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EXHIBIT 10.1
DXP ENTERPRISES, INC.
1999 EMPLOYEE STOCK OPTION PLAN
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DXP ENTERPRISES, INC.
1999 EMPLOYEE STOCK OPTION PLAN
TABLE OF CONTENTS
SECTION
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ARTICLE I
PLAN
Purpose..................................................... 1.1
Term of Plan................................................ 1.2
ARTICLE II
DEFINITIONS
Affiliate................................................... 2.1
Board....................................................... 2.2
Change of Control........................................... 2.3
Change of Control Value..................................... 2.4
Code........................................................ 2.5
Committee................................................... 2.6
Company..................................................... 2.7
Corporate Change............................................ 2.8
Disability.................................................. 2.9
Employee.................................................... 2.10
Exchange Act................................................ 2.11
Fair Market Value........................................... 2.12
Incentive Option............................................ 2.13
Mature Shares............................................... 2.14
Non-Employee Director....................................... 2.15
Nonqualified Option......................................... 2.16
Option...................................................... 2.17
Optionee.................................................... 2.18
Option Agreement............................................ 2.19
Outside Director............................................ 2.20
Plan........................................................ 2.21
Retirement.................................................. 2.22
Stock....................................................... 2.23
Ten Percent Stockholder..................................... 2.24
Voting Stock................................................ 2.25
ARTICLE III
ELIGIBILITY
ARTICLE IV
GENERAL PROVISIONS RELATING TO OPTIONS
Authority to Grant Options.................................. 4.1
Dedicated Shares; Maximum Options........................... 4.2
Non-Transferability......................................... 4.3
Requirements of Law......................................... 4.4
Recapitalization or Reorganization of the Company........... 4.5
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SECTION
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ARTICLE V
OPTIONS
Type of Option.............................................. 5.1
Exercise Price.............................................. 5.2
Duration of Options......................................... 5.3
Amount Exercisable.......................................... 5.4
Exercise of Options......................................... 5.5
Exercise on Termination of Employment....................... 5.6
Substitution Options........................................ 5.7
No Rights as Stockholder.................................... 5.8
ARTICLE VI
ADMINISTRATION
ARTICLE VII
AMENDMENT OR TERMINATION OF PLAN
ARTICLE VIII
MISCELLANEOUS
No Establishment of a Trust Fund............................ 8.1
No Employment or Affiliation Obligation..................... 8.2
Forfeiture.................................................. 8.3
Tax Withholding............................................. 8.4
Written Agreement........................................... 8.5
Indemnification of the Committee and the Board.............. 8.6
Gender...................................................... 8.7
Headings.................................................... 8.8
Other Compensation Plans.................................... 8.9
Other Options............................................... 8.10
Governing Law............................................... 8.11
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ARTICLE I
PLAN
1.1 Purpose. The Plan is intended to advance the best interests of the
Company and its stockholders by providing those persons who have substantial
responsibility for the management and growth of the Company and its Affiliates
with additional incentives and an opportunity to obtain or increase their
proprietary interest in the Company, thereby encouraging them to continue in the
employ of the Company or any of its Affiliates.
1.2 Term of Plan. The Plan is effective April 19, 1999, if within one year
of that date it shall have been approved by at least a majority vote of
stockholders voting in person or by proxy at a duly held stockholders' meeting,
or if the provisions of the corporate charter, by-laws or applicable state law
prescribes a greater degree of stockholders' approval for this action, the
approval by the stockholders of that percentage, at a duly-held meeting of
stockholders. No Option shall be granted under the Plan after April 19, 2009.
The Plan shall remain in effect until all Options under the Plan have been
satisfied or expired.
ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set
out in these definitions throughout the Plan, unless the context in which any
such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
2.1 "Affiliate" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of the action or transaction, each of the corporations other than the
Company owns stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain. The
term "subsidiary corporation" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the action or transaction, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain.
2.2 "Board" means the board of directors of the Company.
2.3 "Change of Control" means the occurrence of any of the following after
the date on which the applicable Option is granted:
(i) a report on Schedule 13D or Schedule 14D-1 (or any successor
schedule, form or report) shall be filed with the Securities and Exchange
Commission pursuant to the Exchange Act and that report discloses that any
person (within the meaning of Section 13(d) or Section 14(d)(2) of the
Exchange Act), other than the Company (or one of its subsidiaries) or any
employee benefit plan sponsored by the Company (or one of its
subsidiaries), is the beneficial owner (as that term is defined in Rule
13d-3 or any successor rule or regulation promulgated under the Exchange
Act), directly or indirectly, of 20 percent or more of the outstanding
Voting Stock;
(ii) any person (within the meaning of Section 13(d) or Section
14(d)(2) of the Exchange Act), other than the Company (or one of its
subsidiaries) or any employee benefit plan sponsored by the Company (or one
of its subsidiaries), shall purchase securities pursuant to a tender offer
or exchange offer to acquire any Voting Stock (or any securities
convertible into Voting Stock) and, immediately after consummation of that
purchase, that person is the beneficial owner (as that term is defined in
Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act), directly or indirectly, of 20 percent or more of the
outstanding Voting Stock (such person's beneficial ownership to be
determined, in the case of rights to acquire Voting Stock, pursuant to
paragraph (d) of Rule 13d-3 or any successor rule or regulation promulgated
under the Exchange Act);
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(iii) the consummation of:
(x) a merger, consolidation or reorganization of the Company with
or into any other person if as a result of such merger, consolidation or
reorganization, 50 percent or less of the combined voting power of the
then-outstanding securities of such other person immediately after such
merger, consolidation or reorganization are held in the aggregate by the
Optionees of Voting Stock immediately prior to such merger,
consolidation or reorganization;
(y) any sale, lease, exchange or other transfer of all or
substantially all the assets of the Company and its consolidated
subsidiaries to any other person if as a result of such sale, lease,
exchange or other transfer, 50 percent or less of the combined voting
power of the then-outstanding securities of such other person
immediately after such sale, lease, exchange or other transfer are held
in the aggregate by the Optionees of Voting Stock immediately prior to
such sale, lease, exchange or other transfer; or
(z) a transaction immediately after the consummation of which any
person (within the meaning of Section 13(d) or Section 14(d)(2) of the
Exchange Act) would be the beneficial owner (as that term is defined in
Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act), directly or indirectly, of more than 50 percent of the
outstanding Voting Stock;
(iv) the stockholders of the Company approve the dissolution of the
Company; or
(v) during any period of 12 consecutive months, the individuals who at
the beginning of that period constituted the Board shall cease to
constitute a majority of the Board, unless the election, or the nomination
for election by the Company's stockholders, of each director of the Company
first elected during such period was approved by a vote of at least a
two-thirds majority of the directors of the Company then still in office
who were directors of the Company at the beginning of any such period.
2.4 "Change of Control Value" means the amount determined in clause (i),
(ii) or (iii), whichever is applicable, as follows: (i) the per share price
offered to stockholders of the Company in the merger, consolidation,
reorganization, sale of assets or dissolution transaction, (ii) the price per
share offered to stockholders of the Company in any tender offer or exchange
offer whereby a Corporate Change takes place, or (iii) if a Corporate Change
occurs other than pursuant to a tender or exchange offer, the fair market value
per share of the shares into which such Options being surrendered are
exercisable, as determined by the Committee as of the date determined by the
Committee to be the date of cancellation and surrender of such Options. If the
consideration offered to stockholders of the Company in any transaction
described above consists of anything other than cash, the Committee shall
determine the fair cash equivalent of the portion of the consideration offered
which is other than cash.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Committee" means a committee of at least two persons appointed by the
Board. The Committee shall be comprised solely of persons who are both
Non-Employee Directors and Outside Directors.
2.7 "Company" means DXP Enterprises, Inc, a Texas corporation.
2.8 "Corporate Change" means that any of the following shall have
occurred: (i) the Company shall not be the surviving entity in any merger,
consolidation or other reorganization (or survives only as a subsidiary of an
entity other than a previously wholly owned subsidiary of the Company), (ii) the
Company sells, leases or exchanges or agrees to sell, lease or exchange all or
substantially all of its assets to any other person or entity (other than a
wholly owned subsidiary of the Company), (iii) the Company is to be dissolved
and liquidated, (iv) any person or entity, including a "group" as contemplated
by Section 13(d)(3) of the Exchange Act, acquires or gains ownership or control
of more than 50 percent of the shares of the Voting Stock, or (v) as a result of
or in connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board.
2.9 "Disability" means a medically determinable mental or physical
impairment which, in the opinion of a physician selected by the Committee, shall
prevent the Optionee from engaging in any substantial gainful
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activity and which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than 12 months and
which: (a) was not contracted, suffered or incurred while the Optionee was
engaged in, or did not result from having engaged in, a felonious criminal
enterprise; (b) did not result from alcoholism or addiction to narcotics; (c)
did not result from an injury incurred while a member of the Armed Forces of the
United States for which the Optionee receives a military pension; and (d) did
not result from an intentionally self-inflicted injury.
2.10 "Employee" means a person employed by the Company or any Affiliate.
2.11 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.12 "Fair Market Value" of the Stock as of any date means (a) the average
of the high and low sale prices of the Stock on that date (or, if there was no
sale on such date, the next preceding date on which there was such a sale) on
the principal securities exchange on which the Stock is listed; or (b) if the
Stock is not listed on a securities exchange, an amount as determined by the
Committee in its sole discretion.
2.13 "Incentive Option" means an Option granted under the Plan that is
designated as an "Incentive Option" and satisfies the requirements of section
422 of the Code.
2.14 "Mature Shares" means shares of Stock that the Optionee has held for
at least six months.
2.15 "Non-Employee Director" means a "non-employee director" as defined in
Rule 16b-3 of the Exchange Act.
2.16 "Nonqualified Option" means an Option granted under the Plan other
than an Incentive Option.
2.17 "Option" means either an Incentive Option or a Nonqualified Option
granted under the Plan to purchase shares of Stock.
2.18 "Option Agreement" means the written agreement which sets out the
terms of an Option.
2.19 "Optionee" means a person to whom an Option is granted under the
Plan.
2.20 "Outside Director" means a member of the Board serving on the
Committee who qualifies as an outside director as defined in Department of
Treasury regulations promulgated under section 162(m) of the Code.
2.21 "Plan" means the DXP Enterprises, Inc. 1999 Employee Stock Option
Plan, as set forth in this document and as it may be amended from time to time.
2.22 "Retirement" means the termination of an Employee's employment
relationship with the Company and all Affiliates after attaining the age of 65.
2.23 "Stock" means the common stock of the Company, $.01 par value or, in
the event that the outstanding shares of common stock are later changed into or
exchanged for a different class of stock or securities of the Company or another
corporation, that other stock or security.
2.24 "Ten Percent Stockholder" means an individual who, at the time the
Option is granted, owns stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or of any
Affiliate. An individual shall be considered as owning the stock owned, directly
or indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants; and stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust, shall be
considered as being owned proportionately by or for its stockholders, partners,
or beneficiaries.
2.25 "Voting Stock" means shares of capital stock of the Company the
holders of which are entitled to vote for the election of directors, but
excluding shares entitled to so vote only upon the occurrence of a contingency
unless that contingency shall have occurred.
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ARTICLE III
ELIGIBILITY
The individuals who shall be eligible to receive Incentive Options shall be
those key employees of the Company or any of its Affiliates as the Committee
shall determine from time to time. The individuals who shall be eligible to
receive Nonqualified Options shall be those persons, including employees,
consultants, advisors and directors, who have substantial responsibility for the
management and growth of the Company or any of its Affiliates as the Committee
shall determine from time to time. The Board may designate one or more
individuals who shall not be eligible to receive an Option under the Plan.
ARTICLE IV
GENERAL PROVISIONS RELATING TO OPTIONS
4.1 Authority to Grant Options. The Committee may grant to those key
Employees of the Company or any of its Affiliates and other eligible persons as
it shall from time to time determine, Options under the terms and conditions of
the Plan. Subject only to any applicable limitations set out in the Plan, the
number of shares of Stock to be covered by any Option to be granted to any
person shall be as determined by the Committee.
4.2 Dedicated Shares; Maximum Options. The total number of shares of Stock
with respect to which Options may be granted under the Plan is 500,000. The
shares of Stock may be treasury shares or authorized but unissued shares. The
total number of shares of Stock with respect to which Incentive Options may be
granted under the Plan is 500,000 shares. The maximum number of shares subject
to Options which may be issued to any person under the Plan during any calendar
year is 125,000 shares. If an Optionee's Option is canceled, the canceled Option
continues to be counted against the maximum number of shares of Stock for which
Options may be granted to the Optionee under the Plan. The number of shares
stated in this Section 4.2 shall be subject to adjustment in accordance with the
provisions of Section 4.5.
If any outstanding Option expires or terminates for any reason or any
Option is surrendered, the shares of Stock allocable to the unexercised portion
of that Option may again be subject to an Option under the Plan.
4.3 Non-Transferability. Incentive Options shall not be transferable by
the Employee other than by will or under the laws of descent and distribution,
and shall be exercisable, during the Employee's lifetime, only by him. Except as
specified in the applicable Option agreements or in domestic relations court
orders, Nonqualified Options shall not be transferable by the Optionee other
than by will or under the laws of descent and distribution, and shall be
exercisable, during the Optionee's lifetime, only by him. In the discretion of
the Committee, any attempt to transfer an Option other than under the terms of
the Plan and the applicable Option Agreement may terminate the Option.
4.4 Requirements of Law. The Company shall not be required to sell or
issue any Stock under any Option if issuing that Stock would constitute or
result in a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of any Option, the Company shall not
be required to issue any Stock unless the Committee has received evidence
satisfactory to it to the effect that the Optionee will not transfer the Stock
except in accordance with applicable law, including receipt of an opinion of
counsel satisfactory to the Company to the effect that any proposed transfer
complies with applicable law. The determination by the Committee on this matter
shall be final, binding and conclusive. The Company may, but shall in no event
be obligated to, register any Stock covered by the Plan pursuant to applicable
securities laws of any country or any political subdivision. In the event the
Stock issuable on exercise of an Option is not registered, the Company may
imprint on the certificate evidencing the Stock any legend that counsel for the
Company considers necessary or advisable to comply with applicable law. The
Company shall not be obligated to take any other affirmative action in order to
cause the exercise of an Option or vesting under an Optionee, or the issuance of
shares pursuant thereto, to comply with any law or regulation of any
governmental authority.
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4.5 Recapitalization or Reorganization of the Company.
(a) No Limitations on Company's Rights to Effect Changes. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations 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 stock ahead of or
affecting the Stock or its rights, 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.
(b) Increase or Reduction of Outstanding Shares. If a stock split, reverse
stock split, stock dividend, combination, recapitalization or reclassification
of the Stock, or any other increase or decrease in the number of shares of the
Stock outstanding, is effected without receipt of consideration by the Company,
then (a) the number, class, and per share price of shares of Stock subject to
outstanding Options under the Plan shall be appropriately adjusted in such a
manner as to entitle an Optionee to receive upon exercise of an Option, for the
same aggregate cash consideration, the equivalent total number and class of
shares he would have received had he exercised his Option in full immediately
prior to the event requiring the adjustment; and (b) the number and class of
shares of Stock then reserved to be issued under the Plan shall be adjusted by
substituting for the total number and class of shares of Stock then reserved,
that number and class of shares of Stock that would have been received by the
owner of an equal number of outstanding shares of each class of Stock as the
result of the event requiring the adjustment. The conversion of any convertible
securities of the Company shall not be deemed to have been "effected without
receipt of consideration by the Company". Such adjustment shall be made by the
Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Stock subject to an Option.
(c) Sale or Merger of the Company Where the Company is Not the Survivor;
Dissolution or Liquidation of the Company. In the event of a Corporate Change,
no later than (x) ten days after the approval by the stockholders of the Company
of the Corporate Change or (y) thirty days after the occurrence of a Corporate
Change for which no approval by the stockholder of the Company is required, the
Committee, acting in its sole discretion without the consent or approval of any
Optionee, shall act to effect one or more of the following alternatives, which
may vary among individual Optionees and which may vary among Options held by any
individual Optionee: (1) accelerate the time at which Options then outstanding
may be exercised so that such Options may be exercised in full for a limited
period of time on or before a specified date (before or after the Corporate
Change) fixed by the Committee, after which specified date all unexercised
Options and all rights of Optionees thereunder shall terminate, (2) require the
mandatory surrender to the Company by selected Optionees of some or all of the
outstanding Options held by such Optionees(irrespective of whether such Options
are then exercisable under the provisions of the Plan) as of a date, before or
after such Corporate Change, specified by the Committee, in which event the
Committee shall thereupon cancel such Options and the Company shall pay to each
Optionee an amount of cash per share equal to the excess, if any, of the Change
of Control Value of the shares subject to such Options over the exercise
price(s) under such Options for such shares, (3) make any adjustments to Options
then outstanding as the Committee deems appropriate, or (4) provide that the
number and class of shares of Stock covered by an Optionee theretofore granted
shall be adjusted so that such Optionee shall thereafter cover the number and
class of shares of stock or other securities or property (including, without
limitation, cash) to which the Optionee would have been entitled pursuant to the
terms of the agreement of merger, consolidation or sale of assets and
dissolution if, immediately prior to such merger, consolidation or sale of
assets and dissolution, the Optionee had been the holder of record of the number
of shares of Stock then covered by such Option.
(d) Merger of the Company Where the Company is the Survivor. After a merger
of one or more corporations into the Company or after a consolidation of the
Company and one or more corporations in which the Company shall be the surviving
corporation, each Optionee shall be entitled to have his Option appropriately
adjusted based on the manner in which the Stock was adjusted under the terms of
the agreement of merger or consolidation.
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ARTICLE V
OPTIONS
5.1 Type of Option. The Committee shall specify in an Option Agreement
whether a given Option is an Incentive Option or a Nonqualified Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value (determined as of the time an Incentive Option is granted) of the Stock
with respect to which incentive stock options first become exercisable by an
Employee during any calendar year (under the Plan and any other incentive stock
option plan(s) of the Company or any Affiliate) exceeds $100,000.00, the
Incentive Option shall be treated as a Nonqualified Option. In making this
determination, incentive stock options shall be taken into account in the order
in which they were granted.
5.2 Exercise Price. The price at which Stock may be purchased under an
Incentive Option or Nonqualified Option shall not be less than 100 percent of
the Fair Market Value of the shares of Stock on the date the Option is granted.
In the case of any Ten Percent Stockholder, the price at which shares of Stock
may be purchased under an Incentive Option shall not be less than 110 percent of
the Fair Market Value of the Stock on the date the Incentive Option is granted.
In its discretion, the Committee may provide that the price at which shares of
Stock may be purchased under an Option shall be more than the minimum price
specified above.
5.3 Duration of Options. No Option shall be exercisable after the
expiration of ten years from the date the Option is granted. In the case of a
Ten Percent Stockholder, no Incentive Option shall be exercisable after the
expiration of five years from the date the Incentive Option is granted.
5.4 Amount Exercisable. Each Option may be exercised at the time, in the
manner and subject to the conditions the Committee specifies in the Option
Agreement in its sole discretion. If specified in the Option Agreement, an
Option will be exercisable in full upon the occurrence of a Change of Control.
5.5 Exercise of Options. Each Option shall be exercised by the delivery of
written notice to the Committee setting forth the number of shares of Stock with
respect to which the Option is to be exercised, together with: (a) cash,
certified check, bank draft, or postal or express money order payable to the
order of the Company for an amount equal to the exercise price under the Option,
(b) Mature Shares with a Fair Market Value on the date of exercise equal to the
exercise price under the Option, (c) an election to make a cashless exercise
through a registered broker-dealer (if approved in advance by the Committee),
and/or (d) any other form of payment which is acceptable to the Committee, and
specifying the address to which the certificates for the shares are to be
mailed. As promptly as practicable after receipt of written notification and
payment, the Company shall deliver to the Optionee certificates for the number
of shares with respect to which the Option has been exercised, issued in the
Optionee's name. If Mature Shares are used for payment by the Optionee, the
aggregate Fair Market Value of the shares of Stock tendered must be equal to or
less than the aggregate exercise price of the shares being purchased upon
exercise of the Option, and any difference must be paid by cash, certified
check, bank draft, or postal or express money order payable to the order of the
Company. Delivery of the shares shall be deemed effected for all purposes when a
stock transfer agent of the Company shall have deposited the certificates in the
United States mail, addressed to the Optionee, at the address specified by the
Optionee.
Whenever an Option is exercised by exchanging Mature Shares owned by the
Optionee, the Optionee shall deliver to the Company certificates registered in
the name of the Optionee representing a number of shares of Stock legally and
beneficially owned by the Optionee, free of all liens, claims, and encumbrances
of every kind, accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by the certificates (with signature guaranteed
by a commercial bank or trust company or by a brokerage firm having a membership
on a registered national stock exchange). The delivery of certificates upon the
exercise of Options is subject to the condition that the person exercising the
Option provide the Company with the information the Company might reasonably
request pertaining to exercise, sale or other disposition.
The Committee may permit an Optionee to elect to pay the exercise price
upon exercise of an Option by authorizing a third-party broker to sell all or a
portion of the shares of Stock acquired upon exercise of the
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Option and remit to the Company a sufficient portion of the sale proceeds to pay
the exercise price and any applicable tax withholding resulting from such
exercise.
An Option may not be exercised for a fraction of a share of Stock.
5.6 Exercise on Termination of Employment.
(a) Termination of Employment Other Than As a Result of Retirement, Death
or Disability. Unless it is expressly provided otherwise in the Option
Agreement, an Option shall terminate one day less than three months after the
severance of employment or affiliation relationship between the Optionee and the
Company and all Affiliates for any reason, with or without cause, other than
Retirement, death or Disability. Whether authorized leave of absence or absence
on military or government service shall constitute severance of the employment
of an Employee shall be determined by the Committee at that time.
(b) Retirement. Unless it is expressly provided otherwise in the Option
Agreement, an Option shall terminate one day less than one year after the
Retirement of the Optionee.
(c) Death. After the death of the Optionee, his executors, administrators
or any persons to whom his Option may be transferred by will or by the laws of
descent and distribution shall have the right, at any time prior to the earlier
of the Option's expiration or one day less than one year after the death of the
Optionee, to exercise it, to the extent to which he was entitled to exercise it
immediately prior to his death, unless it is expressly provided otherwise in the
Option Agreement.
(d) Disability. If, before the expiration of an Option, the Optionee shall
be severed from the employ of or affiliation with the Company and all Affiliates
due to Disability, the Option shall terminate on the earlier of the Optionee's
expiration date or one day less than one year after the date of his severance
due to Disability, unless it is expressly provided otherwise in the Option
Agreement. In the event that the Optionee shall be severed from the employ of or
affiliation with the Company and all Affiliates for Disability, the Optionee
shall have the right prior to the termination of the Option to exercise the
Option, to the extent to which he was entitled to exercise it immediately prior
to his severance of employment or affiliation due to Disability, unless it is
expressly provided otherwise in the Option Agreement.
(e) Employment With an Entity in a Section 424(a) Transaction. In
determining the employment relationship between the Company and/or any Affiliate
and an Employee, employment by a corporation issuing or assuming a stock option
in a transaction to which section 424(a) of the Code applies shall be considered
employment by the Company or an Affiliate.
5.7 Substitution Options. Options may be granted under the Plan from time
to time in substitution for stock options held by employees of other
corporations who are about to become employees of or affiliated with the Company
or any Affiliate as the result of a merger or consolidation of the employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation, or the acquisition
by the Company or any Affiliate of stock of the employing corporation as the
result of which it becomes an Affiliate of the Company. The terms and conditions
of the substitute Options granted may vary from the terms and conditions set out
in the Plan to the extent the Committee, at the time of grant, may deem
appropriate to conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted.
5.8 No Rights as Stockholder. No Optionee shall have any rights as a
stockholder with respect to Stock covered by his Option until the date a stock
certificate is issued for the Stock.
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ARTICLE VI
ADMINISTRATION
The Plan shall be administered by the Committee. All questions of
interpretation and application of the Plan and Options shall be subject to the
determination of the Committee. A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by a majority of the members shall be as effective as if it had been made
by a majority vote at a meeting properly called and held. The Plan shall be
administered in such a manner as to permit the Options which are designated to
be Incentive Options to qualify as Incentive Options. In carrying out its
authority under the Plan, the Committee shall have full and final authority and
discretion, including but not limited to the following rights, powers and
authorities, to:
(a) determine the persons to whom and the time or times at which
Options will be granted,
(b) determine the number of shares and the exercise price of Stock
covered in each Option, subject to the terms of the Plan,
(c) determine the terms, provisions and conditions of each Option,
which need not be identical,
(d) accelerate the time at which any outstanding Option may be
exercised,
(e) define the effect, if any, on an Optionee of the death,
disability, retirement, or termination of employment or affiliation
relationship between the Optionee and the Company and Affiliates,
(f) prescribe, amend and rescind rules and regulations relating to
administration of the Plan, and
(g) make all other determinations and take all other actions deemed
necessary, appropriate, or advisable for the proper administration of the
Plan.
The actions of the Committee in exercising all of the rights, powers, and
authorities set out in this Article and all other Articles of the Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive and
binding on all parties.
ARTICLE VII
AMENDMENT OR TERMINATION OF PLAN
The Board may amend, terminate or suspend the Plan at any time, in its sole
and absolute discretion; provided, however, that to the extent required to
maintain the status of any Incentive Option under the Code, no amendment that
would: (a) change the aggregate number of shares of Stock which may be issued
under Incentive Options, (b) change the class of employees eligible to receive
Incentive Options, or (c) decrease the exercise price for Incentive Options
below the Fair Market Value of the Stock at the time it is granted, shall be
made without the approval of the Company's stockholders. Subject to the
preceding sentence, the Board shall have the power to make any changes in the
Plan and in the regulations and administrative provisions under it or in any
outstanding Incentive Option as in the opinion of counsel for the Company may be
necessary or appropriate from time to time to enable any Incentive Option
granted under the Plan to continue to qualify as an incentive stock option or
such other stock option as may be defined under the Code so as to receive
preferential federal income tax treatment.
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ARTICLE VIII
MISCELLANEOUS
8.1 No Establishment of a Trust Fund. No property shall be set aside nor
shall a trust fund of any kind be established to secure the rights of any
Optionee under the Plan. All Optionees shall at all times rely solely upon the
general credit of the Company for the payment of any benefit which becomes
payable under the Plan.
8.2 No Employment or Affiliation Obligation. The granting of any Option
shall not constitute an employment contract, express or implied, nor impose upon
the Company or any Affiliate any obligation to employ or continue to employ, or
utilize the services of, any Optionee. The right of the Company or any Affiliate
to terminate the employment of any person shall not be diminished or affected by
reason of the fact that an Option has been granted to him.
8.3 Forfeiture. Notwithstanding any other provisions of the Plan, if the
Committee finds by a majority vote after full consideration of the facts that
the Optionee, before or after termination of his employment or affiliation
relationship with the Company or an Affiliate for any reason (a) committed or
engaged in fraud, embezzlement, theft, commission of a felony, or proven
dishonesty in the course of his employment by the Company or an Affiliate, which
conduct damaged the Company or Affiliate, or disclosed trade secrets of the
Company or an Affiliate, or (b) participated, engaged in or had a material,
financial or other interest, whether as an employee, officer, director,
consultant, contractor, stockholder, owner, or otherwise, in any commercial
endeavor in the United States which is competitive with the business of the
Company or an Affiliate without the written consent of the Company or Affiliate,
the Optionee shall forfeit all outstanding Options, and including all exercised
Options and other situations pursuant to which the Company has not yet delivered
a stock certificate. Clause (b) shall not be deemed to have been violated solely
by reason of the Optionee's ownership of stock or securities of any publicly
owned corporation, if that ownership does not result in effective control of the
corporation.
The decision of the Committee as to the cause of the Optionee's discharge,
the damage done to the Company or an Affiliate, and the extent of the Optionee's
competitive activity shall be final. No decision of the Committee, however,
shall affect the finality of the discharge of the Optionee by the Company or an
Affiliate in any manner.
8.4 Tax Withholding. The Company or any Affiliate shall be entitled to
deduct from other compensation payable to each Optionee any sums required by
federal, state, or local tax law to be withheld with respect to the grant or
exercise of an Option, or lapse of restrictions on Restricted Stock. In the
alternative, the Company may require the Optionee to pay such sums for taxes
directly to the Company or any Affiliate in cash or by check within ten days
after the date of exercise or lapse of restrictions. In the discretion of the
Committee, an Optionee may use shares of Stock received by the Optionee upon the
exercise of a Nonqualified Option to satisfy any required tax withholding
obligations of the Company or an Affiliate that result from the exercise. The
Company shall have no obligation upon exercise of any Option until the Company
or an Affiliate has received payment sufficient to cover all tax withholding
amounts due with respect to that exercise. Neither the Company nor any Affiliate
shall be obligated to advise an Optionee of the existence of the tax or the
amount which it will be required to withhold.
8.5 Written Agreement. Each Option shall be embodied in a written
agreement which shall be subject to the terms and conditions of the Plan and
shall be signed by the Optionee and by a member of the Committee on behalf of
the Committee and the Company or an executive officer of the Company, other than
the Optionee, on behalf of the Company. The agreement may contain any other
provisions that the Committee in its discretion shall deem advisable which are
not inconsistent with the terms of the Plan.
8.6 Indemnification of the Committee and the Board. With respect to
administration of the Plan, the Company shall indemnify each present and future
member of the Committee and the Board against, and each member of the Committee
and the Board shall be entitled without further act on his part to indemnity
from the Company for, all expenses (including attorney's fees, the amount of
judgments and the amount of
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approved settlements made with a view to the curtailment of costs of litigation,
other than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his being or having been a member of the Committee
and/or the Board, whether or not he continues to be a member of the Committee
and/or the Board at the time of incurring the expenses -- including, without
limitation, matters as to which he shall be finally adjudged in any action, suit
or proceeding to have been found to have been negligent in the performance of
his duty as a member of the Committee or the Board. However, this indemnity
shall not include any expenses incurred by any member of the Committee and/or
the Board in respect of matters as to which he shall be finally adjudged in any
action, suit or proceeding to have been guilty of gross negligence or willful
misconduct in the performance of his duty as a member of the Committee and the
Board. In addition, no right of indemnification under the Plan shall be
available to or enforceable by any member of the Committee and the Board unless,
within 60 days after institution of any action, suit or proceeding, he shall
have offered the Company, in writing, the opportunity to handle and defend same
at its own expense. This right of indemnification shall inure to the benefit of
the heirs, executors or administrators of each member of the Committee and the
Board and shall be in addition to all other rights to which a member of the
Committee and the Board may be entitled as a matter of law, contract, or
otherwise.
8.7 Gender. If the context requires, words of one gender when used in the
Plan shall include the other and words used in the singular or plural shall
include the other.
8.8 Headings. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of the Plan and shall
not be used in construing the terms of the Plan.
8.9 Other Compensation Plans. The adoption of the Plan shall not affect
any other stock option, incentive or other compensation or benefit plans in
effect for the Company or any Affiliate, nor shall the Plan preclude the Company
from establishing any other forms of incentive or other compensation for
employees of the Company or any Affiliate.
8.10 Other Options. The grant of an Option shall not confer upon the
Optionee the right to receive any future Options under the Plan, whether or not
Options may be granted to similarly situated Optionees, or the right to receive
future Options upon the same terms or conditions as previously granted.
8.11 Governing Law. The provisions of the Plan shall be construed,
administered, and governed under the laws of the State of Texas.
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