quarterly Fair Market
Value of the Stock. All such adjustments will be made in such a manner as
avoids dilution or enlargement of the rights of key executives under the Plan.
9. AMENDMENT OF THE PLAN
The Board of Directors of the Company may suspend or terminate the
Plan or revise or amend it in any respect whatsoever; provided that, without
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approval of the shareholders of the Company, no revision or amendment may change
the number of shares subject to the Plan (except as provided in Section 8 of the
Plan) or materially increase the benefits accruing to participants under the
Plan, and provided further that no revision or amendment or termination shall,
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without the consent of the affected key executive(s), impair the rights of any
key executive under any Option previously awarded.
10. LEGAL RESTRICTIONS
The Company will not be obligated to issue shares of Stock if counsel
to the Company determines that such issuance would violate any law or regulation
of any governmental authority or any agreement between the Company and any
national securities exchange upon which the Stock is listed. In connection with
any stock issuance or transfer, the person acquiring the shares shall, if
requested by the Company, give assurances satisfactory to counsel to the Company
regarding such matters as the Company may deem desirable to assure compliance
with all legal requirements. The Company shall in no event be obliged to take
any action in order to cause the exercise of any Option.
11. GOVERNING LAW
The Plan will be governed, and its provisions construed, in accordance
with the laws of the State of Delaware and applicable federal law, without
regard to conflicts of law.
As amended, effective July 1, 1996
Note: Amendments needing shareholder approval are: (i) addition of stock
component and conditional grants of stock, (ii) deletion of expiration date of
the plan.
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