EXHIBIT 10.11
INTERNETWORK EXPERTS, INC.
INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE AUGUST 1, 2003)
INTERNETWORK EXPERTS, INC.
INCENTIVE PLAN
SECTION 1.
GENERAL PROVISIONS RELATING TO
PLAN GOVERNANCE, COVERAGE AND BENEFITS
1.1 PURPOSE
This Internetwork Experts Incentive Plan as amended and restated
effective August 1, 2003 (the "PLAN") amends and restates the Internetwork
Experts, Inc. 2000 Stock Incentive Plan (the "PRIOR PLAN") to (a) change the
name of the Plan to "Internetwork Experts, Inc. Incentive Plan," (b) modify Plan
language to accommodate regulatory and policy changes, (c) increase the number
of shares of Common Stock available for Incentive Awards under the Plan from
nine million (9,000,000) shares to ten million (10,000,000) Shares, and (d) make
certain other changes as provided herein.
The purpose of the Plan is to foster and promote the long-term
financial success of Internetwork Experts, Inc. (the "COMPANY") and its
Subsidiaries and to increase stockholder value by: (a) encouraging the
commitment of selected key Employees, Consultants and Outside Directors, (b)
motivating superior performance of key Employees, Consultants and Outside
Directors by means of long-term performance related incentives, (c) encouraging
and providing key Employees, Consultants and Outside Directors with a program
for obtaining ownership interests in the Company which link and align their
personal interests to those of the Company's stockholders, (d) attracting and
retaining key Employees, Consultants and Outside Directors by providing
competitive incentive compensation opportunities, and (e) enabling key
Employees, Consultants and Outside Directors to share in the long-term growth
and success of the Company.
The Plan provides for payment of various forms of incentive
compensation. It is not intended to be a plan that is subject to the Employee
Retirement Income Security Act of 1974, as amended (ERISA). The Plan will be
interpreted, construed and administered consistent with its status as a plan
that is not subject to ERISA.
The Effective Date of the Prior Plan is July 1, 2000. The term
EFFECTIVE DATE as used herein shall mean July 1, 2000. Subject to approval by
the Company's stockholders pursuant to Section 7.1, the Plan will be amended and
restated effective as of July 1, 2003. The Plan shall continue from the
Effective Date, and will remain in effect, subject to the right of the Board to
amend or terminate the Plan at any time pursuant to Section 7.7, until all
Shares subject to the Plan have been purchased or acquired according to its
provisions. However, in no event may an Incentive Award be granted under the
Plan after the expiration of ten (10) years from the Effective Date.
1.2 DEFINITIONS
The following terms shall have the meanings set forth below:
(a) APPRECIATION. The difference between the option exercise
price per share of the Nonstatutory Stock Option to which a Tandem SAR
relates and the Fair Market Value of a share of Common Stock on the
date of exercise of the Tandem SAR.
(b) AUTHORIZED OFFICER. The Chairman of the Board, the CEO or
any other senior officer of the Company to whom either of them delegate
the authority to execute any Incentive
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Agreement for and on behalf of the Company. No officer or director
shall be an Authorized Officer with respect to any Incentive Agreement
for himself.
(c) BOARD. The Board of Directors of the Company.
(d) CAUSE. When used in connection with the termination of a
Grantee's Employment, shall mean the termination of the Grantee's
Employment by the Company or any Subsidiary by reason of (i) the
conviction of the Grantee by a court of competent jurisdiction as to
which no further appeal can be taken of a crime involving moral
turpitude or a felony; (ii) the proven commission by the Grantee of a
material act of fraud upon the Company or any Subsidiary, or any
customer or supplier thereof; (iii) the willful and proven
misappropriation of any funds or property of the Company or any
Subsidiary, or any customer or supplier thereof; (iv) the willful,
continued and unreasonable failure by the Grantee to perform the
material duties assigned to him which is not cured to the reasonable
satisfaction of the Company within 30 days after written notice of such
failure is provided to Grantee by the Board or a designated officer of
the Company or a Subsidiary; (v) the knowing engagement by the Grantee
in any direct and material conflict of interest with the Company or any
Subsidiary without compliance with the Company's or Subsidiary's
conflict of interest policy, if any, then in effect; or (vi) the
knowing engagement by the Grantee, without the written approval of the
Board, in any material activity which competes with the business of the
Company or any Subsidiary or which would result in a material injury to
the business, reputation or goodwill of the Company or any Subsidiary.
(e) CEO. The Chief Executive Officer of the Company.
(f) CHANGE IN CONTROL. Any of the events described in and
subject to Section 6.7.
(g) CODE. The Internal Revenue Code of 1986, as amended, and
the regulations and other authority promulgated thereunder by the
appropriate governmental authority. References herein to any provision
of the Code shall refer to any successor provision thereto.
(h) COMMITTEE. A committee appointed by the Board consisting
of at least one member as appointed by the Board to administer the
Plan. However, if the Company is a Publicly Held Corporation, the Plan
shall be administered by a committee appointed by the Board consisting
of not less than two directors who fulfill the "non-employee director"
requirements of Rule 16b-3 under the Exchange Act and the "outside
director" requirements of Section 162(m) of the Code. In either case,
the Committee may be the Compensation Committee of the Board, or any
subcommittee of the Compensation Committee, provided that the members
of the Committee satisfy the requirements of the previous provisions of
this paragraph.
The Board shall have the power to fill vacancies on the
Committee arising by resignation, death, removal or otherwise. The
Board, in its sole discretion, may bifurcate the powers and duties of
the Committee among one or more separate committees, or retain all
powers and duties of the Committee in a single Committee. The members
of the Committee shall serve at the discretion of the Board.
Notwithstanding the preceding paragraphs of this Section
1.2(h), the term "Committee" as used in the Plan with respect to any
Incentive Award for an Outside Director shall refer to the entire
Board. In the case of an Incentive Award for an Outside Director, the
Board shall have all the powers and responsibilities of the Committee
hereunder as to such Incentive Award, and any actions as to such
Incentive Award may be acted upon only by the Board (unless it
otherwise
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designates in its discretion). When the Board exercises its authority
to act in the capacity as the Committee hereunder with respect to an
Incentive Award for an Outside Director, it shall so designate with
respect to any action that it undertakes in its capacity as the
Committee.
(i) COMMON STOCK. The common stock of the Company, $.01 par
value per share, and any class of common stock into which such common
shares may hereafter be converted, reclassified or recapitalized.
(j) COMPANY. Internetwork Experts, Inc., a corporation
organized under the laws of the State of Delaware and any successor in
interest thereto.
(k) CONSULTANT. An independent agent, consultant, attorney, an
individual who has agreed to become an Employee within the next six
months, or any other individual who is not an Outside Director or
employee of the Company (or any Parent or Subsidiary) and who, in the
opinion of the Committee, is in a position to contribute to the growth
or financial success of the Company (or any Parent or Subsidiary), (ii)
is a natural person and (iii) provides bona fide services to the
Company (or any Parent or Subsidiary), which services are not in
connection with the offer or sale of securities in a capital raising
transaction, and do not directly or indirectly promote or maintain a
market for the Company's securities.
(l) COVERED EMPLOYEE. A named executive officer who is one of
the group of covered employees, as defined in Section 162(m) of the
Code and Treasury Regulation Section 1.162-27(c) (or its successor),
during any such period that the Company is a Publicly Held Corporation.
(m) DEFERRED STOCK. Shares of Common Stock to be issued or
transferred to a Grantee under an Other Stock-Based Award granted
pursuant to Section 5 at the end of a specified deferral period, as set
forth in the Incentive Agreement pertaining thereto.
(n) DISABILITY. As determined by the Committee in its
discretion exercised in good faith, a physical or mental condition of
the Employee that would entitle him to payment of disability income
payments under the Company's long term disability insurance policy or
plan for employees, as then effective, if any; or in the event that the
Grantee is not covered, for whatever reason, under the Company's
long-term disability insurance policy or plan, "Disability" means a
permanent and total disability as defined in Section 22(e)(3) of the
Code. A determination of Disability may be made by a physician selected
or approved by the Committee and, in this respect, the Grantee shall
submit to any reasonable examination by such physician upon request.
(o) EMPLOYEE. Any employee of the Company (or any Parent or
Subsidiary) within the meaning of Section 3401(c) of the Code who, in
the opinion of the Committee, is in a position to contribute to the
growth, development or financial success of the Company (or any Parent
or Subsidiary), including, without limitation, officers who are members
of the Board.
(p) EMPLOYMENT. Employment by the Company (or any Parent or
Subsidiary), or by any corporation issuing or assuming an Incentive
Award in any transaction described in Section 424(a) of the Code, or by
a parent corporation or a subsidiary corporation of such corporation
issuing or assuming such Incentive Award, as the parent-subsidiary
relationship shall be determined at the time of the corporate action
described in Section 424(a) of the Code. In this regard, neither the
transfer of a Grantee from Employment by the Company to Employment by
any Parent or Subsidiary, nor the transfer of a Grantee from Employment
by any Parent or Subsidiary to Employment by the Company, shall be
deemed to be a termination of Employment
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of the Grantee. Moreover, the Employment of a Grantee shall not be
deemed to have been terminated because of an approved leave of absence
from active Employment on account of temporary illness, authorized
vacation or granted for reasons of professional advancement, education,
health, or government service, or military leave, or during any period
required to be treated as a leave of absence by virtue of any
applicable statute, Company personnel policy or agreement. Whether an
authorized leave of absence shall constitute termination of Employment
hereunder shall be determined by the Committee in its discretion.
Unless otherwise provided in the Incentive Agreement, the term
"Employment" for purposes of the Plan is also defined to include (i)
compensatory or advisory services performed by a Consultant for the
Company (or any Parent or Subsidiary) and (ii) membership on the Board
by an Outside Director.
(q) EXCHANGE ACT. The Securities Exchange Act of 1934, as
amended.
(r) FAIR MARKET VALUE. If the Company is not a Publicly Held
Corporation at the time a determination of the Fair Market Value of the
Common Stock is required to be made hereunder, the determination of
Fair Market Value for purposes of the Plan shall be made by the
Committee in its discretion. In this respect, the Committee may rely on
such financial data, appraisals, valuations, experts, and other
sources, in its discretion, as it deems advisable under the
circumstances.
If the Company is a Publicly Held Corporation, the Fair Market
Value of one share of Common Stock on the date in question is deemed to
be (i) the closing sales price on the immediately preceding business
day of a share of Common Stock as reported on the New York Stock
Exchange or other principal securities exchange on which Shares are
then listed or admitted to trading, or (ii) if not so reported, the
average of the closing bid and asked prices for a Share on the
immediately preceding business day as quoted on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ"), or (iii) if not quoted on NASDAQ, the average of the
closing bid and asked prices for a Share as quoted by the National
Quotation Bureau's "Pink Sheets" or the National Association of
Securities Dealers' OTC Bulletin Board System. If there was no public
trade of Common Stock on the date in question, Fair Market Value shall
be determined by reference to the last preceding date on which such a
trade was so reported.
(s) GRANTEE. Any Employee, Consultant or Outside Director who
is granted an Incentive Award under the Plan.
(t) IMMEDIATE FAMILY. With respect to a Grantee, the Grantee's
child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships.
(u) INCENTIVE AWARD. A grant of an award under the Plan to a
Grantee, including any Nonstatutory Stock Option, Incentive Stock
Option, Reload Options, Stock Appreciation Right, Restricted Stock
Award, Performance Unit, Performance Share, or Other Stock-Based Award,
as well as any Supplemental Payment.
(v) INCENTIVE AGREEMENT. The written agreement entered into
between the Company and the Grantee setting forth the terms and
conditions pursuant to which an Incentive Award is granted under the
Plan, as such agreement is further defined in Section 6.1(a).
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(w) INCENTIVE STOCK OPTION. A Stock Option granted by the
Committee to an Employee under Section 2 which is designated by the
Committee as an Incentive Stock Option and intended to qualify as an
Incentive Stock Option under Section 422 of the Code.
(x) INDEPENDENT SAR. A Stock Appreciation Right described in
Section 2.5.
(y) INSIDER. If the Company is a Publicly Held Corporation, an
individual who is, on the relevant date, an officer, director or ten
percent (10%) beneficial owner of any class of the Company's equity
securities that is registered pursuant to Section 12 of the Exchange
Act, all as defined under Section 16 of the Exchange Act.
(z) NONSTATUTORY STOCK OPTION. A Stock Option granted by the
Committee to a Grantee under Section 2 that is not designated by the
Committee as an Incentive Stock Option.
(aa) OPTION PRICE. The exercise price at which a Share may be
purchased by the Grantee of a Stock Option.
(bb) OTHER STOCK-BASED AWARD. An award granted by the
Committee to a Grantee under Section 5.1 that is valued in whole or in
part by reference to, or is otherwise based upon, Common Stock.
(cc) OUTSIDE DIRECTOR. A member of the Board who is not, at
the time of grant of an Incentive Award, an employee of the Company or
any Parent or Subsidiary.
(dd) PARENT. Any corporation (whether now or hereafter
existing) which constitutes a "parent" of the Company, as defined in
Section 424(e) of the Code. .
(ee) PERFORMANCE-BASED AWARDS. An award granted by the
Committee to the Grantee under Section 4 which may include Performance
Shares or Performance Units.
(ff) PERFORMANCE-BASED EXCEPTION. The performance-based
exception from the tax deductibility limitations of Section 162(m) of
the Code, as prescribed in Code Section 162(m) and Treasury Regulation
Section 1.162-27(e) (or its successor), which is applicable during such
period that the Company is a Publicly Held Corporation.
(gg) PERFORMANCE PERIOD. A period of time determined by the
Committee and set out in the Incentive Agreement over which performance
is measured for the purpose of determining a Grantee's right to and the
payment value of any Performance Unit, Performance Share or Other
Stock-Based Award.
(hh) PERFORMANCE SHARE OR PERFORMANCE UNIT. An Incentive Award
representing a contingent right to receive cash or shares of Common
Stock (which may be Restricted Stock) at the end of a Performance
Period and which, in the case of Performance Shares, is denominated in
Common Stock, and, in the case of Performance Units, is denominated in
cash values.
(ii) PLAN. Internetwork Experts, Inc. Incentive Plan, as set
forth herein and as it may be amended from time to time.
(jj) PUBLICLY HELD CORPORATION. A corporation issuing any
class of common equity securities required to be registered under
Section 12 of the Exchange Act.
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(kk) RESTRICTED STOCK. Shares of Common Stock issued or
transferred to a Grantee pursuant to Section 3.
(ll) RESTRICTED STOCK AWARD. An authorization by the Committee
to issue or transfer Restricted Stock to a Grantee.
(mm) RESTRICTION PERIOD. The period of time determined by the
Committee and set forth in the Incentive Agreement during which the
transfer of Restricted Stock by the Grantee is restricted.
(nn) RETIREMENT. The voluntary termination of Employment from
the Company or any Parent or Subsidiary constituting retirement for age
on any date after the Employee attains the normal retirement age of 65
years, or such other age as may be designated by the Committee in the
Employee's Incentive Agreement.
(oo) SHARE. A share of the Common Stock of the Company.
(pp) SHARE POOL. The number of shares authorized for issuance
under Section 1.4, as adjusted for awards and payouts under Section 1.5
and as adjusted for changes in corporate capitalization under Section
6.5.
(qq) SPREAD. The difference between the exercise price per
Share specified in any Independent SAR grant and the Fair Market Value
of a Share on the date of exercise of the Independent SAR.
(rr) STOCK APPRECIATION RIGHT OR SAR. A Tandem SAR described
in Section 2.4 or an Independent SAR described in Section 2.5.
(ss) STOCK OPTION OR OPTION. Pursuant to Section 2, (i) an
Incentive Stock Option granted to an Employee, or (ii) a Nonstatutory
Stock Option granted to an Employee, Consultant or Outside Director,
whereunder such option the Grantee has the right to purchase Shares of
Common Stock. In accordance with Section 422 of the Code, only an
Employee may be granted an Incentive Stock Option.
(tt) SUBSIDIARY. Any corporation (whether now or hereafter
existing) which constitutes a "subsidiary" of the Company, as defined
in Section 424(f) of the Code.
(uu) SUPPLEMENTAL PAYMENT. Any amount, as described in
Sections 2.7, 3.4 and/or 4.2, that is dedicated to payment of income
taxes which are payable by the Grantee resulting from an Incentive
Award.
(vv) TANDEM SAR. A Stock Appreciation Right that is granted in
connection with a related Stock Option pursuant to Section 2.4, the
exercise of which shall require forfeiture of the right to purchase a
Share under the related Stock Option (and when a Share is purchased
under the Stock Option, the Tandem SAR shall similarly be canceled).
1.3 PLAN ADMINISTRATION
(a) AUTHORITY OF THE COMMITTEE. Except as may be limited by
law and subject to the provisions herein, the Committee shall have full
power to (i) select Grantees who shall
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participate in the Plan; (ii) determine the sizes, duration and types
of Incentive Awards; (iii) determine the terms and conditions of
Incentive Awards and Incentive Agreements; (iv) determine whether any
Shares subject to Incentive Awards will be subject to any restrictions
on transfer; (v) construe and interpret the Plan and any Incentive
Agreement or other agreement entered into under the Plan; and (vi)
establish, amend, or waive rules for the Plan's administration.
Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan, including
without limitation, correcting any defect, supplying any omission or
reconciling any inconsistency in the Plan or any Incentive Agreement.
The determinations of the Committee shall be final and binding.
(b) MEETINGS. The Committee shall designate a chairman from
among its members who shall preside at all of its meetings, and shall
designate a secretary, without regard to whether that person is a
member of the Committee, who shall keep the minutes of the proceedings
and all records, documents, and data pertaining to its administration
of the Plan. Meetings shall be held at such times and places as shall
be determined by the Committee and the Committee may hold telephonic
meetings. The Committee may take any action otherwise proper under the
Plan by the affirmative vote, taken with or without a meeting, of a
majority of its members. The Committee may authorize any one or more of
their members or any officer of the Company to execute and deliver
documents on behalf of the Committee.
(c) DECISIONS BINDING. All determinations and decisions made
by the Committee shall be made in its discretion pursuant to the
provisions of the Plan, and shall be final, conclusive and binding on
all persons including the Company, its shareholders, Employees,
Grantees, and their estates and beneficiaries. The Committee's
decisions and determinations with respect to any Incentive Award need
not be uniform and may be made selectively among Incentive Awards and
Grantees, whether or not such Incentive Awards are similar or such
Grantees are similarly situated.
(d) MODIFICATION OF OUTSTANDING INCENTIVE AWARDS. Subject to
the stockholder approval requirements of Section 7.7 if applicable, the
Committee may, in its discretion, provide for the extension of the
exercisability of an Incentive Award, accelerate the vesting or
exercisability of an Incentive Award, eliminate or make less
restrictive any restrictions contained in an Incentive Award, waive any
restriction or other provisions of an Incentive Award, or otherwise
amend or modify an Incentive Award in any manner that is either (i) not
adverse to the Grantee to whom such Incentive Award was granted or (ii)
consented to by such Grantee. With respect to an Incentive Award that
is an incentive stock option (as described in Section 422 of the Code),
no adjustment to such option shall be made to the extent constituting a
"modification" within the meaning of Section 424(h)(3) of the Code
unless otherwise agreed to by the optionee in writing.
(e) DELEGATION OF AUTHORITY. The Committee may delegate to
designated officers or other employees of the Company any of its duties
and authority under the Plan pursuant to such conditions or limitations
as the Committee may establish from time to time; provided, however, if
the Company is a Publicly Held Corporation, the Committee may not
delegate to any person the authority to (i) grant Incentive Awards, or
(ii) take any action which would contravene the requirements of Rule
16b-3 under the Exchange Act or the Performance-Based Exception under
Section 162(m) of the Code.
(f) EXPENSES OF COMMITTEE. The Committee may employ legal
counsel, including, without limitation, independent legal counsel and
counsel regularly employed by the Company,
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and other agents as the Committee may deem appropriate for the
administration of the Plan. The Committee may rely upon any opinion or
computation received from any such counsel or agent. All expenses
incurred by the Committee in interpreting and administering the Plan,
including, without limitation, meeting expenses and professional fees,
shall be paid by the Company.
(g) INDEMNIFICATION. EACH PERSON WHO IS OR WAS A MEMBER OF THE
COMMITTEE, OR OF THE BOARD, SHALL BE INDEMNIFIED BY THE COMPANY AGAINST
AND FROM ANY DAMAGE, LOSS, LIABILITY, COST AND EXPENSE THAT MAY BE
IMPOSED UPON OR REASONABLY INCURRED BY HIM IN CONNECTION WITH OR
RESULTING FROM ANY CLAIM, ACTION, SUIT, OR PROCEEDING TO WHICH HE MAY
BE A PARTY OR IN WHICH HE MAY BE INVOLVED BY REASON OF ANY ACTION TAKEN
OR FAILURE TO ACT UNDER THE PLAN (INCLUDING SUCH INDEMNIFICATION FOR A
PERSON'S OWN, SOLE, CONCURRENT OR JOINT NEGLIGENCE OR STRICT
LIABILITY), EXCEPT FOR ANY SUCH ACT OR OMISSION CONSTITUTING WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE. SUCH PERSON SHALL BE INDEMNIFIED BY THE
COMPANY FOR ALL AMOUNTS PAID BY HIM IN SETTLEMENT THEREOF, WITH THE
COMPANY'S APPROVAL, OR PAID BY HIM IN SATISFACTION OF ANY JUDGMENT IN
ANY SUCH ACTION, SUIT, OR PROCEEDING AGAINST HIM, PROVIDED HE SHALL
GIVE THE COMPANY AN OPPORTUNITY, AT ITS OWN EXPENSE, TO HANDLE AND
DEFEND THE SAME BEFORE HE UNDERTAKES TO HANDLE AND DEFEND IT ON HIS OWN
BEHALF. THE FOREGOING RIGHT OF INDEMNIFICATION SHALL NOT BE EXCLUSIVE
OF ANY OTHER RIGHTS OF INDEMNIFICATION TO WHICH SUCH PERSONS MAY BE
ENTITLED UNDER THE COMPANY'S ARTICLES OR CERTIFICATE OF INCORPORATION
OR BYLAWS, AS A MATTER OF LAW, OR OTHERWISE, OR ANY POWER THAT THE
COMPANY MAY HAVE TO INDEMNIFY THEM OR HOLD THEM HARMLESS.
1.4 SHARES OF COMMON STOCK AVAILABLE FOR INCENTIVE AWARDS
Subject to adjustment under Section 6.5, there shall be available for
Incentive Awards that are granted wholly or partly in Common Stock (including
rights or Options that may be exercised for or settled in Common Stock) ten
million (10,000,000) Shares of Common Stock. Not more than the total number of
Shares reserved for issuance under the Plan (pursuant to the previous sentence)
shall be available for any one of the following types of grants: Incentive Stock
Options, Nonstatutory Stock Options, SAR, Restricted Stock, a payment of a
Performance Share in Shares, a payout of a Performance Unit in Shares, a payout
of an Other Stock-Based Award in Shares described in Section 5 (which includes,
without limitation, Deferred Stock, purchase rights, shares of Common Stock
awarded which are not subject to any restrictions or conditions, convertible or
exchangeable debentures, other rights convertible into Shares, Incentive Awards
valued by reference to the value of securities of or the performance of a
specified Subsidiary, division or department, and settlement in cancellation of
rights of any person with a vested interest in any other plan, fund, program or
arrangement that is or was sponsored, maintained or participated in by the
Company or any Parent or Subsidiary. The number of Shares of Common Stock that
are the subject of Incentive Awards under this Plan, that are forfeited or
terminated, expire unexercised, are settled in cash in lieu of Common Stock or
in a manner such that all or some of the Shares covered by an Incentive Award
are not issued to a Grantee or are exchanged for Incentive Awards that do not
involve Common Stock, shall again immediately become available for Incentive
Awards hereunder. The Committee may from time to time adopt and observe such
procedures concerning the counting of Shares against the Plan maximum as it may
deem appropriate. The Board and the appropriate officers of the Company shall
from time to time take whatever actions are necessary to
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file any required documents with governmental authorities, stock exchanges and
transaction reporting systems to ensure that Shares are available for issuance
pursuant to Incentive Awards.
During any period that the Company is a Publicly Held Corporation, then
unless and until the Committee determines that a particular Incentive Award
granted to a Covered Employee is not intended to comply with the
Performance-Based Exception, the following rules shall apply to grants of
Incentive Awards to Covered Employees:
(a) Subject to adjustment as provided in Section 6.5, the
maximum aggregate number of Shares of Common Stock (including Stock
Options, SARs, Restricted Stock, Performance Units and Performance
Shares paid out in Shares, or Other Stock-Based Awards paid out in
Shares) that may be granted or that may vest, as applicable, in any
calendar year pursuant to any Incentive Award held by any individual
Covered Employee shall be 10,000,000 Shares.
(b) The maximum aggregate cash payout (including SARs,
Performance Units and Performance Shares paid out in cash, or Other
Stock-Based Awards paid out in cash) with respect to Incentive Awards
granted in any calendar year which may be made to any Covered Employee
shall be Twenty Million dollars ($20,000,000).
(c) With respect to any Stock Option or Stock Appreciation
Right granted to a Covered Employee that is canceled or repriced, the
number of Shares subject to such Stock Option or Stock Appreciation
Right shall continue to count against the maximum number of Shares that
may be the subject of Stock Options or Stock Appreciation Rights
granted to such Covered Employee hereunder and, in this regard, such
maximum number shall be determined in accordance with Section 162(m) of
the Code.
(d) The limitations of subsections (a), (b) and (c) above
shall be construed and administered so as to comply with the
Performance-Based Exception.
1.5 SHARE POOL ADJUSTMENTS FOR AWARDS AND PAYOUTS.
The following Incentive Awards and payouts shall reduce, on a one Share
for one Share basis, the number of Shares authorized for issuance under the
Share Pool:
(a) Stock Option;
(b) SAR (except a Tandem SAR);
(c) Restricted Stock;
(d) A payout of a Performance Share in Shares;
(e) A payout of a Performance Unit in Shares; and
(f) A payout of an Other Stock-Based Award in Shares.
The following transactions shall restore, on a one Share for one Share
basis, the number of Shares authorized for issuance under the Share Pool:
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(a) A Payout of an SAR, Tandem SAR, Restricted Stock Award, or
Other Stock-Based Award in the form of cash;
(b) A cancellation, termination, expiration, forfeiture, or
lapse for any reason (with the exception of the termination of a Tandem
SAR upon exercise of the related Stock Option, or the termination of a
related Stock Option upon exercise of the corresponding Tandem SAR) of
any Shares subject to an Incentive Award; and
(c) Payment of an Option Price with previously acquired Shares
or by withholding Shares which otherwise would be acquired on exercise
(i.e., the Share Pool shall be increased by the number of Shares turned
in or withheld as payment of the Option Price).
1.6 COMMON STOCK AVAILABLE.
The Common Stock available for issuance or transfer under the Plan
shall be made available from Shares now or hereafter (a) held in the treasury of
the Company, (b) authorized but unissued shares, or (c) shares to be purchased
or acquired by the Company. No fractional shares shall be issued under the Plan;
payment for fractional shares shall be made in cash.
1.7 PARTICIPATION
(a) ELIGIBILITY. The Committee shall from time to time
designate those Employees, Consultants and/or Outside Directors, if
any, to be granted Incentive Awards under the Plan, the type of
Incentive Awards granted, the number of Shares, Stock Options, rights
or units, as the case may be, which shall be granted to each such
person, and any other terms or conditions relating to the Incentive
Awards as it may deem appropriate to the extent consistent with the
provisions of the Plan. A Grantee who has been granted an Incentive
Award may, if otherwise eligible, be granted additional Incentive
Awards at any time.
(b) INCENTIVE STOCK OPTION ELIGIBILITY. No Consultant or
Outside Director shall be eligible for the grant of any Incentive Stock
Option. In addition, no Employee shall be eligible for the grant of any
Incentive Stock Option who owns or would own immediately before the
grant of such Incentive Stock Option, directly or indirectly, stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, or any Parent or
Subsidiary. This restriction does not apply if, at the time such
Incentive Stock Option is granted, the Incentive Stock Option exercise
price is at least one hundred and ten percent (110%) of the Fair Market
Value on the date of grant and the Incentive Stock Option by its terms
is not exercisable after the expiration of five (5) years from the date
of grant. For the purpose of the immediately preceding sentence, the
attribution rules of Section 424(d) of the Code shall apply for the
purpose of determining an Employee's percentage ownership in the
Company or any Parent or Subsidiary. This paragraph shall be construed
consistent with the requirements of Section 422 of the Code.
1.8 TYPES OF INCENTIVE AWARDS
The types of Incentive Awards under the Plan are Stock Options, Stock
Appreciation Rights and Supplemental Payments as described in Section 2,
Restricted Stock and Supplemental Payments as described in Section 3,
Performance Units, Performance Shares and Supplemental Payments as described in
Section 4, Other Stock-Based Awards and Supplemental Payments as described in
Section 5, or any combination of the foregoing.
PAGE 10 OF 32
SECTION 2.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 GRANT OF STOCK OPTIONS
The Committee is authorized to grant (a) Nonstatutory Stock Options to
Employees, Consultants and/or Outside Directors and (b) Incentive Stock Options
to Employees only, in accordance with the terms and conditions of the Plan, and
with such additional terms and conditions, not inconsistent with the Plan, as
the Committee shall determine in its discretion. Successive grants may be made
to the same Grantee whether or not any Stock Option previously granted to such
person remains unexercised.
2.2 STOCK OPTION TERMS
(a) WRITTEN AGREEMENT. Each grant of a Stock Option shall be
evidenced by a written Incentive Agreement. Among its other provisions,
each Incentive Agreement shall set forth the extent to which the
Grantee shall have the right to exercise the Stock Option following
termination of the Grantee's Employment. Such provisions shall be
determined in the discretion of the Committee, shall be included in the
Grantee's Incentive Agreement, need not be uniform among all Stock
Options issued pursuant to the Plan.
(b) NUMBER OF SHARES. Each Stock Option shall specify the
number of Shares of Common Stock to which it pertains.
(c) EXERCISE PRICE. The exercise price per Share of Common
Stock under each Stock Option shall be determined by the Committee;
provided, however, that in the case of an Incentive Stock Option, such
exercise price shall not be less than 100% of the Fair Market Value per
Share on the date the Incentive Stock Option is granted (110% for 10%
or greater shareholders pursuant to Section 1.7(b)). To the extent that
the Company is a Publicly Held Corporation and the Stock Option is
intended to qualify for the Performance-Based Exception, the exercise
price shall not be less than 100% of the Fair Market Value per Share on
the date the Stock Option is granted. Each Stock Option shall specify
the method of exercise which shall be consistent with the requirements
of Section 2.3(a).
(d) TERM. In the Incentive Agreement, the Committee shall fix
the term of each Stock Option which shall be not more than ten (10)
years from the date of grant (five years for ISO grants to 10% or
greater shareholders pursuant to Section 1.7(b)). In the event no term
is fixed, such term shall be ten (10) years from the date of grant.
(e) EXERCISE. The Committee shall determine the time or times
at which a Stock Option may be exercised in whole or in part. Each
Stock Option may specify the required period of continuous Employment
and/or the performance objectives to be achieved before the Stock
Option or portion thereof will become exercisable. Each Stock Option,
the exercise of which, or the timing of the exercise of which, is
dependent, in whole or in part, on the achievement of designated
performance objectives, may specify a minimum level of achievement in
respect of the specified performance objectives below which no Stock
Options will be exercisable and a method for determining the number of
Stock Options that will be exercisable if performance is at or above
such minimum but short of full achievement of the performance
objectives. All such terms and conditions shall be set forth in the
Incentive Agreement.
PAGE 11 OF 32
(f) $100,000 ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS.
Notwithstanding any contrary provision in the Plan, to the extent that
the aggregate Fair Market Value (determined as of the time the
Incentive Stock Option is granted) of the Shares of Common Stock with
respect to which Incentive Stock Options are exercisable for the first
time by any Grantee during any single calendar year (under the Plan and
any other stock option plans of the Company and its Subsidiaries or
Parent) exceeds the sum of $100,000, such Incentive Stock Option shall
be treated as a Nonstatutory Stock Option to the extent in excess of
the $100,000 limit, and not an Incentive Stock Option, but all other
terms and provisions of such Stock Option shall remain unchanged. This
paragraph shall be applied by taking Incentive Stock Options into
account in the order in which they were granted and shall be construed
in accordance with Section 422(d) of the Code. In the absence of such
regulations or other authority, or if such regulations or other
authority require or permit a designation of the Options which shall
cease to constitute Incentive Stock Options, then such Incentive Stock
Options, only to the extent of such excess, shall automatically be
deemed to be Nonstatutory Stock Options but all other terms and
conditions of such Incentive Stock Options, and the corresponding
Incentive Agreement, shall remain unchanged.
2.3 STOCK OPTION EXERCISES
(a) METHOD OF EXERCISE AND PAYMENT. Stock Options shall be
exercised by the delivery of a signed written notice of exercise to the
Company as of a date set by the Company in advance of the effective
date of the proposed exercise. The notice shall set forth the number of
Shares with respect to which the Option is to be exercised, accompanied
by full payment for the Shares.
The Option Price upon exercise of any Stock Option shall be
payable to the Company in full either: (i) in cash or its equivalent,
or (ii) subject to prior approval by the Committee in its discretion,
by tendering previously acquired Shares having an aggregate Fair Market
Value at the time of exercise equal to the total Option Price (provided
that the Shares which are tendered must have been held by the Grantee
for at least six (6) months prior to their tender to satisfy the Option
Price), or (iii) subject to prior approval by the Committee in its
discretion, by withholding Shares which otherwise would be acquired on
exercise having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price, or (iv) subject to prior approval by
the Committee in its discretion, by a combination of (i), (ii), and
(iii) above. Any payment in Shares of Common Stock shall be effected by
the delivery of such Shares to the Secretary of the Company, duly
endorsed in blank or accompanied by stock powers duly executed in
blank, together with any other documents as the Secretary or Committee
may require from time to time.
The Committee, in its discretion, also may allow the Option
Price to be paid with such other consideration as shall constitute
lawful consideration for the issuance of Shares (including, without
limitation, effecting a "cashless exercise" with a broker of the
Option), subject to applicable securities law restrictions and tax
withholdings, or by any other means which the Committee determines to
be consistent with the Plan's purpose and applicable law. A "cashless
exercise" of an Option is a procedure by which a broker provides the
funds to the Grantee to effect an Option exercise, to the extent
consented to by the Committee in its discretion. At the direction of
the Grantee, the broker will either (i) sell all of the Shares received
when the Option is exercised and pay the Grantee the proceeds of the
sale (minus the Option Price, withholding taxes and any fees due to the
broker) or (ii) sell enough of the Shares received upon exercise of the
Option to cover the Option Price, withholding taxes and any fees due
the broker and deliver to the Grantee (either directly or through the
Company) a stock certificate for the remaining Shares. Dispositions to
a broker effecting a cashless exercise are not exempt under Section 16
of the
PAGE 12 OF 32
Exchange Act (if the Company is a Publicly Held Corporation). In no
event will the Committee allow the Option Price to be paid with a form
of consideration, including a loan or cashless exercise, if such form
of consideration would violate the Sarbanes-Oxley Act of 2002 as
determined by the Committee in its discretion.
In the discretion of the Committee, an Option may be exercised
by a broker-dealer acting on behalf of the Grantee if (i) the
broker-dealer has received from the Grantee a duly endorsed Incentive
Agreement evidencing such Option and instructions signed by the Grantee
requesting the Company to deliver the shares of Common Stock subject to
such Option to the broker-dealer on behalf of the Grantee and
specifying the account into which such shares should be deposited, (ii)
adequate provision has been made with respect to the payment of any
withholding taxes due upon such exercise, and (iii) the broker-dealer
and the Grantee have otherwise complied with Section 220.3(e)(4) of
Regulation T, 12 CFR Part 220 (or its successor).
As soon as practicable after receipt of a written notification
of exercise and full payment, the Company shall deliver, or cause to be
delivered, to or on behalf of the Grantee, in the name of the Grantee
or other appropriate recipient, Share certificates for the number of
Shares purchased under the Stock Option. Such delivery shall be
effected for all purposes when the Company or a stock transfer agent of
the Company shall have deposited such certificates in the United States
mail, addressed to Grantee or other appropriate recipient.
Subject to Section 6.2, during the lifetime of a Grantee, each
Option granted to him shall be exercisable only by the Grantee (or his
legal guardian in the event of his Disability) or by a broker-dealer
acting on his behalf pursuant to a cashless exercise under the
foregoing provisions of this Section 2.3(a).
(b) RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may
impose such restrictions on any grant of Stock Option or on any Shares
acquired pursuant to the exercise of a Stock Option as it may deem
advisable, including, without limitation, restrictions under (i) any
stockholders' agreement, buy/sell agreement, stockholders' agreement,
right of first refusal, non-competition, and any other agreement
between the Company and any of its securities holders or employees,
(ii) any applicable federal securities laws, (iii) the requirements of
any stock exchange or market upon which such Shares are then listed
and/or traded, or (iv) any blue sky or state securities law applicable
to such Shares. Any certificate issued to evidence Shares issued upon
the exercise of an Incentive Award may bear such legends and statements
as the Committee shall deem advisable to assure compliance with federal
and state laws and regulations.
Any Grantee or other person exercising an Incentive Award may
be required by the Committee to give a written representation that the
Incentive Award and the Shares subject to the Incentive Award will be
acquired for investment and not with a view to public distribution;
provided, however, that the Committee, in its sole discretion, may
release any person receiving an Incentive Award from any such
representations either prior to or subsequent to the exercise of the
Incentive Award.
(c) NOTIFICATION OF DISQUALIFYING DISPOSITION OF SHARES FROM
INCENTIVE STOCK OPTIONS. Notwithstanding any other provision of the
Plan, a Grantee who disposes of Shares of Common Stock acquired upon
the exercise of an Incentive Stock Option by a sale or exchange either
(i) within two (2) years after the date of the grant of the Incentive
Stock Option under which the Shares were acquired or (ii) within one
(1) year after the transfer of such Shares to him pursuant to exercise,
shall promptly notify the Company of such disposition, the amount
realized and his adjusted basis in such Shares.
PAGE 13 OF 32
(d) PROCEEDS OF OPTION EXERCISE. The proceeds received by the
Company from the sale of Shares pursuant to Stock Options exercised
under the Plan shall be used for general corporate purposes.
2.4 STOCK APPRECIATION RIGHTS IN TANDEM WITH NONSTATUTORY STOCK OPTIONS
(a) GRANT. The Committee may, at the time of grant of a
Nonstatutory Stock Option, or at any time thereafter during the term of
the Nonstatutory Stock Option, grant Stock Appreciation Rights with
respect to all or any portion of the Shares of Common Stock covered by
such Nonstatutory Stock Option. A Stock Appreciation Right in tandem
with a Nonstatutory Stock Option is referred to herein as a "TANDEM
SAR."
(b) GENERAL PROVISIONS. The terms and conditions of each
Tandem SAR shall be evidenced by an Incentive Agreement. The Option
Price per Share of a Tandem SAR shall be fixed in the Incentive
Agreement and shall not be less than one hundred percent (100%) of the
Fair Market Value of a Share on the grant date of the Nonstatutory
Stock Option to which it relates.
(c) EXERCISE. A Tandem SAR may be exercised at any time the
Nonstatutory Stock Option to which it relates is then exercisable, but
only to the extent such Nonstatutory Stock Option is exercisable, and
shall otherwise be subject to the conditions applicable to such
Nonstatutory Stock Option. When a Tandem SAR is exercised, the
Nonstatutory Stock Option to which it relates shall terminate to the
extent of the number of Shares with respect to which the Tandem SAR is
exercised. Similarly, when a Nonstatutory Stock Option is exercised,
the Tandem SARs relating to the Shares covered by such Nonstatutory
Stock Option exercise shall terminate. Any Tandem SAR which is
outstanding on the last day of the term of the related Nonstatutory
Stock Option shall be automatically exercised on such date for cash,
without the need for any action by the Grantee, to the extent of any
Appreciation.
(d) SETTLEMENT. Upon exercise of a Tandem SAR, the holder
shall receive, for each Share with respect to which the Tandem SAR is
exercised, an amount equal to the Appreciation. The Appreciation shall
be payable in cash, Common Stock, or a combination of both, as
specified in the Incentive Agreement (or in the discretion of the
Committee if not so specified). The Appreciation shall be paid within
30 calendar days of the exercise of the Tandem SAR. The number of
Shares of Common Stock which shall be issuable upon exercise of a
Tandem SAR shall be determined by dividing (1) by (2), where (1) is the
number of Shares as to which the Tandem SAR is exercised multiplied by
the Appreciation in such shares and (2) is the Fair Market Value of a
Share on the exercise date.
2.5 STOCK APPRECIATION RIGHTS INDEPENDENT OF NONSTATUTORY STOCK OPTIONS
(a) GRANT. The Committee may grant Stock Appreciation Rights
independent of Nonstatutory Stock Options ("INDEPENDENT SARs").
(b) GENERAL PROVISIONS. The terms and conditions of each
Independent SAR shall be evidenced by an Incentive Agreement. The
exercise price per share of Common Stock shall be not less than one
hundred percent (100%) of the Fair Market Value of a Share of Common
Stock on the date of grant of the Independent SAR. The term of an
Independent SAR shall be determined by the Committee.
PAGE 14 OF 32
(c) EXERCISE. Independent SARs shall be exercisable at such
time and subject to such terms and conditions as the Committee shall
specify in the Incentive Agreement for the Independent SAR grant.
(d) SETTLEMENT. Upon exercise of an Independent SAR, the
holder shall receive, for each Share specified in the Independent SAR
grant, an amount equal to the Spread. The Spread shall be payable in
cash, Common Stock, or a combination of both, in the discretion of the
Committee or as specified in the Incentive Agreement. The Spread shall
be paid within 30 calendar days of the exercise of the Independent SAR.
The number of Shares of Common Stock which shall be issuable upon
exercise of an Independent SAR shall be determined by dividing (1) by
(2), where (1) is the number of Shares as to which the Independent SAR
is exercised multiplied by the Spread in such Shares and (2) is the
Fair Market Value of a Share on the exercise date.
2.6 SUPPLEMENTAL PAYMENT ON EXERCISE OF NONSTATUTORY STOCK OPTIONS OR STOCK
APPRECIATION RIGHTS
The Committee, either at the time of grant or as of the time of
exercise of any Nonstatutory Stock Option or Stock Appreciation Right, may
provide in the Incentive Agreement for a Supplemental Payment by the Company to
the Grantee with respect to the exercise of any Nonstatutory Stock Option or
Stock Appreciation Right. The Supplemental Payment shall be in the amount
specified by the Committee, which amount shall not exceed the amount necessary
to pay the federal and state income tax payable with respect to both the
exercise of the Nonstatutory Stock Option and/or Stock Appreciation Right and
the receipt of the Supplemental Payment, assuming the holder is taxed at either
the maximum effective income tax rate applicable thereto or at a lower tax rate
as deemed appropriate by the Committee. The Committee shall have the discretion
to grant Supplemental Payments that are payable solely in cash or Supplemental
Payments that are payable in cash, Common Stock, or a combination of both, as
determined by the Committee at the time of payment.
SECTION 3.
RESTRICTED STOCK
3.1 AWARD OF RESTRICTED STOCK
(a) GRANT. In consideration of the performance of Employment
by any Grantee who is an Employee, Consultant or Outside Director,
Shares of Restricted Stock may be awarded under the Plan by the
Committee with such restrictions during the Restriction Period as the
Committee may designate in its discretion, any of which restrictions
may differ with respect to each particular Grantee. Restricted Stock
shall be awarded for no additional consideration or such additional
consideration as the Committee may determine, which consideration may
be less than, equal to or more than the Fair Market Value of the shares
of Restricted Stock on the grant date. The terms and conditions of each
grant of Restricted Stock shall be evidenced by an Incentive Agreement.
PAGE 15 OF 32
(b) IMMEDIATE TRANSFER WITHOUT IMMEDIATE DELIVERY OF
RESTRICTED STOCK. Unless otherwise specified in the Grantee's Incentive
Agreement, each Restricted Stock Award shall constitute an immediate
transfer of the record and beneficial ownership of the Shares of
Restricted Stock to the Grantee in consideration of the performance of
services as an Employee, Consultant or Outside Director, as applicable,
entitling such Grantee to all voting and other ownership rights in such
Shares.
As specified in the Incentive Agreement, a Restricted Stock
Award may limit the Grantee's dividend rights during the Restriction
Period in which the shares of Restricted Stock are subject to a
"substantial risk of forfeiture" (within the meaning given to such term
under Code Section 83) and restrictions on transfer. In the Incentive
Agreement, the Committee may apply any restrictions to the dividends
that the Committee deems appropriate. Without limiting the generality
of the preceding sentence, if the grant or vesting of Shares of
Restricted Stock granted to a Covered Employee, if applicable, is
designed to comply with the requirements of the Performance-Based
Exception, the Committee may apply any restrictions it deems
appropriate to the payment of dividends declared with respect to such
Shares of Restricted Stock, such that the dividends and/or the Shares
of Restricted Stock maintain eligibility for the Performance-Based
Exception. In the event that any dividend constitutes a derivative
security or an equity security pursuant to the rules under Section 16
of the Exchange Act, if applicable, such dividend shall be subject to a
vesting period equal to the remaining vesting period of the Shares of
Restricted Stock with respect to which the dividend is paid.
Shares awarded pursuant to a grant of Restricted Stock may be
issued in the name of the Grantee and held, together with a stock power
endorsed in blank, by the Committee or Company (or their delegates) or
in trust or in escrow pursuant to an agreement satisfactory to the
Committee, as determined by the Committee, until such time as the
restrictions on transfer have expired. All such terms and conditions
shall be set forth in the particular Grantee's Incentive Agreement. The
Company or Committee (or their delegates) shall issue to the Grantee a
receipt evidencing the certificates held by it which are registered in
the name of the Grantee.
3.2 RESTRICTIONS
(a) FORFEITURE OF RESTRICTED STOCK. Restricted Stock awarded
to a Grantee may be subject to the following restrictions until the
expiration of the Restriction Period: (i) a restriction that
constitutes a "substantial risk of forfeiture" (as defined in Code
Section 83), or a restriction on transferability; (ii) unless otherwise
specified by the Committee in the Incentive Agreement, the Restricted
Stock that is subject to restrictions which are not satisfied shall be
forfeited and all rights of the Grantee to such Shares shall terminate;
and (iii) any other restrictions that the Committee determines in
advance are appropriate, including, without limitation, rights of
repurchase or first refusal in the Company or provisions subjecting the
Restricted Stock to a continuing substantial risk of forfeiture in the
hands of any transferee. Any such restrictions shall be set forth in
the particular Grantee's Incentive Agreement.
(b) ISSUANCE OF CERTIFICATES. Reasonably promptly after the
date of grant with respect to Shares of Restricted Stock, the Company
shall cause to be issued a stock certificate, registered in the name of
the Grantee to whom such Shares of Restricted Stock were granted,
evidencing such Shares; provided, however, that the Company shall not
cause to be issued such a stock certificate unless it has received a
stock power duly endorsed in blank with respect to such Shares. Each
such stock certificate shall bear the following legend or any other
legend approved by the Company:
PAGE 16 OF 32
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF
STOCK REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS,
TERMS AND CONDITIONS (INCLUDING FORFEITURE AND RESTRICTIONS
AGAINST TRANSFER) CONTAINED IN THE INTERNETWORK EXPERTS, INC.
INCENTIVE PLAN AND AN INCENTIVE AGREEMENT ENTERED INTO BETWEEN
THE REGISTERED OWNER OF SUCH SHARES AND INTERNETWORK EXPERTS,
INC. A COPY OF THE PLAN AND INCENTIVE AGREEMENT ARE ON FILE IN
THE CORPORATE OFFICES OF INTERNETWORK EXPERTS, INC.
Such legend shall not be removed from the certificate evidencing such
Shares of Restricted Stock until such Shares vest pursuant to the terms of the
Incentive Agreement.
(c) REMOVAL OF RESTRICTIONS. The Committee, in its discretion,
shall have the authority to remove any or all of the restrictions on
the Restricted Stock if it determines that, by reason of a change in
applicable law or another change in circumstance arising after the
grant date of the Restricted Stock, such action is appropriate.
3.3 DELIVERY OF SHARES OF COMMON STOCK
Subject to withholding taxes under Section 7.3 and to the terms of the
Incentive Agreement, a stock certificate evidencing the Shares of Restricted
Stock with respect to which the restrictions in the Incentive Agreement have
been satisfied shall be delivered to the Grantee or other appropriate recipient
free of restrictions. Such delivery shall be effected for all purposes when the
Company shall have deposited such certificate in the United States mail,
addressed to the Grantee or other appropriate recipient.
3.4 SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED STOCK
The Committee, either at the time of grant or vesting of Restricted
Stock, may provide for a Supplemental Payment by the Company to the holder in an
amount specified by the Committee, which amount shall not exceed the amount
necessary to pay the federal and state income tax payable with respect to both
the vesting of the Restricted Stock and receipt of the Supplemental Payment,
assuming the Grantee is taxed at either the maximum effective income tax rate
applicable thereto or at a lower tax rate as deemed appropriate by the
Committee. The Committee shall have the discretion to grant Supplemental
Payments that are payable solely in cash or Supplemental Payments that are
payable in cash, Common Stock, or a combination of both, as determined by the
Committee at the time of payment.
SECTION 4.
PERFORMANCE UNITS AND PERFORMANCE SHARES
4.1 PERFORMANCE BASED AWARDS
(a) GRANT. The Committee is authorized to grant
Performance-Based Awards consisting of Performance Units and
Performance Shares to selected Grantees who are Employees, Outside
Directors or Consultants. Each grant of Performance Units and/or
Performance Shares shall be evidenced by an Incentive Agreement in such
amounts and upon such terms as shall be determined by the Committee.
The Committee may make grants of Performance Units or Performance
Shares in such a manner that more than one Performance Period is in
progress concurrently. For each Performance Period, the Committee shall
establish the number of Performance Units or Performance Shares and
their contingent values which may
PAGE 17 OF 32
vary depending on the degree to which performance criteria established
by the Committee are met.
(b) PERFORMANCE CRITERIA. The Committee may establish
performance goals applicable to Performance-Based Awards based upon
criteria in one or more of the following categories: (i) performance of
the Company as a whole, (ii) performance of a segment of the Company's
business, and (iii) individual performance. Performance criteria for
the Company shall relate to the achievement of predetermined financial
objectives for the Company and its Subsidiaries on a consolidated
basis. Performance criteria for a segment of the Company's business
shall relate to the achievement of financial and operating objectives
of the segment for which the participant is accountable. Examples of
performance criteria shall include (but are not limited to) pre-tax or
after-tax profit levels, including: earnings per share, earnings before
interest and taxes, earnings before interest, taxes, depreciation and
amortization, net operating profits after tax, and net income; total
stockholder return; return on assets, equity, capital or investment;
cash flow and cash flow return on investment; economic value added and
economic profit; growth in earnings per share; levels of operating
expense and maintenance expense or measures of customer satisfaction
and customer service as determined from time to time including the
relative improvement therein. Individual performance criteria shall
relate to a participants overall performance, taking into account,
among other measures of performance, the attainment of individual goals
and objectives. The performance goals may differ among participants.
(c) MODIFICATION. If the Committee determines, in its
discretion exercised in good faith, that the established performance
measures or objectives are no longer suitable to the Company's
objectives because of a change in the Company's business, operations,
corporate structure, capital structure, or other conditions the
Committee deems to be appropriate, the Committee may modify the
performance measures and objectives to the extent it considers such
modification to be necessary. The Committee shall not permit any such
modification that would cause the Performance-Based Awards to fail to
qualify for the Performance-Based Exception, if applicable.
(d) PAYMENT. The basis for payment of Performance-Based Awards
for a given Performance Period shall be the achievement of those
performance objectives determined by the Committee at the beginning of
the Performance Period as specified in the Grantee's Incentive
Agreement. If minimum performance is not achieved for a Performance
Period, no payment shall be made and all contingent rights shall cease.
If minimum performance is achieved or exceeded, the number of
Performance-Based Awards may be based on the degree to which actual
performance exceeded the pre-established minimum performance standards.
The amount of payment shall be determined by multiplying the number of
Performance-Based Awards granted at the beginning of the Performance
Period times the final Performance Award value. Payments shall be made,
in the discretion of the Committee as specified in the Incentive
Agreement.
(e) SPECIAL RULE FOR COVERED EMPLOYEES. No later than the
ninetieth (90th) day following the beginning of a Performance Period
(or twenty-five percent (25%) of the Performance Period) the Committee
shall establish performance goals as described in Section 4.1
applicable to Performance-Based Awards awarded to Covered Employees in
such a manner as shall permit payments with respect thereto to qualify
for the Performance-Based Exception, if applicable. If a Performance
Award granted to a Covered Employee is intended to comply with the
Performance-Based Exception, the Committee in establishing
PAGE 18 OF 32
performance goals shall comply with Treasury Regulation Section
l.162-27(e)(2) (or its successor). As soon as practicable following the
Company's determination of the Company's financial results for any
Performance Period, the Committee shall certify in writing: (i) whether
the Company achieved its minimum performance for the objectives for the
Performance Period, (ii) the extent to which the Company achieved its
performance objectives for the Performance Period, (iii) any other
terms that are material to the grant of Performance-Based Awards, and
(iv) the calculation of the payments, if any, to be paid to each
Grantee for the Performance Period.
4.2 SUPPLEMENTAL PAYMENT ON VESTING OF PERFORMANCE UNITS OR PERFORMANCE
SHARES
The Committee, either at the time of grant or at the time of vesting of
Performance Units or Performance Shares, may provide for a Supplemental Payment
by the Company to the Grantee in an amount specified by the Committee, which
amount shall not exceed the amount necessary to pay the federal and state income
tax payable with respect to both the vesting of such Performance Units or
Performance Shares and receipt of the Supplemental Payment, assuming the Grantee
is taxed at either the maximum effective income tax rate applicable thereto or
at a lower tax rate as seemed appropriate by the Committee. The Committee shall
have the discretion to grant Supplemental Payments that are payable in cash,
Common Stock, or a combination of both, as determined by the Committee at the
time of payment.
SECTION 5.
OTHER STOCK-BASED AWARDS
5.1 GRANT OF OTHER STOCK-BASED AWARDS
Other Stock-Based Awards may be awarded by the Committee to selected
Grantees that are denominated or payable in, valued in whole or in part by
reference to, or otherwise related to, Shares of Common Stock, as deemed by the
Committee to be consistent with the purposes of the Plan and the goals of the
Company. Other types of Stock-Based Awards include, without limitation, Deferred
Stock, purchase rights, Shares of Common Stock awarded which are not subject to
any restrictions or conditions, convertible or exchangeable debentures, other
rights convertible into Shares, Incentive Awards valued by reference to the
value of securities of or the performance of a specified Subsidiary, division or
department, and settlement in cancellation of rights of any person with a vested
interest in any other plan, fund, program or arrangement that is or was
sponsored, maintained or participated in by the Company or any Parent or
Subsidiary. As is the case with other Incentive Awards, Other Stock-Based Awards
may be awarded either alone or in addition to or in tandem with any other
Incentive Awards.
5.2 OTHER STOCK-BASED AWARD TERMS
(a) WRITTEN AGREEMENT. The terms and conditions of each grant
of an Other Stock-Based Award shall be evidenced by an Incentive
Agreement.
(b) PURCHASE PRICE. Except to the extent that an Other
Stock-Based Award is granted in substitution for an outstanding
Incentive Award or is delivered upon exercise of a Stock Option, the
amount of consideration required to be received by the Company shall be
either (i) no consideration other than services actually rendered (in
the case of authorized and unissued shares) or to be rendered, or (ii)
in the case of an Other Stock-Based Award in the nature of a purchase
right, consideration (other than services rendered or to be rendered)
at least equal to
PAGE 19 OF 32
50% of the Fair Market Value of the Shares covered by such grant on the
date of grant (or such percentage higher than 50% that is required by
any applicable tax or securities law).
(c) PERFORMANCE CRITERIA AND OTHER TERMS. In its discretion,
the Committee may specify such criteria, periods or goals for vesting
in Other Stock-Based Awards and payment thereof to the Grantee as it
shall determine; and the extent to which such criteria, periods or
goals have been met shall be determined by the Committee. All terms and
conditions of Other Stock-Based Awards shall be determined by the
Committee and set forth in the Incentive Agreement. The Committee may
also provide for a Supplemental Payment similar to such payment as
described in Section 4.2.
(d) PAYMENT. Other Stock-Based Awards may be paid in Shares of
Common Stock or other consideration related to such Shares, in a single
payment or in installments on such dates as determined by the
Committee, all as specified in the Incentive Agreement.
(e) DIVIDENDS. The Grantee of an Other Stock-Based Award shall
be entitled to receive, currently or on a deferred basis, dividends or
dividend equivalents with respect to the number of Shares covered by
the Other Stock-Based Award only to the extent as determined by the
Committee and set forth in the Incentive Agreement. The Committee may
also provide in the Incentive Agreement that such amounts (if any)
shall be deemed to have been reinvested in additional Shares of Common
Stock.
SECTION 6.
PROVISIONS RELATING TO PLAN PARTICIPATION
6.1 PLAN CONDITIONS
(a) INCENTIVE AGREEMENT. Each Grantee to whom an Incentive
Award is granted shall be required to enter into an Incentive Agreement
with the Company, in such a form as is provided by the Committee. The
Incentive Agreement shall contain specific terms as determined by the
Committee, in its discretion, with respect to the Grantee's particular
Incentive Award. Such terms need not be uniform among all Grantees or
any similarly-situated Grantees. The Incentive Agreement may include,
without limitation, vesting, forfeiture and other provisions particular
to the particular Grantee's Incentive Award, as well as, for example,
provisions to the effect that the Grantee (i) shall not disclose any
confidential information acquired during Employment with the Company,
(ii) shall abide by all the terms and conditions of the Plan and such
other terms and conditions as may be imposed by the Committee, (iii)
shall not interfere with the employment or other service of any
employee, (iv) shall not compete with the Company or become involved in
a conflict of interest with the interests of the Company, (v) shall
forfeit an Incentive Award if terminated for Cause, (vi) shall not be
permitted to make an election under Section 83(b) of the Code when
applicable, and (vii) shall be subject to any other agreement between
the Grantee and the Company regarding Shares that may be acquired under
an Incentive Award including, without limitation, a stockholders'
agreement or other agreement restricting the transferability of Shares
by Grantee. An Incentive Agreement shall include such terms and
conditions as are determined by the Committee, in its discretion, to be
appropriate with respect to any individual Grantee. The Incentive
Agreement shall be signed by the Grantee to whom the Incentive Award is
made and by an Authorized Officer.
PAGE 20 OF 32
(b) NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any
instrument executed pursuant to the Plan shall create any Employment
rights (including without limitation, rights to continued Employment)
in any Grantee or affect the right of the Company to terminate the
Employment of any Grantee at any time without regard to the existence
of the Plan.
(c) SECURITIES REQUIREMENTS. The Company shall be under no
obligation to effect the registration pursuant to the Securities Act of
1933 of any Shares of Common Stock to be issued hereunder or to effect
similar compliance under any state laws. Notwithstanding anything
herein to the contrary, the Company shall not be obligated to cause to
be issued or delivered any certificates evidencing Shares pursuant to
the Plan unless and until the Company is advised by its counsel that
the issuance and delivery of such certificates is in compliance with
all applicable laws, regulations of governmental authorities, and the
requirements of any securities exchange on which Shares are traded. The
Committee may require, as a condition of the issuance and delivery of
certificates evidencing Shares of Common Stock pursuant to the terms
hereof, that the recipient of such Shares make such covenants,
agreements and representations, and that such certificates bear such
legends, as the Committee, in its discretion, deems necessary or
desirable.
If the Shares issuable on exercise of an Incentive Award are
not registered under the Securities Act of 1933, the Company may
imprint on the certificate for such Shares the following legend or any
other legend which counsel for the Company considers necessary or
advisable to comply with the Securities Act of 1933:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON RECEIPT BY
THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION, IN FORM AND SUBSTANCE SATISFACTORY TO THE
CORPORATION, THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE
OR TRANSFER.
6.2 TRANSFERABILITY
Incentive Awards granted under the Plan shall not be transferable or
assignable other than: (a) by will or the laws of descent and distribution or
(b) pursuant to a qualified domestic relations order (as defined by Section
414(p) of the Code); provided, however, only with respect to Incentive Awards
consisting of Nonstatutory Stock Options, the Committee may, in its discretion,
authorize all or a portion of the Nonstatutory Stock Options to be granted on
terms which permit transfer by the Grantee to (i) the members of the Grantee's
Immediate Family, (ii) a trust or trusts for the exclusive benefit of such
Immediate Family, (iii) a partnership in which such members of such Immediate
Family are the only partners, or (iv) any other entity owned solely by members
of the Immediate Family; provided that (A) there may be no consideration for any
such transfer, (B) the Incentive Agreement pursuant to which such Nonstatutory
Stock Options are granted must be approved by the Committee, and must expressly
provide for transferability in a manner consistent with this Section 6.2, and
(C) subsequent transfers of transferred Nonstatutory Stock Options shall be
prohibited except in accordance with clauses (a) and (b) (above) of this
sentence. Following any permitted transfer, the Nonstatutory Stock Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that the term "Grantee" shall be deemed
to refer to the transferee. The events of termination of employment, as set out
in Section 6.6 and in the Incentive Agreement, shall continue to be applied with
respect to the
PAGE 21 OF 32
original Grantee, and the Incentive Award shall be exercisable by the transferee
only to the extent, and for the periods, specified in the Incentive Agreement.
Except as may otherwise be permitted under the Code, in the event of a
permitted transfer of a Nonstatutory Stock Option hereunder, the original
Grantee shall remain subject to withholding taxes upon exercise. In addition,
the Company and the Committee shall have no obligation to provide any notices to
any Grantee or transferee thereof, including, for example, notice of the
expiration of an Incentive Award following the original Grantee's termination of
employment.
No transfer by will or by the laws of descent and distribution shall be
effective to bind the Company unless the Committee has been furnished with a
copy of the deceased Grantee's enforceable will or such other evidence as the
Committee deems necessary to establish the validity of the transfer. Any
attempted transfer in violation of this Section 6.2 shall be void and
ineffective. All determinations under this Section 6.2 shall be made by the
Committee in its discretion.
6.3 RIGHTS AS A STOCKHOLDER
(a) NO STOCKHOLDER RIGHTS. Except as otherwise provided in
Section 3.1(b) for grants of Restricted Stock, a Grantee of an
Incentive Award (or a permitted transferee of such Grantee) shall have
no rights as a stockholder with respect to any Shares of Common Stock
until the issuance of a stock certificate for such Shares.
(b) REPRESENTATION OF OWNERSHIP. In the case of the exercise
of an Incentive Award by a person or estate acquiring the right to
exercise such Incentive Award by reason of the death or Disability of a
Grantee, the Committee may require reasonable evidence as to the
ownership of such Incentive Award or the authority of such person and
may require such consents and releases of taxing authorities as the
Committee may deem advisable.
6.4 LISTING AND REGISTRATION OF SHARES OF COMMON STOCK
The exercise of any Incentive Award granted hereunder shall only be
effective at such time as counsel to the Company shall have determined that the
issuance and delivery of Shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authorities and
the requirements of any securities exchange on which Shares of Common Stock are
traded. The Committee may, in its discretion, defer the effectiveness of any
exercise of an Incentive Award in order to allow the issuance of Shares of
Common Stock to be made pursuant to registration or an exemption from
registration or other methods for compliance available under federal or state
securities laws. The Committee shall inform the Grantee in writing of its
decision to defer the effectiveness of the exercise of an Incentive Award.
During the period that the effectiveness of the exercise of an Incentive Award
has been deferred, the Grantee may, by written notice to the Committee, withdraw
such exercise and obtain the refund of any amount paid with respect thereto.
6.5 CHANGE IN STOCK AND ADJUSTMENTS
(a) CHANGES IN LAW OR CIRCUMSTANCES. Subject to Section 6.7
(which only applies in the event of a Change of Control), in the event
of any change in applicable laws or any change in circumstances which
results in or would result in any dilution of the rights granted under
the Plan, or which otherwise warrants equitable adjustment because it
interferes with the intended operation of the Plan, then, if the
Committee should determine, in its absolute discretion, that such
change equitably requires an adjustment in the number or kind of shares
of stock or other
PAGE 22 OF 32
securities or property theretofore subject, or which may become
subject, to issuance or transfer under the Plan or in the terms and
conditions of outstanding Incentive Awards, such adjustment shall be
made in accordance with such determination. Such adjustments may
include changes with respect to (i) the aggregate number of Shares that
may be issued under the Plan, (ii) the number of Shares subject to
Incentive Awards, and (iii) the price per Share for outstanding
Incentive Awards. Any adjustment under this paragraph of an outstanding
Incentive Stock Option shall be made only to the extent not
constituting a "modification" within the meaning of Section 424(h)(3)
of the Code unless otherwise agreed to by the Grantee in writing. The
Committee shall give notice to each applicable Grantee of such
adjustment which shall be effective and binding.
(b) EXERCISE OF CORPORATE POWERS. The existence of the Plan or
outstanding Incentive Awards hereunder shall not affect in any way the
right or power of the Company or its stockholders to make or authorize
any or all adjustments, recapitalization, reorganization or other
changes in the Company's capital structure or its business or any
merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stocks ahead of or affecting
the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding
whether of a similar character or otherwise.
(c) RECAPITALIZATION OF THE COMPANY. Subject to Section 6.7
(which only applies in the event of a Change in Control), if while
there are Incentive Awards outstanding, the Company shall effect any
subdivision or consolidation of Shares of Common Stock or other capital
readjustment, the payment of a stock dividend, stock split, combination
of Shares, recapitalization or other increase or reduction in the
number of Shares outstanding, without receiving compensation therefor
in money, services or property, then the number of Shares available
under the Plan and the number of Incentive Awards which may thereafter
be exercised shall (i) in the event of an increase in the number of
Shares outstanding, be proportionately increased and the Fair Market
Value of the Incentive Awards awarded shall be proportionately reduced;
and (ii) in the event of a reduction in the number of Shares
outstanding, be proportionately reduced, and the Fair Market Value of
the Incentive Awards awarded shall be proportionately increased. The
Committee shall take such action and whatever other action it deems
appropriate, in its discretion, so that the value of each outstanding
Incentive Award to the Grantee shall not be adversely affected by a
corporate event described in this subsection (c).
(d) ISSUE OF COMMON STOCK BY THE COMPANY. Except as
hereinabove expressly provided in this Section 6.5 and subject to
Section 6.7 in the event of a Change in Control, the issue by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon any conversion of shares or
obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of, or Fair Market Value of, any
Incentive Awards then outstanding under previously granted Incentive
Awards; provided, however, in such event, outstanding Shares of
Restricted Stock shall be treated the same as outstanding unrestricted
Shares of Common Stock.
(e) ASSUMPTION UNDER THE PLAN OF OUTSTANDING STOCK OPTIONS.
Notwithstanding any other provision of the Plan, the Committee, in its
absolute discretion, may authorize the assumption and continuation
under the Plan of outstanding and unexercised stock options or other
types of stock-based incentive awards that were granted under a stock
option plan (or other type
PAGE 23 OF 32
of stock incentive plan or agreement) that is or was maintained by a
corporation or other entity that was merged into, consolidated with, or
whose stock or assets were acquired by, the Company as the surviving
corporation. Any such action shall be upon such terms and conditions as
the Committee, in its discretion, may deem appropriate, including
provisions to preserve the holder's rights under the previously granted
and unexercised stock option or other stock-based incentive award, such
as, for example, retaining an existing exercise price under an
outstanding stock option. Any such assumption and continuation of any
such previously granted and unexercised incentive award shall be
treated as an outstanding Incentive Award under the Plan and shall thus
count against the number of Shares reserved for issuance pursuant to
Section 1.4. In addition, any Shares issued by the Company through the
assumption or substitution of outstanding grants from an acquired
company shall reduce the Shares available for grants under Section 1.4.
(f) ASSUMPTION OF INCENTIVE AWARDS BY A SUCCESSOR. Subject to
the accelerated vesting and other provisions of Section 6.7 that apply
in the event of a Change in Control, in the event of a Corporate Event
(defined below), each Grantee shall be entitled to receive, in lieu of
the number of Shares subject to Incentive Awards, such shares of
capital stock or other securities or property as may be issuable or
payable with respect to or in exchange for the number of Shares which
Grantee would have received had he exercised the Incentive Award
immediately prior to such Corporate Event, together with any
adjustments (including, without limitation, adjustments to the Option
Price and the number of Shares issuable on exercise of outstanding
Stock Options). For this purpose, Shares of Restricted Stock shall be
treated the same as unrestricted outstanding Shares of Common Stock. A
"Corporate Event" means any of the following: (i) a dissolution or
liquidation of the Company, (ii) a sale of all or substantially all of
the Company's assets, or (iii) a merger, consolidation or combination
involving the Company (other than a merger, consolidation or
combination (A) in which the Company is the continuing or surviving
corporation and (B) which does not result in the outstanding Shares
being converted into or exchanged for different securities, cash or
other property, or any combination thereof). The Committee shall take
whatever other action it deems appropriate to preserve the rights of
Grantees holding outstanding Incentive Awards.
Notwithstanding the previous paragraph of this Section 6.5(f),
but subject to the accelerated vesting and other provisions of Section
6.7 that apply in the event of a Change in Control, the Committee, in
its discretion, if it determines that such action is in the best
interests of the Company, shall have the right and power to:
(i) cancel, effective immediately prior to the
occurrence of the Corporate Event, each outstanding Incentive
Award (whether or not then exercisable) and, in full
consideration of such cancellation, pay to the Grantee an
amount in cash equal to the excess of (A) the value, as
determined by the Committee, of the property (including cash)
received by the holders of Common Stock as a result of such
Corporate Event over (B) the exercise price of such Incentive
Award, if any; provided, however, this subsection (i) shall be
inapplicable to an Incentive Award granted within six (6)
months before the occurrence of the Corporate Event but only
if the Grantee is an Insider and such disposition is not
exempt under Rule 16b-3 (or other rules preventing liability
of the Insider under Section 16(b) of the Exchange Act) and,
in that event, the provisions hereof shall be applicable to
such Incentive Award after the expiration of six (6) months
from the date of grant; or
(ii) provide for the exchange of each Incentive Award
outstanding immediately prior to such Corporate Event (whether
or not then exercisable) for another
PAGE 24 OF 32
award with respect to the Common Stock or other property for
which such Incentive Award is exchangeable and, incident
thereto, make an equitable adjustment as determined by the
Committee, in its discretion, in the exercise price of the
Incentive Award, if any, or in the number of Shares or amount
of property (including cash) subject to the Incentive Award.
The Committee, in its discretion, shall have the authority to take
whatever action it deems to be necessary or appropriate to effectuate
the provisions of this subsection (f).
6.6 TERMINATION OF EMPLOYMENT, DEATH, DISABILITY AND RETIREMENT
(a) TERMINATION OF EMPLOYMENT. Unless otherwise expressly
provided in the Grantee's Incentive Agreement, if the Grantee's
Employment is terminated for any reason other than due to his death,
Disability, Retirement or for Cause, any non-vested portion of any
Stock Option or other applicable Incentive Award at the time of such
termination shall automatically expire and terminate and no further
vesting shall occur after the termination date. In such event, except
as otherwise expressly provided in his Incentive Agreement, the Grantee
shall be entitled to exercise his rights only with respect to the
portion of the Incentive Award that was vested as of his termination of
Employment date for a period that shall end on the earlier of (i) the
expiration date set forth in the Incentive Agreement or (ii) ninety
(90) days (not exceeding 3 months in the case of a statutory stock
option) after the date of his termination of Employment.
(b) TERMINATION OF EMPLOYMENT FOR CAUSE. Unless otherwise
expressly provided in the Grantee's Incentive Agreement, in the event
of the termination of a Grantee's Employment for Cause, all vested and
non-vested Stock Options and other Incentive Awards granted to such
Grantee shall immediately expire, and shall not be exercisable to any
extent, as of 12:01 a.m. (CST) on the date of such termination of
Employment.
(c) RETIREMENT. Unless otherwise expressly provided in the
Grantee's Incentive Agreement, upon the termination of Employment due
to the Retirement of any Employee who is a Grantee:
(i) any non-vested portion of any outstanding Option
or other Incentive Award shall immediately terminate and no
further vesting shall occur; and
(ii) any vested Option or other Incentive Award shall
expire on the earlier of (A) the expiration date set forth in
the Incentive Agreement for such Incentive Award; or (B) the
expiration of (1) six months after the date of his termination
of Employment due to Retirement in the case of any Incentive
Award other than an Incentive Stock Option or (2) three months
after his termination date in the case of an Incentive Stock
Option.
(d) DISABILITY OR DEATH. Unless otherwise expressly provided
in the Grantee's Incentive Agreement, upon termination of Employment as
a result of the Grantee's Disability or death:
(i) any nonvested portion of any outstanding Option
or other applicable Incentive Award shall immediately
terminate upon termination of Employment and no further
vesting shall occur; and
PAGE 25 OF 32
(ii) any vested Incentive Award shall expire on the
earlier of either (A) the expiration date set forth in the
Incentive Agreement or (B) the one year anniversary date of
the Grantee's termination of Employment date.
In the case of any vested Incentive Stock Option held by an
Employee following termination of Employment, notwithstanding the
definition of "Disability" in Section 1.2, whether the Employee has
incurred a "Disability" for purposes of determining the length of the
Option exercise period following termination of Employment under this
paragraph (d) shall be determined by reference to Section 22(e)(3) of
the Code to the extent required by Section 422(c)(6) of the Code. The
Committee shall determine whether a Disability for purposes of this
subsection (d) has occurred.
(e) CONTINUATION. Subject to the conditions and limitations of
the Plan and applicable law and regulation in the event that a Grantee
ceases to be an Employee, Outside Director or Consultant, as
applicable, for whatever reason, the Committee and Grantee may mutually
agree with respect to any outstanding Option or other Incentive Award
then held by the Grantee (i) for an acceleration or other adjustment in
any vesting schedule applicable to the Incentive Award, (ii) for a
continuation of the exercise period following termination for a longer
period than is otherwise provided under such Incentive Award, or (iii)
to any other change in the terms and conditions of the Incentive Award.
In the event of any such change to an outstanding Incentive Award, a
written amendment to the Grantee's Incentive Agreement shall be
required.
6.7 CHANGE IN CONTROL
Notwithstanding any contrary provision in the Plan, in the event of a
Change in Control (as defined below), the following actions shall automatically
occur as of the day immediately preceding the Change in Control date unless
expressly provided otherwise in the Grantee's Incentive Agreement:
(a) all of the Stock Options and Stock Appreciation Rights
then outstanding shall become 100% vested and immediately and fully
exercisable;
(b) all of the restrictions and conditions of any Restricted
Stock and any Other Stock-Based Awards then outstanding shall be deemed
satisfied, and the Restriction Period with respect thereto shall be
deemed to have expired, and thus each such Incentive Award shall become
free of all restrictions and fully vested; and
(c) all of the Performance Shares, Performance Units and any
Other Stock-Based Awards shall become fully vested, deemed earned in
full, and promptly paid within thirty (30) days to the affected
Grantees without regard to payment schedules and notwithstanding that
the applicable performance cycle, retention cycle or other restrictions
and conditions have not been completed or satisfied.
Notwithstanding any other provision of this Plan, unless otherwise
expressly provided in the Grantee's Incentive Agreement, the provisions of this
Section 6.7 may not be terminated, amended, or modified to adversely affect any
Incentive Award theretofore granted under the Plan without the prior written
consent of the Grantee with respect to his outstanding Incentive Awards subject,
however, to the last paragraph of this Section 6.7.
For all purposes of this Plan, a "CHANGE IN CONTROL" of the Company
means the occurrence of any one or more of the following events:
PAGE 26 OF 32
(a) The acquisition by any individual, entity or group (within
the meaning of 14(d)(2) of the Exchange Act (a "PERSON")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares
of common stock of the Company (the "OUTSTANDING COMPANY STOCK") or
(ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "OUTSTANDING COMPANY VOTING SECURITIES"); provided,
however, that the following acquisitions shall not constitute a Change
in Control: (i) any acquisition directly from the Company or any
Subsidiary, (ii) any acquisition by the Company or any Subsidiary or by
any employee benefit plan (or related trust) sponsored or maintained by
the Company or any Subsidiary, or (iii) any acquisition by any
corporation pursuant to a reorganization, merger, consolidation or
similar business combination involving the Company (a "MERGER"), if,
following such Merger, the conditions described in clauses (i) and (ii)
Section 6.7(c) (below) are satisfied;
(b) Individuals who, as of the Effective Date, constitute the
Board of Directors of the Company (the "INCUMBENT BOARD") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the
Effective Date whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board;
(c) Approval by the shareholders of the Company of a Merger,
unless immediately following such Merger, (i) substantially all of the
holders of the Outstanding Company Voting Securities immediately prior
to Merger beneficially own, directly or indirectly, more than 50% of
the common stock of the corporation resulting from such Merger in
substantially the same proportions as their ownership of Outstanding
Company Voting Securities immediately prior to such Merger and (ii) at
least a majority of the members of the board of directors of the
corporation resulting from such Merger were members of the Incumbent
Board at the time of the execution of the initial agreement providing
for such Merger;
(d) The sale or other disposition of all or substantially all
of the assets of the Company, unless immediately following such sale or
other disposition, (i) substantially all of the holders of the
Outstanding Company Voting Securities immediately prior to the
consummation of such sale or other disposition beneficially own,
directly or indirectly, more than 50% of the common stock of the
corporation acquiring such assets in substantially the same proportions
as their ownership of Outstanding Company Voting Securities immediately
prior to the consummation of such sale or disposition, and (ii) at
least a majority of the members of the board of directors of such
corporation were members of the Incumbent Board at the time of
execution of the initial agreement or action of the Board providing for
such sale or other disposition of assets of the Company; or
(e) Any other event that a majority of the Board, in its sole
discretion, determines to constitute a Change in Control hereunder.
Notwithstanding the occurrence of any of the foregoing events of this
Section 6.7 which would otherwise result in a Change in Control, the Board may
determine in its discretion, if it deems it to be in
PAGE 27 OF 32
the best interest of the Company, that an event or events otherwise constituting
or reasonably leading to a Change in Control shall not be deemed a Change in
Control hereunder. Such determination shall be effective only if it is made by
the Board prior to the occurrence of an event that otherwise would be, or
reasonably lead to, a Change in Control, or after such event only if made by the
Board a majority of which is composed of directors who were members of the Board
immediately prior to the event that otherwise would be, or reasonably lead to, a
Change in Control.
6.8 EXCHANGE OF INCENTIVE AWARDS
The Committee may, in its discretion, permit any Grantee to surrender
outstanding Incentive Awards in order to exercise or realize his rights under
other Incentive Awards or in exchange for the grant of new Incentive Awards, or
require holders of Incentive Awards to surrender outstanding Incentive Awards
(or comparable rights under other plans or arrangements) as a condition
precedent to the grant of new Incentive Awards.
SECTION 7.
GENERAL
7.1 EFFECTIVE DATE AND GRANT PERIOD
This Plan is hereby amended and restated by the Board effective as of
July 1, 2003, subject to the approval of the stockholders of the Company within
one year from July 1, 2003. Incentive Awards may be granted under the Plan at
any time prior to receipt of such stockholder approval; provided, however, if
the requisite stockholder approval is not obtained then any Incentive Awards
granted hereunder shall automatically become null and void and of no force or
effect. Unless sooner terminated by the Board, no Incentive Award shall be
granted under the Plan after ten (10) years from the Effective Date, as defined
in Section 1.1.
7.2 FUNDING AND LIABILITY OF COMPANY
No provision of the Plan shall require the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made, or otherwise
to segregate any assets. In addition, the Company shall not be required to
maintain separate bank accounts, books, records or other evidence of the
existence of a segregated or separately maintained or administered fund for
purposes of the Plan. Although bookkeeping accounts may be established with
respect to Grantees who are entitled to cash, Common Stock or rights thereto
under the Plan, any such accounts shall be used merely as a bookkeeping
convenience. The Company shall not be required to segregate any assets that may
at any time be represented by cash, Common Stock or rights thereto. The Plan
shall not be construed as providing for such segregation, nor shall the Company,
the Board or the Committee be deemed to be a trustee of any cash, Common Stock
or rights thereto. Any liability or obligation of the Company to any Grantee
with respect to an Incentive Award shall be based solely upon any contractual
obligations that may be created by this Plan and any Incentive Agreement, and no
such liability or obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company. Neither the Company,
the Board nor the Committee shall be required to give any security or bond for
the performance of any obligation that may be created by the Plan.
7.3 WITHHOLDING TAXES
PAGE 28 OF 32
(a) TAX WITHHOLDING. The Company shall have the power and the
right to deduct or withhold, or require a Grantee to remit to the
Company, an amount sufficient to satisfy federal, state, and local
taxes, domestic or foreign, required by law or regulation to be
withheld with respect to any taxable event arising as a result of the
Plan or an Incentive Award hereunder. Upon the lapse of restrictions on
Restricted Stock, the Committee, in its discretion, may elect to
satisfy the tax withholding requirement, in whole or in part, by having
the Company withhold Shares having a Fair Market Value on the date the
tax is to be determined equal to the minimum statutory total tax which
could be imposed on the transaction.
(b) SHARE WITHHOLDING. With respect to tax withholding
required upon the exercise of Stock Options or SARs, upon the lapse of
restrictions on Restricted Stock, or upon any other taxable event
arising as a result of any Incentive Awards, Grantees may elect,
subject to the approval of the Committee in its discretion, to satisfy
the withholding requirement, in whole or in part, by having the Company
withhold Shares having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could be
imposed on the transaction. All such elections shall be made in
writing, signed by the Grantee, and shall be subject to any
restrictions or limitations that the Committee, in its discretion,
deems appropriate.
(c) INCENTIVE STOCK OPTIONS. With respect to Shares received
by a Grantee pursuant to the exercise of an Incentive Stock Option, if
such Grantee disposes of any such Shares within (i) two years from the
date of grant of such Option or (ii) one year after the transfer of
such shares to the Grantee, the Company shall have the right to
withhold from any salary, wages or other compensation payable by the
Company to the Grantee an amount sufficient to satisfy federal, state
and local tax withholding requirements attributable to such
disqualifying disposition.
7.4 NO GUARANTEE OF TAX CONSEQUENCES
Neither the Company nor the Committee makes any commitment or guarantee
that any federal, state or local tax treatment will apply or be available to any
person participating or eligible to participate hereunder.
7.5 DESIGNATION OF BENEFICIARY BY PARTICIPANT
Each Grantee may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his death before he receives any
or all of such benefit. Each such designation shall revoke all prior
designations by the same Grantee, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Grantee in writing with
the Committee during the Grantee's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Grantee's death shall be paid to
the Grantee's estate.
7.6 DEFERRALS
The Committee may permit a Grantee to defer such Grantee's receipt of
the payment of cash or the delivery of Shares that would, otherwise be due to
such Grantee by virtue of the lapse or waiver of restrictions with respect to
Restricted Stock, or the satisfaction of any requirements or goals with respect
to Performance Units, Performance Shares or Other Stock-Based Awards. If any
such deferral election is permitted, the Committee shall, in its discretion,
establish rules and procedures for such payment deferrals to the extent required
for tax deferral of compensation under the Code.
7.7 AMENDMENT AND TERMINATION
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The Board and CEO shall each have the power and authority to terminate
or amend the Plan at any time; provided, however, the Board or CEO shall not,
without the approval of the stockholders of the Company within the time period
required by applicable law, (a) except as provided in Section 6.5, increase the
maximum number of Shares which may be issued under the Plan pursuant to Section
1.4, (b) amend the requirements as to the class of Employees eligible to
purchase Common Stock under the Plan, (c) extend the term of the Plan, or, if
the Company is a Publicly Held Corporation (i) increase the maximum limits on
Incentive Awards to Covered Employees as set for compliance with the
Performance-Based Exception, or (ii) decrease the authority granted to the
Committee under the Plan in contravention of Rule 16b-3 under the Exchange Act.
No termination, amendment, or modification of the Plan shall adversely
affect in any material way any outstanding Incentive Award previously granted to
a Grantee under the Plan, without the written consent of such Grantee or other
designated holder of such Incentive Award.
In addition, to the extent that the Committee determines that (a) the
listing for qualification requirements of any national securities exchange or
quotation system on which the Company's Common Stock is then listed or quoted,
if applicable, or (b) the Code (or regulations promulgated thereunder), require
stockholder approval in order to maintain compliance with such listing
requirements or to maintain any favorable tax advantages or qualifications, then
the Plan shall not be amended in such respect without approval of the Company's
stockholders.
7.8 REQUIREMENTS OF LAW
(a) GOVERNMENTAL ENTITIES AND SECURITIES EXCHANGES. The
granting of Incentive Awards and the issuance of Shares under the Plan
shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national securities
exchanges as may be required. Certificates evidencing shares of Common
Stock delivered under this Plan (to the extent that such shares are so
evidenced) may be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules and
regulations of the Securities and Exchange Commission, any securities
exchange or transaction reporting system upon which the Common Stock is
then listed or to which it is admitted for quotation, and any
applicable federal or state securities law, if applicable. The
Committee may cause a legend or legends to be placed upon such
certificates (if any) to make appropriate reference to such
restrictions.
(b) SECURITIES ACT RULE 701. If no class of the Company's
securities is registered under Section 12 of the Exchange Act, then
unless otherwise determined by the Committee, grants of Incentive
Awards to "Rule 701 Grantees" (as defined below) and issuances of the
underlying shares of Common Stock, if any, on the exercise or
conversion of such Incentive Awards are intended to comply with all
applicable conditions of Securities Act Rule 701 ("Rule 701"),
including, without limitation, the restrictions as to the amount of
securities that may be offered and sold in reliance on Rule 701, so as
to qualify for an exemption from the registration requirements of the
Securities Act. Any ambiguities or inconsistencies in the construction
of an Incentive Award or the Plan shall be interpreted to give effect
to such intention. In accordance with Rule 701, each Grantee shall
receive a copy of the Plan on or before the date an Incentive Award is
granted to him, as well as the additional disclosure required by Rule
701(e) if the aggregate sales price or amount of securities sold during
any consecutive 12-month period exceeds $5,000,000 as determined under
Rule 701(e). If Rule 701 (or any successor provision) is amended to
eliminate or otherwise modify any of the requirements specified in Rule
701, then the provisions of this subsection 7.8(b) shall be interpreted
and construed in accordance with Rule
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701 as so amended. For purposes of this subsection 7.8(b), as
determined in accordance with Rule 701, "Rule 701 Grantees" shall mean
any Grantee other than a director of the Company, the Company's
chairman, chief executive officer, president, chief financial officer,
controller and any vice president of the Company, and any other key
employee of the Company who generally has access to financial and other
business related information and possesses sufficient sophistication to
understand and evaluate such information.
7.9 RULE 16b-3 SECURITIES LAW COMPLIANCE FOR INSIDERS
If the Company is a Publicly Held Corporation, transactions under the
Plan with respect to Insiders are intended to comply with all applicable
conditions of Rule 16b-3 under the Exchange Act. With respect to all Grantees,
transactions under the Plan are intended to comply with Securities Regulation
BTR and the Company's insider trading policies as revised from time to time or
such other similar Company policies, including but not limited to, policies
relating to black out periods. Any ambiguities or inconsistencies in the
construction of an Incentive Award or the Plan shall be interpreted to give
effect to such intention, and to the extent any provision of the Plan or action
by the Committee fails to so comply, it shall be deemed null and void to the
extent permitted by law and deemed advisable by the Committee in its discretion.
7.10 COMPLIANCE WITH CODE SECTION 162(m) FOR PUBLICLY HELD CORPORATION
If the Company is a Publicly Held Corporation, unless otherwise
determined by the Committee with respect to any particular Incentive Award, it
is intended that the Plan shall comply fully with the applicable requirements so
that any Incentive Awards subject to Section 162(m) that are granted to Covered
Employees shall qualify for the Performance-Based Exception, except for grants
of Nonstatutory Stock Options with an Option Price set at less than the Fair
Market Value of a Share on the date of grant. If any provision of the Plan or an
Incentive Agreement would disqualify the Plan or would not otherwise permit the
Plan or Incentive Award to comply with the Performance-Based Exception as so
intended, such provision shall be construed or deemed to be amended to conform
to the requirements of the Performance-Based Exception to the extent permitted
by applicable law and deemed advisable by the Committee; provided, however, no
such construction or amendment shall have an adverse effect on the prior grant
of an Incentive Award or the economic value to a Grantee of any outstanding
Incentive Award, unless consented to in writing by the Grantee.
7.11 SUCCESSORS TO COMPANY
All obligations of the Company under the Plan with respect to Incentive
Awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business and/or assets of the Company.
7.12 MISCELLANEOUS PROVISIONS
(a) No Employee, Consultant, Outside Director, or other person
shall have any claim or right to be granted an Incentive Award under
the Plan. Neither the Plan, nor any action taken hereunder, shall be
construed as giving any Employee, Consultant, or Outside Director any
right to be retained in the Employment or other service of the Company
or any Parent or Subsidiary.
(b) The expenses of the Plan shall be borne by the Company.
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(c) By accepting any Incentive Award, each Grantee and each
person claiming by or through him shall be deemed to have indicated his
acceptance of the Plan.
(d) No Shares of Common Stock shall be issued hereunder unless
counsel for the Company is then reasonably satisfied that such issuance
will be in compliance with federal and state securities laws, if
applicable.
7.13 SEVERABILITY
In the event that any provision of this Plan shall be held illegal,
invalid or unenforceable for any reason, such provision shall be fully
severable, but shall not affect the remaining provisions of the Plan, and the
Plan shall be construed and enforced as if the illegal, invalid, or
unenforceable provision was not included herein.
7.14 GENDER, TENSE AND HEADINGS
Whenever the context so requires, words of the masculine gender used
herein shall include the feminine and neuter, and words used in the singular
shall include the plural. Section headings as used herein are inserted solely
for convenience and reference and constitute no part of the interpretation or
construction of the Plan.
7.15 GOVERNING LAW
The Plan shall be interpreted, construed and constructed in accordance
with the laws of the State of Texas without regard to its conflicts of law
provisions, except as may be superseded by applicable laws of the United States.
IN WITNESS WHEREOF, the Company has caused this Plan to be duly
executed in its name and on its behalf by its duly authorized officer.
INTERNETWORK EXPERTS, INC.
By: /s/ Mark T. Hilz
----------------------------------------
Mark T. Hilz
President and CEO
Witness:
/s/ Patricia L. Winstead
- ---------------------------------
Patricia L. Winstead
Secretary
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